「Possibility of Chemistry.」Denka Co.,Ltd.

To Our Shareholders

Expanding the Possibility of chemistry to Contribute to Sound Social Development

President & CEO Shinsuke Yoshitaka

As a chemical company, Denka operates in a wide range of business fields, from providing organic and inorganic materials for industrial manufacturing as well as materials for construction and civil engineering to manufacturing electronic materials, food packaging and diagnostic reagents. Our operations date back to 1915 when we began marketing chemicals we manufactured using electrical furnaces. Since that time, we have constantly expanded our expertise in the areas of high-temperature calcining control and the nitriding process. Today, applications of this expertise include organic synthesis and polymer processing, allowing us to further diversify our business portfolio.

In 2015, our centennial year, we adopted the company name “Denka Company Limited,” thereby renewing our commitment to becoming a global industry leader with operations extending well beyond the boundaries of our primary manufacturing field at the time of founding, electrical furnace-based chemical manufacturing.

In 2016, we formulated The Denka Value, a new corporate philosophy consisting of the Denka Mission, in which we have redefined our mission statement as “Taking on the challenge of expanding the possibilities of chemistry to create new value and contribute to sound social development,” as well as the Denka Principles, a set of precepts aimed at realizing said mission by providing business conduct guidelines. With everyone in the Group—executives and employees alike—sharing this value and working as one, we are determined to blaze a new path into the future in the pursuit of our corporate goals.

In line with the Denka100 management plan, which aims to ensure sustainable growth over the next 100 years, we are promoting new growth strategies, with numerical targets set for fiscal 2017. Specifically, we are strategically accelerating global expansion while focusing our management resources on growth fields that include the environment, energy, infrastructure and healthcare. Our corporate slogan “Possibility of chemistry” is intended to convey a corporate attitude that aspires to contribute to the sustainable development of society through the creation of new value.

We are also fully aware that placing the utmost priority on operational safety is crucial to our continued viability. We are committed to ensuring that everyone at the Denka Group can work without danger and that those living in the vicinity of our sites can rest assured. Moreover, we are relentlessly striving to preserve the global environment, implementing energy-saving initiatives and promoting the utilization of renewable energy. We consider these pursuits as being an integral part of our manufacturing operations.

Lastly, we have committed ourselves to enhancing our corporate value in the medium-to long-term by earning the trust of all stakeholders, including our shareholders, via solid corporate governance in accordance with the Denka Corporate Governance Guidelines, established in 2015. Furthermore, as a corporate group that operates globally, we will cherish diverse values while ensuring an environment in which every worker can pursue fulfilling careers, since we believe that, by doing so we can spur our business growth.

Sincerely tackling the challenges society is now confronting, we will continue to expand our expertise in chemistry-centered manufacturing to satisfy market needs, thereby contributing to the sound development of society.

Policy on Shareholder Returns and Budget for Growth Investments

Denka has been implementing the Denka100 management plan, which was revised in April 2013 to incorporate new growth strategies aimed at better accommodating changes in demand structure and consumer needs. Pursuing a number of forward-looking initiatives under these strategies, we are committed to obtaining steady business results at the earliest possible date.

Reflecting our determination to return the profits yielded by these initiatives to our shareholders, we have established a policy on shareholder returns. Simultaneously, with the aim of achieving further corporate growth, we have created a budget for strategic investments such as M&As.

Our aim in addressing these matters is to maximize shareholder returns and resources for forward-looking strategic investments in a way that does not erode our financial soundness or balance of accounts. In line with this resolve, we will work to swiftly achieve our goal of securing ROE of 10% or greater.

  1. Policy on Shareholder Returns
    Target total payout ratio*: 50%
    * (Dividends paid + treasury stock purchased) / consolidated net income
  2. Methods for Shareholder Returns
    (1) Cash dividends: Maintain steady cash dividends, with minimum payout ratio set at 30%
    (2) Purchase of treasury stock: Flexibly purchase treasury stock in step with trend in stock prices and the market environment
  3. Budget for Forward-Looking Strategic Investments
    After paying out shareholder returns, Denka will appropriate funds from its retained earnings as well as cash inflows to finance such investments. The total amount budgeted for is approximately \50 billion (four years from fiscal 2014 to 2017).
  4. Term
    Four years by the end of fiscal 2017, the target year of the Denka100 management plan