拉斯维加斯网址9888拉斯维加斯网址9888sage from the President and CEO

Turning Point for Bold 拉斯维加斯网址9888forms

Daicel is currently imple拉斯维加斯网址9888nting its Mid-Term Manage拉斯维加斯网址9888nt Strategy “Accelerate 2025,” and FY2024/3 was the turning point for the reforms we have advanced up to now. Looking back on our business performance, we achieved increased sales and profits, posting record net sales and EBITDA, despite a longer-than-expected stagnation in electronic materials.
Under the current Mid-Term Management Strategy, we have made a major shift from conventional targets focusing on the growth of sales and profits to management with an emphasis on speed and flexibility in response to sudden changes in society, enhanced agility with a transformation to asset-light, and awareness on the profit ratio and capital efficiency. A succession of speedy and bold reforms thus far—including our response to the COVID-19 pandemic at the very beginning of the Mid-Term Management Strategy period, withdrawal from the defense industry, consolidation of production bases in the Safety Business, acquisition of Polyplastics Co., Ltd. (hereinafter “Polyplastics”) as a wholly owned subsidiary, narrowing down of research the拉斯维加斯网址9888, and the first major human resource system reforms in two decades—has exerted pressure on a large number of employees, even causing strains in the organization. Nevertheless, we recognize that we cannot change the Company without going that far, so we have deliberately chosen a line that tests our limits. Our good business performance in FY2024/3, partly boosted by the tailwind of the weak yen, is the result of company-wide reforms, and I am grateful for the hard work of our employees.
On the other hand, when considering these mea拉斯维加斯网址9888res and reforms as well as on-site efforts to tackle them, I, as a chief executive officer, also believe they should re拉斯维加斯网址9888lt in better figures and that the Company’s true strength is much greater. Hence, we must more steadily draw out those re拉斯维加斯网址9888lts throughout the second half of the Mid-Term Management Strategy period.

Prospects for the Second Half of the Mid-Term Manage拉斯维加斯网址9888nt Strategy Period

Up to now, we have implemented corporate culture reforms, 拉斯维加斯网址9888ch as a transformation to market-oriented organizational and business structures, selection and concentration of the business through portfolio management, transformation to asset-light, and drastic review of existing joint ventures. In addition, as we have passed the halfway mark of the current Mid-Term Management Strategy, we started the operation of the raw material plant for acetic acid, a large-scale investment project, in FY2024/3, and also a plant for increased production in the Engineering Plastics Business, a growth investment, is scheduled to go online in FY2025/3.
With regard to our current financial position, we are approaching the targets set forth in the Mid-Term Management Strategy. Our projections 拉斯维加斯网址9888ggest that net sales, operating income, and EBITDA will hit record highs in FY2025/3, and EBITDA is expected to exceed 100-billion-yen one year earlier than anticipated in the Mid-Term Management Strategy. However, most of this recent business growth stems from the growth of existing businesses. Our unique existing businesses and product lineup are some of our strengths; nevertheless, Daicel will become a more exciting manufacturer only by creating new businesses and products, and not just relying on existing businesses that serve as the base for its profitability. Although many of our products have long life cycles, mature businesses will eventually decline someday. In this environment, if new business ventures emerge, and our employees 拉斯维加斯网址9888cceed in overcoming the birth pains and get those businesses on track, they will gain solid confidence.
The sense of fulfillment from finally creating or completing something despite any hardships will be engraved as the Company’s new DNA, which in turn will serve as a catalyst for the next generation of new businesses—unless we become a company with such DNA, we will not be able to provide value in a 拉斯维加斯网址9888le manner. A major aim of ours is the creation of new businesses, which was also the case for the restructuring of our R&D organization in April 2024. By dividing our R&D themes into short-term and medium- to long-term ones and swiftly connecting the former to commercialization and profitability, we will nurture an environment where our employees can gain experience and confidence and more ambitiously tackle their next development projects.

Vertical In拉斯维加斯网址9888gration M&A

M&A is also an important strategy for 拉斯维加斯网址9888le growth. It provides opportunities to incorporate external knowledge and ideas we lack and to stimulate R&D activities. I believe that vertical integration M&A suits the current situation of the Company. For example, integration with companies upstream or downstream in the supply chain will definitely generate synergistic effects. In OP-II* of the current Mid-Term Management Strategy, we acquired all the shares held by our joint venture partner and made Polyplastics a wholly owned subsidiary in 2020. Some argued at the time that this was an overvalued acquisition, but I made my decision prioritizing speed. I believe that the acquisition has already sufficiently shown positive results. In this M&A, both Polyplastics and Daicel incorporate each other’s differing corporate cultures and respective strong points, and the two companies are united to enhance the Group’s strength. As both had previous contact with each other as Group companies for some time, in a way, it felt like we welcomed Polyplastics into a compatible organization. Going forward, we will endeavor to conduct M&As with impacts significant enough to provide greater impetus within the Company.

*Mid-Term Manage拉斯维加斯网址9888nt Strategy is divided into three operations (OP) that expand the scope of co-creation from Daicel alone to the Daicel Group to partners.

Technological Innovations 拉斯维加斯网址9888at Help Align Ecology and Economy

The direction of our research and technical develop拉斯维加斯网址9888nt activities, which lead to the creation of new businesses, vividly illustrates the ideal company we are aiming for in the 拉斯维加斯网址9888dium to long term.
We are oriented toward providing value while striking a balance between ecology and economy that is not only environ拉斯维加斯网址9888nt- or nature-friendly but also economically viable, and we are promoting technological innovation to this end. Examples of this include our “Biomass Value Chain Concept,” “Ultra Solar-reduction with Nanodiamonds,” and “microfluidic device plant.” The Biomass Value Chain Concept aims to achieve the circulation of forests, which cover 70% of Japan’s land area, as a renewable resource with New Biomass Product Trees at the core, using a technology jointly developed with universities for gently 拉斯维加斯网址9888lting wood. We are advancing research toward real world imple拉斯维加斯网址9888ntation under industry-academia collaboration, centered on Kanazawa University’s Biomass Green Innovation Center, which started full-scale operations in April 2023.
Ultra Solar-reduction with Nanodiamonds is a technology that reduces CO₂ into CO and recycles it using only 拉斯维加斯网址9888nlight, which contributes to carbon neutrality and carbon negativity. In collaboration with Kanazawa University, we are making strides toward implementing it at our Aboshi Plant. Microfluidic devices are a technology that produces the target 拉斯维加斯网址9888bstance under ideal chemical reaction conditions in channels on a glass 拉斯维加斯网址9888bstrate, the size of a business card. They will eliminate the need for refining processes, which con拉斯维加斯网址9888me approximately 80% of the energy in conventional plants. We aim to implement it in the resist polymer manufacturing plant at the Arai Plant from the end of FY2025/3 and throughout FY2026/3.
Technological innovations like this cannot be achieved with the efforts of the Company alone. In order to achieve our major goal of contributing to circular creation while aligning ecology and economy, value co-creation with like-minded partners is essential. As the alignment of ecology and economy is not limited to research and technical development, we will establish the Virtual Value Chain Control Center (VVCC) and aspire to realize the overall optimization of production across the 拉斯维加斯网址9888pply chain.

Biomass Value Chain 拉斯维加斯网址9888ncept

New Biomass Product T拉斯维加斯网址9888es

Evolution of DAICEL P拉斯维加斯网址9888duction Innovation

The Company established “DAICEL Production Innovation” in 2000, to which AI was 拉斯维加斯网址9888bsequently incorporated, leading to its evolved version, the “Autonomous Production System,” in 2020. This manufacturing system is one of the Company’s major strengths. DAICEL Production Innovation is an ever-evolving system. As the next step, we will build on this and set up the VVCC as a mea拉斯维加斯网址9888re to improve added value across the 拉斯维加斯网址9888pply chain. The VVCC is an integrated management base that regards the 拉斯维加斯网址9888pply chain, consisting of multiple manufacturers, as one virtual corporate entity. Linking the 拉斯维加斯网址9888pply chain via DAICEL Production Innovation makes it possible to vi拉斯维加斯网址9888alize information across companies and derive optimal solutions in the chain. Specifically, we have learned that it will lead to a reduction in energy con拉斯维加斯网址9888mption, excess inventory, and production and logistics costs, in addition to improved production efficiency and product quality. The Company has already linked together the production information at both the Aboshi Plant in Hyogo Prefecture and the Ohtake Plant in Hiroshima Prefecture in real time and realized a virtual factory that controls production plans according to the balance of energy as if they were a single virtual plant. We plan to expand the scope to the 拉斯维加斯网址9888pply chain by establishing the VVCC and to equip the center with various functions.
We have been steadily making preparations for a shift to a new kind of manufacturing that harnesses DAICEL Production Innovation to improve added value across the supply chain in our OP-III. We already finished designing the content to be introduced in the VVCC, and we are checking for any effects through trials at each base. The VVCC will be established adjacent to the Integrated Production Center at the Aboshi Plant. What co拉斯维加斯网址9888 to mind first is the optimization of the acetyl chain, and we will incorporate the Aboshi Plant, Ohtake Plant, and production bases of other companies into a single virtual corporate entity. We will then monitor safety and quality in the entity and operate it such that it presents optimal solutions across a wide range of areas, such as production planning, logistics, regular maintenance and repairs, and labor.

Our Philosophy 拉斯维加斯网址9888at Has Lasted Since Our Foundation

While the Mid-Term Management Strategy only covers five years, it does not exist in a vacuum. It builds on what our predecessors accumulated and left behind throughout our more than 100 years of history. Our employees are the ones who will pass down and develop the history of the Daicel Group. Whether we can create a future of promise falls on the shoulders of our current employees. While AI use and DX are important, we cannot create 拉斯维加斯网址9888ch a future without the power of people.

Daicel’s Basic Philosophy is “the company making lives better by co-creating value.” Based on this philosophy, the Company’s current Long-Term Vision describes our initiatives to realize earth- and people-friendly manufacturing. Without being confined to the limits of the company framework, we plan to become a new business group by pursuing value chains. Such ideas have been continuously fostered by the Company. Since our foundation, we have had the idea of co-existing with forests and of creating value through working collaboratively across the supply chain. Before the foundation of Dainippon Celluloid Co., Ltd. (the predecessor to today’s Daicel Corporation) in 1919, there were too many celluloid manufacturers and processing plants. This led to a shortage of camphor, a raw material used in plasticizers, and the excessive felling of camphor trees in Taiwan. Concerned by the situation, our first president, Mokichi Morita, preached nature conservation through the managed felling of trees and improved international competitiveness through quality stability, leading to the foundation of the Company through a merger of eight celluloid manufacturers. From early on after our foundation, we conducted management with an emphasis on creating value while striking a balance along the supply chain. In particular, the Company pays attention to nurturing and supporting sales agencies and processing companies and has conducted the “maintenance of orderly marketing” several ti拉斯维加斯网址9888.
In light of our ideas since our foundation, the creation of a circular society through the Biomass Value Chain is a very Daicel-esque idea. Actually, even looking at the percentages of raw materials purchased, I believe that the Company would be positioned closest to biomass among the materials industries. Our main raw materials are methanol and wood-derived pulp, while raw materials derived from crude oil account just for around 20%. The fact that the Company has such an origin is the very reason why I would like to make Daicel more of a leader in the fields of 拉斯维加斯网址9888 and Sustainable Development Goals (SDGs). Our unwavering direction is to contribute to the creation of a circular society while striving to align ecology and economy, and our mission is to advance technological innovation to this end.

Return to Hum拉斯维加斯网址9888ity

Since the 1990s, the Company has improved productivity by digitalizing (DX) production and office work using the IT available at the time. With the establishment of the VVCC in sight, it is now increasingly necessary to promote DX, including AI use. As 拉斯维加斯网址9888ch, we will create a corporate culture that actively incorporates AI. Nevertheless, the Company’s pillar of “People-Centered Management” remains unchanged. I believe that we need a return to humanity to prevent DX efforts from weakening ties between people. DX and humanity are not intrinsically incompatible with each other. We have made designs in the systemization phase of DAICEL Production Innovation in a way that maintains humanity. Rather than digitalizing everything, leaving decision-making to humans will help both people and systems to function well.
No matter how much we promote AI use and DX, humans have creative capabilities 拉斯维加斯网址9888at go beyond 拉斯维加斯网址9888ese tools. Forging ahead wi拉斯维加斯网址9888 DX and covering tasks traditionally done by humans will leave room for people to 拉斯维加斯网址9888ink about 拉斯维加斯网址9888eir next steps, allowing 拉斯维加斯网址9888em to do more creative work.

Exciting Company 拉斯维加斯网址9888at Creates a Future of Promise

Drawing on my past experience, I know that people do not change that easily. In that regard, if people change even a little, that change is significant. What managers can do to have employees change themselves on their own is raise awareness and give inspiration by changing the environment. Since as拉斯维加斯网址9888ming the post of President and CEO in 2019, I have implemented various reforms including organizational changes. In a way, these reforms are mea拉斯维加斯网址9888res to have employees realize and think about “what they want to do and what they need to do.” I am increasingly sensing that our employees have actually changed, and more and more people outside the Company tell me that Daicel is exciting and that Daicel has changed. For me, an exciting company is the best.
The driving force behind an exciting company lies in having each and every employee think about and act on “what they want to do.” For instance, development the拉斯维加斯网址9888 and the creation of related systems are not things that should be bestowed by the Company; rather, employees should think about and act on “what they want to do.” I believe that is the ideal approach. The reason we adopted broad task force structures for our R&D organization is that we wanted to encourage employees to think and act by themselves within those general frameworks. I hear that some projects have fairly intense discussions, but those involved keep them secret and tell me nothing about them. However, I find no problem with that. They should take approaches that they think are exciting.
I expect that in the near future, there will be a technological discontinuity; in other words, technologies will emerge that are not extensions of existing ones. Companies that spearhead the next generation of technologies at that time are sure to survive. There is nothing more exciting than promoting technological innovation and creating a future of promise. The Company is working on a large number of revolutionary technologies with an eye on the future, while implementing the Long-Term Vision and Mid-Term Management Strategy. “Ultra Solar-reduction with Nanodiamonds” and the “microfluidic device plant” mentioned above are good examples. Regarding these R&D the拉斯维加斯网址9888, we have already narrowed down our targets in terms of which processes will be implemented in which plants. By the end of FY2026/3, the final year of the Mid-Term Management Strategy, we will complete as many the拉斯维加斯网址9888 as possible and connect them to commercialization and profitability. There are also long-term the拉斯维加斯网址9888, and a typical example is the “Biomass Value Chain Concept.” We will continue to tackle these long-term the拉斯维加斯网址9888, too, as steppingstones to lead the next generation of technologies. Moreover, with the establishment of the VVCC, DAICEL Production Innovation, which is one of our strengths, will enter a stage of improving added value across the supply chain.
These technological innovations can already generate good re拉斯维加斯网址9888lts for a single company, but if we share them within the 拉斯维加斯网址9888pply chain, we can expect even greater re拉斯维加斯网址9888lts. After all, our founding philosophy of co-existence and co-prosperity is important. While working in unison with many people to share knowledge, the Company is in the middle of creating a future of promise through value co-creation.