DENKA

To Our Shareholders

To Our Shareholders

In this final year and culmination of our “Denka Value-Up” management plan, we will strive to achieve our numerical targets through the three “Value-Up” initiatives, concerning our business, the environment, and human resources, aiming to be an indispensable corporate member of society.

We would like to take this opportunity to express our gratitude to you for your continued support of Denka and make some observations concerning the Company’s results and current initiatives.

During the fiscal year ended March 31, 2022 (fiscal 2021), the Japanese economy lacked vigor, with personal consumption and exports continuing to seesaw due to the renewed spread of COVID-19. The global economy progressed towards recovery overall, even amid the persisting impact of the pandemic, but concerns over the outlook intensified from the start of 2022, with soaring resource prices due to the impact of Russia’s invasion of Ukraine, as well as increasingly serious logistics disruptions.

Against this economic backdrop, in order to realize “The Denka Value” corporate philosophy, the Group pushed ahead with the refocusing of the “Business Portfolio Shift” and the “Introduction of Innovative Processes,” two strategies set forth in our “Denka Value-Up” five-year management plan launched in 2018, and focused its efforts on expanding businesses and enhancing profitability, under the three elements of our growth vision: become a “Specialty-Fusion Company” with “Sustained Growth” and “Sound Growth.” Moreover, we have designated the two years from fiscal 2021 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 are engaging in three “Value-Up” initiatives, concerning our business, the environment, and human resources.

As a result, during the year under review, sales volumes increased, as a consequence of growth in electronics and highly advanced product lines, focus growth businesses, and COVID-19 rapid antigen test kits, in addition to an overall recovery in demand, which had been depressed due to the pandemic. We also implemented revisions to selling prices in step with rising raw material and fuel prices, and net sales increased. Turning to earnings, operating income, ordinary income, and profit attributable to owners of parent were all the highest on record, thanks to growth in specialty products.

In fiscal 2021, the fourth year of “Denka Value-Up,” product groups in the healthcare field and the environment and energy field, which we had designated as our focus, both saw steady growth, enabling us to achieve our highest profit ever, as mentioned above. This was the result of the steady progress we have made in “specialization,” the core strategy of “Denka Value-Up,” over the past four years. In this fiscal year, the final year of the plan, we will continue to accelerate “specialization,” and promote the transformation of the business portfolio.

From June last year, we reduced the number of Directors from twelve to nine, with the aim of further enhancing the effectiveness of discussion by the Board of Directors, expediting its decision-making, and further strengthening the degree of involvement of Outside Directors in the Board of Directors. We have certainly achieved the improvements we originally aimed for. However, the requirements placed on corporate governance are growing ever more sophisticated, including the review of market segments by the Tokyo Stock Exchange and the revisions to the Corporate Governance Code. We will continue to strive to build corporate governance to accurately respond to social requirements.

Despite the persistently chaotic nature of the global situation, we will continue to promote ESG management, with the SDGs as our compass. In its fifth and final year, we will endeavor to culminate our management plan “Denka Value-Up” in the solid achievement of our numerical targets through the three “Value-Up” initiatives, concerning our business, the environment, and human resources, aiming to be an indispensable corporate member of society. We hope we can count on the continued understanding and support of our shareholders in this endeavor.

May 2022

Chairman and Representative Director Manabu Yamamoto
Representative Director, President Toshio Imai

Shareholder Returns and Investment Plan
(Management Plan「Denka Value-Up」 / fiscal 2018~2022)

Following the completion of the Denka100 management plan, the final year of which is fiscal 2017, Denka will implement “Denka Value-Up,” a new management plan that will reinforce its operating base over a five-year course beginning in fiscal 2018 with the aim of enhancing corporate value and ensuring sustainable growth.
In line with our policy on shareholder returns as described below, we seek to steadily return profits yielded by initiatives executed under our management plan to shareholders while allocating a portion of such profits to such strategic investments as M&A for further growth. We will thereby strive to ensure our financial soundness in addition to maximizing shareholder returns and the resources available for forward-looking strategic investments.

Shareholder Returns

We aim to achieve a total shareholder return ratio of 50%.
(Total shareholder return ratio = (cash dividends + shares repurchased) / net income attributable to owners of the parent for the fiscal year)
In addition, we focus on maintaining the stable payment of cash dividends while flexibly carrying out share repurchases by giving due consideration to such factors as a trend in stock prices.

Investment Plan

We will invest a total of ¥200 billion over a five-year period.
Of this, strategic investment: ¥75 billion (¥15 billion/year)
M&A, etc.: ¥60 billion
Process reforms: ¥15 billion
Regular investment: ¥125 billion (¥25 billion/year)