To Our Shareholders

In pursuit of our Purpose “Making the World a Better Place as Specialists in Chemistry,” we will re-examine our core values of “Initiative,” “Integrity,” and “Empathy.” By surely responding to changes in the assumptions of the management plan and ensuring our actions yield positive outcomes, we’ll promptly get back on the path to growth.

During the fiscal year ended March 31, 2024 (fiscal 2023), the Japanese economy experienced a modest recovery, characterized by sluggish personal consumption due to increasing prices and a lack of vigor in capital investment. In the global economy, the growing sense of economic deceleration in China, alongside escalating prices and monetary tightening in Europe and the U.S. Against this backdrop, uncertainty about the future of the global economy increased.

Under these circumstances, the Group focused on expanding its business and securing profits by promoting the growth strategies set forth in the management plan “Mission 2030” based on the newly established vision.

As a result, net sales for fiscal 2023 totaled 389,263 million yen, down 18,295 million yen (4.5%) year on year, due to lower sales volumes of core products such as electronics & innovative products and chloroprene rubber, despite the positive effects of price revisions implemented in the previous fiscal year and higher proceeds from a weaker yen. On the earnings front, operating income was 13,376 million yen (down 18,947 million yen, or 58.6% year on year) and ordinary income was 5,474 million yen (down 22,550 million yen, or 80.5% year on year) due to a decrease in sales volume of core products and increased costs for the progress of specialization. Profit attributable to owners of parent amounted to 11,947 million yen (down 821 million yen, or 6.4% year on year), reflecting extraordinary loss on liquidation of business and extraordinary gain on sales of investment securities resulting from the reduction of strategic shareholdings.

In the first year of the management plan, “Mission 2030,” we were unable to increase sales volume sufficient to offset the increase in upfront investment and other costs planned under the previous management plan “Denka Value-Up” due to changes in the assumptions of the management plan. In addition, the Company had to suffer severe business results due to the impact of the Noto Peninsula earthquake and an impairment loss associated with the termination of norovirus vaccine development.

“Mission 2030,” our eight-year management plan, places “Business Value Creation” at the core of our growth strategy, and aims to make all of Denka’s businesses “three-star businesses” that fulfill the three elements of Specialty, Megatrends and Sustainability, and focus on ICT&Energy, Healthcare, and Sustainable Living, the three areas of focus derived from the envisioned future world and megatrends. The three growth strategies, including “Business Value Creation,” “Human Resources Value Creation,” and “Management Value Creation,” are the unchanging long-term policies that we will continue to promote. However, in order to overcome the current difficult situation, we have to urgently respond to the changes in the assumptions of the management plan so that we can restore our business performance to a growth track while also controlling financial aspects. Specifically, first, we will accelerate portfolio transformation including selling or exiting a business. Making the profitability improvement of the chloroprene rubber business a top priority, we will carefully examine demand trends, optimal production capacity, etc. to determine drastic measures. Second, we will review our investment plan. In other words, the priority for investment projects will be clarified for more careful selection and, if changes in business environment makes a project less urgent, we will postpone such a project. We are determined to be very strict in selecting investment projects and review the timing and others. Furthermore, with the full commitment of the top management, we will vigorously promote company-wide cost reduction projects. This project is not just for cost reduction. Rather, we will adopt best practices new to us in order not only to reduce cost and improve operational efficiency but to help employees grow; thereby, the entire company will work together to contribute not only to “Business Value Creation” but also to “Human Resources Value Creation” and “Management Value Creation.”

With regard to our response to the serious incident and improprieties that occurred in fiscal 2023, we are mindful that ensuring safety at the manufacturing site and assuring product quality are essential requirements for a manufacturing company, and we take the recommendations of the Accident Investigation Committee and the external investigation committee very seriously. We are determined not to recur such incidents by taking a wide range of preventive measures in the areas of governance, management, processes, and human resources management.

The entire Group will once again reaffirm our core values of “Initiative,” “Integrity,” and “Empathy” which we cherish. To fulfill the Purpose of “Making the world a better place as specialists in chemistry,” we will actively pursue the three growth strategies outlined in our management plan “Mission 2030” and will promptly get back on the path to growth, ensuring that the measures taken in response to changes in the assumptions of the management plan yield positive results.

We hope we can count on the continued understanding and support of our shareholders in this endeavor.