Message from the CEO
Toward new beginningsAn opportunity to think deeply about our “ideal vision.”
Striving toward the targets set in our Long-Term Business Plan, VISION 2025, the Mitsui Chemicals Group is working to deepen our triple bottom line management approach based on the three axes of economy, environment, and society, pursuing initiatives aimed at solving the challenges faced by society as well as the transformation of our business portfolio. Formulated in 2016, VISION 2025 is now drawing close to its halfway point.
In these four years, the social environment surrounding our Group has changed enormously. Awareness of sustainability, including issues such as plastic waste and climate change, has further increased, and innovations in areas such as digital technology and biotechnology have advanced at a pace that is beyond anything we expected.
Today, the world is facing an unprecedented crisis in the form of the COVID-19 pandemic.
I assumed the position of President & CEO right in the middle of this crisis, in April 2020. Our business environment has entered a difficult phase, but I am taking a more positive view of the situation. As we approach the halfway mark of our Long-Term Business Plan, I see it as an opportunity to explore what our business and organization should look like and re-examine what we need to do to achieve sustainable growth. We will redefine ourselves as we move toward our future goal to become a sustainable corporate group with a global presence.
Progress in Long-Term Business PlanPortfolio transformation steadily yielding results under our Long-Term Business Plan.
On the economy axis, we have engaged in the transformation of our business portfolio and created a stronger financial position. On the environment and society axes, although we need to incorporate new perspectives, we have produced a number of results. In fiscal 2019, our operating income was down on the previous year, due in part to the impact of the global economic downturn. Nevertheless, I believe we have made steady progress in our Long-Term Business Plan.
Based on that Plan, we have identified three target domains, namely Mobility, Health Care, and Food & Packaging, and we are making active investments in these areas.
In the Mobility domain, fiscal 2019 saw a global downturn in automobile production and stagnation of demand, and the severe business climate is expected to continue in fiscal 2020 due to the impact of the pandemic. However, we also project an expansion of needs such as lightweighting and electrification in the automotive sector in the medium to long term. Along with our diverse lineup of functional polymeric materials, we will use our Group-wide capabilities in proposing solutions to meet our customers’ needs. Further, the decision has already been made to increase our capacity to produce performance polymers, where we have an advantage in ICT applications, so we will hasten to set up that increased production and turn it into a profit.
In the Health Care domain, we anticipate firm growth in ophthalmic lens materials, an area in which we boast technological prowess and a robust customer base, and we are moving toward a decision to increase capacity in this field as well. In terms of nonwovens, in addition to nonwoven fabrics for hygiene materials, we foresee increased demand in the 5G and automotive sectors, and we will also expand into industrial applications. Regarding dental materials, with the rapid acceleration of digitalization in mind, we will devote Group-wide resources to strengthening cooperation to increase our presence in Japan and Asia.
In the Food & Packaging domain, demand for industrial films is increasing for a number of reasons, including the growing popularity of 5G. The Group’s proactive response to this increased demand includes completing construction of a new plant in Taiwan and increasing our supply capacity by 50%. We will now move to make a return on our investments. With demand for TENEBENAL™, our next generation active ingredient for insecticides, expected in diverse sectors, we are considering a further increase in production.
In the Basic Materials domain, where we are aiming for the stabilization of earnings, the structural reforms we have been working on have resulted in a steady reduction in volatility, which has been a challenge for us. Even so, low profitability cannot be denied, so we will engage in further structural reforms in this domain. In the belief that we can restructure this segment by further strengthening our local production for local consumption approach and downstream businesses, we will devise options from broad perspectives during fiscal 2020 and implement both immediate measures and measures that we will engage in over a longer period.
Review of Long-Term Business PlanAs we reach the halfway point of our Long-Term Business Plan, we will discuss anew our “ideal vision.”
As I mentioned earlier, the social environment has undergone enormous change since we first developed our current Long-Term Business Plan. With that in mind, we will take the opportunity presented by reaching the halfway point to undertake a review of the Plan.
We have re-set the Plan’s end point to around 2030 and we are now in the process of debating what our ideal vision for the future as a company should look like. Setting our sights higher initially, we will envisage what society will look like in 2050 and backcast from there to re-set our targets.
Looking back on the last four years, one regret that I have is that we have been lacking in the ability to get things done. In the Long-Term Business Plan, we formulated a strategy of active investment in new business and R&D, but there are several areas that have not proceeded to plan. Coming up with a new plan is one thing, but we have lacked the ability to put that plan into action.
The same could be said for the transformation of our business portfolio. Until now, we have focused on B-to-B business based on chemical materials, but in the Long-Term Business Plan, we aim to go one step further and expand our B-to-C business. To put it simply, we are like a sportsperson who is used to the rules of baseball now attempting to step foot on a soccer pitch. For such a massive transformation, we need strong resolve to take action. We are currently in the process of investigating the factors that are hampering action.
Our mid-ranking employees in their late thirties to their forties are playing a central role in the deliberation of our ideal vision. This is because they are the ones who will form the core of the Group around 2030, when the Plan ends, and they will be in the position to take action. Even if the picture being painted is somewhat rough with sharp edges, I believe that it is important that the actual people who will act on it be the ones to paint that picture.
Ultimately, in the development of the Plan, we will combine this kind of deductive approach with an inductive perspective that is rooted in the individual businesses. We will come up with the directions by the end of fiscal 2020, with the aim of formulating concrete measures in the first half of fiscal 2021. Re-setting the numerical targets declared in the current Long-Term Business Plan will also form part of these discussions.
Further, I want us to deepen our discussions to include the maximization of our intangible assets, including developing our corporate culture and organization to raise our employees’ ability to get things done and their motivation.
In anticipation of a Post-COVID SocietyAs well as establishing a stable business platform, we will swiftly capture new business opportunities.
Many aspects of the COVID-19 pandemic that we are still in the midst of, as well as the social changes that will come after it, cannot be predicted. It is difficult to reach any clear answers about what impact the pandemic will have on our business. We are adopting a severe outlook in our plans for fiscal 2020, and we are taking all possible measures to ensure cash flow in the event of further downside risks. On the other hand, there are areas of the Health Care and Food & Packaging domains in which we anticipate expansion of demand, so we will be swift to go out and capture new business opportunities in those areas.
The keyword for the post-COVID society will likely be, first and foremost, digitalization. We have expanded the use of remote work in our Group, which has had a certain degree of success. However, there are many workplaces in which remote work cannot be fully implemented, such as manufacturing sites, so we will need to undertake other reforms, such as finding new ways of working and new evaluation systems, including the promotion of digital transformation (DX).
The global pandemic has also brought challenges in supply chains to the surface. With the progress in globalization, our Group’s supply chain has become increasingly diverse and complex. In light of the emergence of economic blocs and the growing trade friction between China and the United States, we will investigate the state of our local production for local consumption systems that we have advanced and, where necessary, consider their restructure.
Our response to COVID-19
(based on data as of June 24, 2020)
An Enhanced Financial Position and Active Growth InvestmentsWith our greatly strengthened financial position, our proactive stance toward growth investments and M&As will not change.
Our work on the strengthening of our financial position has continued in the Long-Term Business Plan, allowing us to build an enhanced foundation that can respond to sudden external changes. The current economic climate in the COVID-19 pandemic is often compared to the Global Financial Crisis, but our Group’s earnings capacity has improved significantly compared to that time, and our net D/E and short-term liquidity are being maintained at healthy levels.
Backed by this enhanced financial position, we will continue to invest for the future. Although some investments will be cut in fiscal 2020 as an emergency financial measure through careful selection and deferrals of projects, we do not intend to change our proactive stance. We will pursue active investment in growth domains such as ICT and Health Care.
In M&As as well, we will continue to watch out for new opportunities. However, I have no intention of considering only the economy axis in our pursuit of M&As, which would aim only for an increase in size. I will always incorporate the perspectives of the environment and society axes as well and pursue M&As that will achieve sustainable growth in our corporate value, so they will be accepted by all our stakeholders.
Transformation of Our Organizational CultureEmbarking on organizational reforms for the creation of a culture of open communication that connects people and technology organically.
The Mitsui Chemicals Group conducted a number of organizational reforms in April 2020. The aim of those changes was to strengthen our business structures in the three target domains and to accelerate next generation business.
The key to our success in the three target domains lies in the total operation of our business. To that end, we must connect our assets, namely people and technology, organically to maximize our value. As such, we established cross-organizational CoEs* in the Mobility and Food & Packaging domains. In the Health Care domain as well, we established a Medical Business Strategy Department for the development and exploration of new businesses and the pursuit of M&As.
Further, we launched a New Business Incubation Center that will be responsible for the exploration and creation of next generation businesses, covering all fields from ICT to robots and energy.
The Group has adopted a business division structure for the pursuit of its business. Because of that structure, vertical lines tend to be stronger, and I sometimes feel that we are not making effective use of the Group’s resources as a result. One aim of these reforms is to make our organization more open and communicative. We will devote even more effort to initiatives aimed at the transformation of our corporate and organizational culture.
*CoE：Center of Excellence
Sustainability ManagementSustainability initiatives with broad perspectives that encompass the entire value chain are vital.
With growing awareness of ESG concerns and the SDGs in recent years, society’s values have changed significantly. Under such circumstances, companies need to be conscious of their role as public institutions in society and to pursue social and corporate sustainability. In those respects, I believe that our triple bottom line approach is truly clear. We will engage in management that places importance in the environment and society while emphasizing their balance with economic growth.
We have introduced Blue Value™ and Rose Value™ as a means of visualizing the results of our triple bottom line management and sharing and communicating those results to our stakeholders. They have also been set in the KPIs for the Long-Term Business Plan, and we will steadily expand our Blue Value™ and Rose Value™ products that help to solve environmental and social challenges. I also believe that these yardsticks are extremely effective as value standards for our employees in engaging in their work and I intend to make use of them for this purpose.
Two issues that we must address seriously as social challenges are climate change and plastic waste. Until now, we have largely focused on a linear business model involving the manufacture of products from raw materials. Going forward, however, unless we pursue those operations in tandem with businesses that create circular flows of resources, that is the recycling and reuse of products and their materials, it will be difficult to raise corporate value further. I want us to take an integrated approach to solving the problems of climate change and plastic waste as a single, inseparable challenge, from the over-arching perspective of transitioning to a circular economy.
For us, social challenges represent both risks and business opportunities. However, cooperation with others outside our own company is essential if we want to grasp those opportunities. Going forward, we will engage in initiatives with broad perspectives that incorporate the entire value chain, including collaborations with companies in other industries and cooperation that transcends national and regional borders.
Creating an Environment for Nurturing Positive AmbitionWe will work on creating an organization in which every single employee can address their work with a high degree of motivation and a sense of reward.
For any company, its people are its greatest asset. This is true of any era. To nurture our people, we have introduced a range of different schemes, including training programs for management personnel and global personnel. I also want to put more effort into the more fundamental aspects, such as reforming work styles and creating an environment for raising motivation, to support a positive mindset in our employees.
One major change in recent times has been the ongoing change in the way young people work and the way they think about the company.
For a company to achieve sustainable growth, it must be attractive to these kinds of people of the new generation. We will aim to be a corporate group that offers a sense of reward for its people of all generations in all sectors, such as manufacturing, sales, and R&D. In our current project to review the Long-Term Business Plan as well, we are discussing our ideal vision for the future including the creation of this kind of culture. We will embark on new reforms on the basis of those discussions.
Thorough Awareness of SafetyRecognizing anew the importance of safety through the unprecedented experience of the COVID-19 pandemic.
Safety is also an extremely important mission in the management of the Mitsui Chemicals Group. To uphold safety, we must never forget the explosion and fire that occurred in the resorcinol production facility at our Iwakuni-Ohtake Works in 2012. Since then, we have united with the manufacturing sites to make cumulative improvements. However, with the continued spate of problems in recent years, we are facing the challenge of a failure to instill a thorough awareness of safety.
To solve such a grave challenge, we will pursue initiatives from renewed fundamental perspectives. In addition to reforming our systems and introducing new technologies, we will go one step further to create an environment in which the employees who are responsible for safety at our manufacturing sites can address their work positively and with enthusiasm.
The pandemic we are currently facing has, I feel, also been an invaluable opportunity to re-examine what safety in the company should look like. I have been struck anew by the importance of the kinds of safety that protect the health of our employees. As a corporate group that fulfills its social responsibilities and ventures forward together with society, we will thoroughly instill an awareness of safety once more.
To Our StakeholdersWe will aim to be a “company that is both strong and good” and that, bringing together the strengths of every one of its employees, has the ability to get things done to achieve its goals.
I believe that the days have passed in which the value demanded of a company is assessed on its exceptional “strength” on the economy axis alone. Having said that, if we pay attention only to the environment and society axes, it will be difficult to raise sufficient profit and we will be unable to meet the expectations of our stakeholders, such as the shareholders and employees. It is for this very reason that our triple bottom line management approach, which seeks the right balance between the economic, environmental, and social dimensions, is so important.
The world is in the midst of a storm such as it has never before experienced in the form of the COVID-19 pandemic. We could certainly say that we are now navigating those rough seas. However, the time will come when the storm has passed, and those adverse winds will subside. I believe that the duty that I have been charged with in steering the Mitsui Chemicals Group is to create the best conditions so that the company can sprint full steam ahead when that time comes. It is precisely because this is the era we are in that we will set our gaze high as we look toward the future, bring together the strengths of every one of our employees, and aim to be a “company that is both strong and good,” a company that will achieve the goals it has set for itself with certainty and achieve sustainable growth together with society.