Three years have passed since we launched VISION 2030. At this point, we are unfortunately falling behind the projected pace for achieving our target of operating income before special items of 200 billion yen by 2025, a key milestone toward VISION 2030. Having acknowledged this reality head-on, I would like to analyze the business environment of fiscal 2023, the results achieved over the past three years, and the challenges that have emerged.

In fiscal 2023, our business environment was significantly impacted by uncertainties surrounding China’s economic outlook, shifts in market dynamics due to oversupply, and intensifying competition from the rising technological capabilities of emerging enterprises in the rest of Asian countries. The chemical industry in Japan is increasingly facing challenges to its traditional technological supremacy.

Despite these circumstances, the Mitsui Chemicals Group’s growth domains have continued to show steady progress, as reflected in our average growth rates for the past five years. However, we must acknowledge that the overall pace is somewhat behind our initial plans. The Life & Healthcare Solutions business, in particular, has encountered challenges such as delays in expanding the oral care business and increased competition in the nonwovens business for hygiene materials, making the return to a growth trajectory an urgent priority. On the other hand, the Mobility Solutions business is expected to achieve its 2025 target ahead of schedule, driven by favorable factors such as the recovery in automobile production and growth in high-value-added areas. The ICT Solutions business, although currently facing a temporary downturn due primarily to the decline in semiconductor demand, is showing signs of recovery, and it is crucial that we capture the growing demand to regain our intended pace. In addition, the Basic & Green Materials business, which is undergoing restructuring, is falling further behind our initial expectations. We had anticipated securing a certain level of profitability once the first phase of restructuring, which involved reviewing and reorganizing large-scale commodity products, was almost completed. However, external factors such as the slowdown in China’s economic growth and changes in domestic market dynamics due to oversupply have so far prevented us from reaching the desired level. Moving forward, we recognize the need to accelerate the second phase of restructuring to swiftly enhance and stabilize profitability.

In this challenging business environment, we expect some of these difficulties to persist long-term. However, we are making steady progress in new business development and corporate transformation, which is bringing us closer to our ideal vision. With a strong commitment to accelerating this momentum and putting our business back on a growth trajectory, we remain determined to achieve our target of operating income before special items of 200 billion yen, a key milestone toward our fiscal 2030 goal.

We will drive our business portfolio transformation through two strategic pillars: the pursuit of high-growth, high-profitability global specialty chemicals businesses in the growth domains, and the pursuit of a green chemicals business centered on competitive derivatives in the Basic & Green Materials business.

To further accelerate growth in the growth domains, we must not only rely on organic growth by refining our Group’s existing technologies to enhance competitiveness but also pursue inorganic growth through M&As and alliances.

For example, in the Life & Healthcare Solutions business, we have established a new company with Asahi Kasei Corp. to strengthen and expand our industrial materials portfolio within the nonwovens business. By combining the Mitsui Chemicals Group’s strengths in polyolefin and other raw material design technology with the processing technology of Asahi Kasei, who have long-standing expertise in fibers, we aim to build a cost-competitive business foundation while enhancing our portfolio by shifting toward higher value-added products in the challenging hygiene materials market. In the ICT Solutions business, we are actively investing in the semiconductor field, where demand is expected to continue growing. In the area of the front-end process of semiconductor manufacturing, we are leveraging our Group’s pellicle technology and collaborating with ASML and imec to commercialize next-generation EUV pellicles, specifically CNT pellicles. Additionally, in the back-end processes where materials such as adhesive and coating materials can maximize their potential, we have decided to invest in Shinko Electric Industries. By leveraging such synergies with other companies in the high-barrier-to-entry semiconductor field, we aim to accelerate material development for next-generation semiconductors and expand our business. Furthermore, in the optical field, including displays, we see opportunities to effectively utilize our Group’s existing materials and technologies in next-generation areas such as AR and VR (collectively referred to as XR). We are actively investing resources to expand the deployment of these products across multiple applications.

In the Basic & Green Materials business, as mentioned earlier, we are accelerating the second phase of restructuring to reduce volatility and strengthen our business foundation. In the derivatives field, we will classify products based on three key perspectives. The first is product competitiveness. The second perspective involves essential demand, taking economic security into consideration as well. This includes so-called commodity products, but we will ensure profitability by pursuing an optimal operating structure in line with demand such as through regional and multi-company collaborations. The third is a focus on capital efficiency. By optimizing our portfolio according to these perspectives, we aim to transform into a leaner, more resilient business structure.

In building solutions-based business models, we have appointed Mr. OMOTE Toshihiko, who has extensive expertise in downstream areas, as Executive Advisor responsible for the New Business Incubation Center. By combining his expertise with our strong upstream B2B perspective, we are creating a process that will generate various new businesses, products, and business models. Additionally, through collaborations with startups via the launch of a CVC fund, we are exploring unmet societal needs. At the same time, by integrating technologies and know-how across different fields within and outside the Group, we are advancing the development of various next-generation businesses. Among others, we have identified three key target areas as candidates for next-generation businesses, where we can fully leverage the Mitsui Chemicals Group’s assets and expertise: robot solutions, data solutions, and medical solutions. This approach goes beyond simply combining two materials or technologies to create new products, such as lens materials and coating technologies. It involves comprehensive system and business design, utilizing our Group’s data and algorithms throughout the entire process, from extensive material selection to design and mass production. As these initiatives bear fruit, we aim to create a unique business model that cannot be easily replicated by others, thereby growing our new businesses to a level where they can stand alongside our four current business domains.

I believe that digital transformation (DX) will be a powerful driver in accelerating these initiatives. We will push forward with technology and R&D to create highly efficient and safe manufacturing environments through the incorporation of advanced technologies such as IoT and AI, promote green chemicals through the development of a resource circulation platform, and utilize materials informatics through leveraging vast amounts of research data. In parallel, our Digital Transformation Sector will lead efforts to improve the digital literacy of our Group’s employees. By accelerating the pace of innovation across the Group and enabling our employees to build up successes, we aim to realize corporate transformation (CX).

In addition, we have strengthened our human resources strategy by introducing Workday—a Group-wide integrated human resources platform—that enables us to manage the data of approximately 20,000 global employees. I believe this has laid the groundwork for fully leveraging our Group’s resources to execute our strategies of accelerating business portfolio transformation and building solutions-based business models.

In addition to the initiatives already mentioned, we will continue to invest in measures to create a comfortable environment for and enhance the skills of our workforce, including measures for work style reform and reskilling. As I explained in my message in the Mitsui Chemicals Report 2022, these measures are designed with the intention of incorporating “the principle of fair equality of opportunity” and “the right to equal liberty,” two important social principles advocated by the political philosopher John Rawls, into our organization. If we are to translate these social principles into corporate principles, it means ensuring that all employees globally are given equal opportunities to excel and the liberty to think freely through the establishment of an optimal work environment and the implementation of policies that recognize and encourage taking on challenges. Of course, equality does not mean uniformity. Our employees have diverse personalities and abilities, so our evaluation systems must not be one-size-fits-all. I believe that by developing systems and environments where employees from diverse backgrounds can leverage their unique strengths, we will move closer to realizing our Group’s ideal vision.

In the rapidly changing world of the chemical industry, the Mitsui Chemicals Group has always been at the forefront of the times—from the first generation of coal chemistry to the second generation of petrochemicals. It is this sense of pride and our transformational DNA that gives me confidence that we can also play a pioneering role in realizing the third generation of green chemicals.

The restructuring of the petrochemical sector is currently a major topic in the chemical industry, but it is important to note that the foundations of next-generation fields, such as semiconductors and electric vehicles (EVs), also rely on basic materials and related technologies upstream in the production chain. The challenge is how to enhance value added and achieve sustainable growth while being mindful of these essential elements, which are also tied to economic security. For our Group, a major challenge is to further develop the lineage of petrochemical-related technologies we have cultivated over our long history and to succeed in the transformation toward green chemicals. While this is undoubtedly a difficult undertaking, we also see it as an opportunity. If we can achieve a shift to green basic materials upstream in the production chain for a wide range of chemical materials, it will serve as a significant point of differentiation for us. Given our journey alongside Japan’s petrochemical industry, from the period after the Second World War through the era of rapid economic growth, we feel it is our responsibility to make this transformation a reality.

To achieve this, we are currently pursuing three major initiatives. The first is promoting the shift to green chemicals in chemical complexes and designing ecosystems for the use of bio-based raw materials and clean ammonia, through collaboration with industry peers, academia, and startups. The second initiative involves promoting competitive and monetizable derivatives in collaboration with national and local governments, as well as customers. The third focuses on the transition to green energy, including electricity, gas, and other essential social infrastructure needed for production. All of these elements are indispensable for the realization of green chemicals.

As we advance these initiatives, it is important to ensure that our contributions to solving social challenges are properly reflected in our profits. If a business is not profitable, it is a sign that society does not fully recognize its value. A business that truly contributes to society is one where our end-users and customers recognize the value added of its products—and that recognition also translates into profitability. A key barometer for measuring whether we are on the right track is the sales revenue ratio of our Blue Value™ and Rose Value™ products, which we have established as non-financial KPIs. I believe that by steadily increasing these figures, we can pursue both social value and financial value at the same time.