Medium-Term Management Plan

Toagosei’s Medium-Term Management Plan for 2017 to 2019
-The Toagosei Group Medium-Term Management Plan “Trajectory Toward Growth 2019”-

Based on our corporate philosophy of “sharing more happiness with more people through the chemical business,” the Toagosei Group is committed to sustainable growth by creating new products and new businesses, and to increase its corporate value over the medium and long term.
Specifically, we established the Toagosei Group medium-term management plan “Trajectory Toward Growth 2019” to give further emphasis to “new product development” and “qualitative shift in the management base”.
We position our new medium-term management plan as a first step toward achieving the Group Vision for 2025 with concerted efforts.

1.Group Vision for 2025

  • A chemical corporate group with a strong presence in technologies and high-value-added products
  • A chemical corporate group operating production and sales activities in Japan and overseas, with overseas net sales ratio of over 25%
  • A chemical corporate group with abundant talented and motivated employees who drive business expansion
  • A chemical corporate group having stable profitable base, with net sales of over 200.0 billion yen

2.Organizational reform responding to strategies

We classified business units into businesses that play core roles in our growth strategy and the commodity business that forms the base of the Company, and reorganized accordingly. As for affiliates, we will develop strategies that conform to the business policy.

①Classification of the businesses

Businesses that play core roles in growth strategy
Acrylic polymers, oligomers, functional adhesives, high purity inorganic chemicals, inorganic functional materials, construction materials and civil engineering, nursing care, elastomers, etc.
Commodity business
Electrolysis products, acrylic monomers, industrial gases, piping equipment, etc.

②Reorganization of business departments

Three business departments: “Polymer & Oligomer,” ”Adhesive Material” and “Performance Chemicals”
the core in growth strategy including overseas expansion
“Commodity Chemicals” business department
strengthen cost competitiveness as well as solidify and expand the commodity business

3.Overview of the action plan

(1)Development of growth strategy

As a core of the growth strategy, we will put into action new product development, new business development, overseas expansion and M&As. As for new product development and new business development, we will promote development by accurately understanding market needs with focus on each of the growth areas of telecommunications, mobility and energy.

Acrylic Polymers
As Phase 1 of Toagosei (Thailand), we will launch acrylic polymers business (start of production in 2018), strengthen the local marketing system and move onto the Phase 2 business plan.
Oligomers (Aronix M and UV)
We will integrate the operation of three domestic and overseas bases (Japan, China and Taiwan) of oligomers (Aronix M and UV) and expand by mutual interchange of new product development and M&As.
Functional Adhesives
We will promote new product development with focus on the areas of electronic parts, automobiles and batteries.
General-use instant glues
We will strengthen brand strategy by advertising, launching new products and enhancing sales activities in both Japan and the United States, thereby increasing market share.
High-purity inorganic chemicals, Inorganic functional materials(Amenity care materials)
We will promote new product development and strengthen the marketing system in Southeast Asia, China, Taiwan, South Korea, and the United States.
Construction materials and civil engineering
Toagosei and Aronkasei will cooperate to boost sales capabilities.
Nursing care
We will continue the launch of new nursing care products, and also expand to the Chinese market.
Elastomers
We will launch products with new function and expand product lineup. Furthermore, we will put into motion production and sales systems in Southeast Asia.

(2)Strengthening of commodity business

As for the commodity business, which forms the management base of the Group, we will improve productivity and strengthen cost competitiveness.

Electrolysis products
We will renew our production facility and strengthen the production system.
Acrylic monomers
We will improve operation rate in Japan and implement structural reforms in the business in Singapore.
Piping equipment
We will optimize the production system of the three plants and launch new products with focus on the areas of disaster response and public infrastructure.

4. Quantitative targets for medium-term management plan “Trajectory Toward Growth 2019”

Table 2. Quantitative targets for medium-term management plan “Trajectory Toward Growth 2019”

Consolidated net sales

FY2016 135.3 billion yen, FY2019 targets 155.0 billion yen

Operating income

FY2016 16.1billion yen, FY2019 targets 18.0 billion yen

Operating income to net sales ratio

FY2016 11.9%, FY2019 targets 11.6%

Net income

FY2016 13.8 billion yen, FY2019 targets 12.5 billion yen

  • (Note)Assumptions for the FY2019 targets: naphtha price: 32,000 Yen/kl, exchange rate: 105 Yen/USD

(1)Investment plan

In order to effectively utilize cash on hand and to facilitate growth, we will plan on investing 60.0 billion yen over three cumulative years. The funds will be financed by the Group’s own funds.

(Breakdown) Growth strategy development: 17.0 billion yen, strengthening of commodity business: 15.0 billion yen, M&As: 18.0 billion yen, infrastructure maintenance and conservation: 10.0 billion yen

(2)Expansion of high-value-added products

By 2019, we will increase operating income from high-value-added products to over 12.5 billion yen, and further promote the qualitative shift in the management base.

Graph 2. Increase of operating income of high-value-added products (Billions of yen)

5.Other key challenges for medium-term management plan “Trajectory Toward Growth 2019”

In 2019, the Group will reach its 75th anniversary. With an eye to the future, to further strengthen the management base and to promote growth strategies, we will also address the key challenges below.

(1)Thorough implementation of corporate governance

As a company with an audit & supervisory committee, we will comply with fair business practices and thoroughly implement corporate governance.

(2)Acceleration of management decisions

We will accelerate management decisions by promoting the delegation of authority from the Board of Directors to the Management Meeting and Executive Directors.

(3)Establishment of environment that enables diverse human resources to play an active role within and outside the Company

In order to establish an environment conducive to diverse working options, especially for women and seniors to play an active role, we will develop a work environment, flexible working styles, individual training programs and others.

(4) Human resource development

For the enhancement of management capabilities and operational capabilities as well as securing global human resources, we will bolster human resources development programs.

* Disclaimer
This document is a translation of the official Japanese version provided for information purpose only.