TOP INTERVIEW

Q How did Sanyo Chemical Group perform FY2016?

A Net sales decreased by appropriate sales price revision to respond to a fall in raw materials costs. ?In terms of profit, however, we recorded increases because of growing sales amount, cost down measurements and other factors, despite declining profit margins due to yen appreciation.

During FY2016 (April 1, 2016 through March. 31, 2017), Japanese economy could marginally break free of the economy leveling off mainly because export showed signs of recovery, despite a long-term stagnation in capacity investment and private consumption. In addition, the outlook for the circumstance surrounding Japan is heading for mild recovery such as a continued economic recovery in the United States and a break in Chinese economic slowdown, despite a continued low growth in European economy.

In the chemical industry, business environment remained severe, because a continuing decline in raw material costs turned upward, the yen got weaker from the trend of the strong yen and other factors.

Under these circumstances, net sales of the current fiscal year decreased by 5.0% from the previous fiscal year, to \150,166 million mainly by appropriate sales price revision in each segment to respond to a fall in raw material costs. However, profit increased from the previous fiscal year because of growing sales amount, cost down measurements and other factors, despite declining profit margins due to yen appreciation. As a result, operating income was \13,647 million (a 9.3% increase from the previous fiscal year), and ordinary income was \15,341 million (a 15.4% increase). Profit attributable to owners of parent was \10,192 million (a 47.1% increase).

 

 

Q What plan does Sanyo Chemical Group have for FY2017?

A Net sales will increase by appropriate sales price revision to respond to a hike in raw materials costs and increased sales volume. ?Profit will increase due to sales volume increase, despite reduction of spread to respond to a hike in raw materials costs.

Japanese economy remains at a standstill as a whole because of stagnations in private consumption and leveling-off in export situation and is expected to continue uncertain situation through FY2017. Moreover, the outlook for the circumstance surrounding Japan remains unclear amid the stagnation such as a slowdown of economic expansion in emerging countries including China and a destabilization of international financial market.

In such business environment, we forecast sales will increase due to appropriate sales price revision to respond to a?hike in raw materials costs in addition to increased sales volume of super absorbent polymer thanks to successful addition of production facilities began operations in San-Dia Polymers (Nantong) Co., Ltd. in FY2015. Profit is forecasted to increase because of sales volume increase, despite reduction of spread to respond to a hike in raw materials costs.

For FY2017, we forecast at this time net sales of ¥167,000 million (a 11.2% increase from the previous fiscal year), operating income of ¥14,000 million (a 2.6% increase), ordinary income of ¥15,500 million (a 1.0% increase), and profit attributable to owners of parent of ¥11,000 million(a 7.9% increase).

 

 

Q Could you tell us about progress of the Ninth-Medium-Term Management Plan and future effort?

A We make smooth progress in implementing our plan for achieving its goal. We continue to make efforts to strengthen business bases and expand business more globally taking advantage of the strength of business division.

The Ninth Medium-Term Management Plan, which covers the four-year period from FY 2015 through FY 2018, seeks to achieve consolidated net sales of 230.0 billion yen or higher, operating income of 20.0 billion yen or higher, and return on equity (ROE) of 10% or higher by FY 2018, the final fiscal year of the plan. Net sales are weak by appropriate sales price revision to respond to a fall in raw materials costs. However, profits are in accordance with the plan.

As the main activities in FY2016, we established “Imaging Materials Division” and “Biotechnology & Medical Division” directly controlled by the President. Consequently Sanyo Chemical will have a three-business division organization, combined with “Lubricating Oil Additives Division”, which was established in October, 2015. Besides these business fields, we focus on energy and electronics business to be the next core business and we newly built R&D facility in Kinuura factory.

We continue to make efforts to strengthen business bases and expand business globally taking advantage of the strength of newly established business divisions.

 

 

Q What are you thoughts about CSR?

A The entire company is working on CSR as a matter of the utmost importance in the business management of the Sanyo Chemical Group.

With the aim of improving corporate value by promotion of CSR management, we will more deeply entrench and globally expand our own management system of “individual-based management.” At the same time, we will focus on strengthening corporate governance and increasing the power of our corporate brand. We will continue community contribution activities: to visit nearby elementary schools and junior high schools to perform chemistry experiments with students and give lectures of our researchers, positive participation in accident prevention measures with local society and involvement in the activities that Kyoto Model Forest Association works to protect and nurture the forests of Kyoto Prefecture.

 

 

Q Could you tell us about any other things to focus on?

A We would like to encourage using “Time” generated by raising work efficiency for every one of employees’ growth.

In order to improve individual productivity and promote active participation of diverse human resources, we review work styles to accommodate diversification as well as promote the efficiency of business by innovating its operation under a slogan of “No Overtime”.

In concrete terms, we progress to eliminate wastefulness, impracticalities and inconsistencies and to improve efficiency of each business in our company-wide organizational reforming. We have adopted the flextime system that employees can independently set working hours and system of paid leave by the hour that employees can take paid leave in hourly units, and we work effectively. I give a message to every employee to use the limited “time” through these activities to think essence over and over in work time. And outside the company, I ask them to get precious experiences that can’t be gained within the company and grow themselves. As the result, Sanyo Chemical was approved as the best practice company that actively promotes work style reforms by Kyoto Labor Bureau for the first time in Kyoto in November 2016.

Moreover, we make efforts to provide the workplace where diverse human resources can work diversely not only by supporting employees to balance work with pregnancy, childbirth, childcare and caregiving but also by conducting the job-class specific trainings about diversity. This action also leads to promoting women’s active participation. I myself express my opinion to support for “Declaration on Action” by a group of male leaders who will create “A Society in which Women Shine”, which Cabinet Office assists, in order to implement the measures to promote greater participation by women in corporate activities.

I believe that a collaborative improvement among diverse human resources who are grown in this way would realize “A truly unique and excellent corporate group that operates on a global scale”. The results of reform will not emerge immediately, we will make constant efforts.

 

 

Q Could you talk about the return of profits to shareholders?

A We will make an effort to enhance corporate value to maintain stable dividends.

We regard increasing returns to shareholders while attempting to reinforce the corporate base for the future through an improvement in Sanyo Chemical Group’s profitability as our important management issue. Our fundamental policy is to maintain stable dividends, targeting a consolidated payout ratio of 30% or higher.

We revised to pay the year-end dividend in FY2016 of ¥55 per share (increasing ¥10 from an interim dividend of implemented last December) with the standard after the reverse stock split* (at a ratio of one share for every five shares) in order to further increase returns to shareholders. It results in paying an annual dividend of ¥100 per share in FY 2016, which includes an interim dividend of ¥45. In FY2017, we forecast an interim and year-end dividend in fiscal year 2017 of \55 each, for an annual dividend of \110 per share.

*The standard after the reverse stock split: Conventional cash dividends paid per share is converted five times because Sanyo Chemical conducted a reserve stock split at a ratio of one share for every five shares. The interim dividend in FY2016 is converted to ¥45 from ¥9 with the standard after the reverse stock split.

 

 

Q Finally, do you have any messages to shareholders?

A We continue an organizational reform and aim to achieve the objective of the Ninth-Medium-Term Management Plan. We look forward to your continued guidance and support.

We promote the organizational reform to convert into the stable earning structure without affecting the change of the outside business environment. We strive to achieve the objective of the Ninth-Medium-Term Management Plan, to develop to be “a major corporation in name and in reality” to be proud of. ?We look forward to your continued guidance and support.

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