To Our Shareholders

We will execute our new management plan, “Mission 2030,” and with the aim of “making the world a better place as specialists in chemistry,” the Group will work as one to take on the challenge of bringing about further transformation.

During the fiscal year ended March 31, 2023 (fiscal 2022), the Japanese economy showed signs of recovery as consumer spending and capital investment picked up. However, as commodity prices soared even higher and the yen rapidly depreciated, uncertainty about the future grew. The world economy showed increasing signs of a slowdown, as prices rose in many countries, the Ukraine crisis dragged on, and China’s zero-COVID policy curbed economic activity.

Amid this economic environment, the Group pushed ahead with “Business Portfolio Shift” and “Introduction of Innovative Processes,” two strategies set forth in our “Denka Value-Up” five-year management plan launched in fiscal 2018, and focused on expanding businesses and enhancing profitability. Moreover, we designated the past two years up to and including the final year of the plan as an important preparatory period for rapid growth towards the vision of the next management plan. As a first step towards being an indispensable corporate member of society, we engaged in three “Value-Up” initiatives, concerning our business, the environment, and human resources. As a result, net sales totaled ¥407,559 million, up ¥22,709 million (5.9%) from the previous year.
Although demand for some of our core products declined due to the global economic slowdown, we revised our selling prices in response to higher raw material and fuel prices and also benefitted from the weaker yen. In terms of earnings, although we revised selling prices in response to rising raw material and fuel prices, sales volumes for some mainstay products declined and costs associated with the development of specialty products climbed, resulting in operating income of ¥32,324 million (down ¥7,799 million, or 19.4% year on year) and an operating income ratio of 7.9% (down 2.5 points). Ordinary income was ¥28,025 million (down ¥8,449 million, or 23.2% year on year), and profit attributable to owners of parent was ¥12,768 million (down ¥13,244 million, or 50.9%), reflecting extraordinary losses, including impairment losses on manufacturing facilities due to the decision to withdraw from the cement business as part of the “Business Portfolio Shift,” as well as extraordinary gains from the paring back and sale of strategic stockholdings.

Under our previous management plan, “Denka Value-Up,” which lasted until fiscal 2022, we have been working to execute a “Business Portfolio Shift” by accelerating the growth of our specialty businesses, turning specialty businesses into core businesses, and restructuring our commodity businesses with the aim of becoming a “fusion of highly competitive specialty businesses that are unaffected by the terms of trade.” In addition, we have been focusing on environmental and human resource initiatives to strengthen ESG management. As a result, we have broken our profit records three times in the past five years, and in fiscal 2022 total operating income in the environment and energy field and the healthcare field, our priority fields, was almost double the figure for fiscal 2017, just before we launched “Denka Value-Up.” However, as a result of sluggish profitability in some of our core businesses during the last fiscal year, our earnings unfortunately declined overall, and we still have some way to go to complete the “specialization” of our businesses.

Our new management plan, “Mission 2030,” launched this fiscal year, is based on a newly established vision and the three growth strategies of “business value creation,” “human resources value creation,” and “management value creation,” and with fiscal 2030 as the goal year, is designed to enhance enterprise value through the implementation of initiatives focused on both financial and non-financial areas. In the realm of “business value creation,” the core growth strategy, we have defined businesses that incorporate the three elements of “specialty,”
which is backed by our outstanding technologies, “megatrends,” which are the demands of society, and “sustainability”, which is a critical requirement for business operations, as “three-star businesses,” and will be making such businesses the central components of our portfolio. In addition, we aim to become a company where each and every employee can demonstrate empathy and experience self-actualization and growth, and we will be further reinforcing our managerial foundation through the advancement of corporate governance from the perspective of ESG management, thereby enhancing the value of our human resources and management.

With our new vision as the starting point, we will execute our new management plan, “Mission 2030,” and with the aim of “making the world a better place as specialists in chemistry,” the Group will work as one to take on the challenge of bringing about further transformation. We hope we can count on the continued understanding and support of our shareholders in this endeavor.

May 2023

Representative Director, President Toshio Imai