Nippon Soda Group

Integrated Report 2020

For inquiries, views, and comments regarding the Integrated Report 2020, please contact us via the following website. https://www.nippon-soda.co.jp/e/contact/

Corporate Communication Section, General Affairs Department, Nippon Soda Co., Ltd. 2-2-1, Ohtemachi, Chiyoda-ku, Tokyo 100-8165 Tel: +81-3-3245-6056 Fax: +81-3-3245-6238 Mission of the Nippon Soda Group Contents Value Creation of the Nippon Soda Group History of Value Creation 2 Message from the President 4 Value Creation Model 10 Create new value through the power of chemistry and Source of Value Creation 12 Explanation of Strategy Explanation of Strategy 16 increase corporate value by contributing to society. Long-Term Vision 18 Megatrends and Materiality for Increasing Corporate Value 20 Business Strategy 22 Materiality Feature 24 The Nippon Soda Group’s Businesses 28 Foundations for Value Creation ESG Management 42 Human Resources Strategy 44 Environmental Protection 48 Process Safety and Disaster Prevention 50 Occupational Safety and Health 51 Logistics Safety and Quality Assurance 52 Chemicals and Product Safety 53 Relationship with Local Communities and Dialogue with Society 54 Corporate Governance 55 Compliance 60 Internal Controls 61 Business and Other Risks 62 Messages from Outside Directors 63 Directors and Executive Officers 64 Financial Data and Corporate Data 10-Year Financial and Non-financial Highlights 66 Financial Review 68 Consolidated Balance Sheets 72 Consolidated Statements of Income 74 Consolidated Statements of Comprehensive Income 75 Consolidated Statements of Changes in Equity 76 Consolidated Statements of Cash Flows 77 Company Information / Shareholder and Investor Information 78

Editorial Policy Integrated Report 2020 comprehensively conveys the corporate value of the Nippon Soda Group and its medium- to long-term goals, both financial and non-financial. When producing this Integrated Report, we strove to provide an easy-to-understand overview of our value creation process by referring to the Guidance for Collaborative Value Creation of the Ministry of Economy, Trade and Industry. From 2020, Nippon Soda has replaced the conventional CSR Report with the Integrated Report. The ESG information listed in the CSR Report is now posted on the Nippon Soda website in a new document entitled ESG Data Book.

Forward-Looking Statements The Integrated Report lists forward-looking plans and strategies, as well as forecasts and outlooks for business performance. Please note that various factors may cause actual results to differ from these forecasts and outlooks.

Nippon Soda Group Integrated Report 2020 01 History of Value Creation

Value Created Since its founding in 1920, the Nippon Soda Group has diversified into business fields such as agriculture, healthcare, the environment, and information. Furthermore, we have successively created products that meet the needs of the Research Organizations times. By using the power of chemistry to solve the issues facing society and by creating value with an eye on the and development and human future, we will continue to contribute to the creation of a society in which every person can live with peace of mind. Multiple businesses and production resources with Global network in niche domains technology that high awareness create long-selling toward social products contributions

Net sales for the 1913 1969 1970 * fiscal year ended Founder Tomonori Nakano received a Started production of the Started production of the resin additive March 31, 2020 patent for the Nakano method of salt pharmaceutical additive NISSO HPC NISSO-PB ¥144.7 billion electrolysis Started production of the fungicide Started operations at the Nisso Kasei Chiba TOPSIN (thiophanate) Plant (currently the Chiba Plant; Ichihara City, 1920 Started operations at the Mizushima Chiba Prefecture) Established Nippon Soda Co., Ltd. Plant (Kurashiki City, Okayama for business activities related to the Prefecture) manufacturing of caustic soda and Established the Agrochemical bleaching powder Synthesis Research Laboratory Started operations at the Nihongi (Odawara City, Kanagawa Prefecture) Plant (Joetsu City, Niigata Prefecture) 1972 Began capital participation in Iharabras S.A. Industrias Quimicas (Brazil) 2002 Established the R&D Laboratory for High-Functional Materials (Ichihara City, Chiba Prefecture)

2004 1995 Acquired the agrichemical business of Dainippon Ink and Chemicals (currently DIC) Nihongi Plant Started production of the insecticide MOSPILAN Agrochemical Synthesis Research (acetamiprid) Laboratory 1934 1997 2010 Started operations at the Started production of the semiconductor photoresist Established the Chiba Research Center (Ichihara City, Chiba Takaoka Plant (Takaoka City, material VP-POLYMER Prefecture) Toyama Prefecture) Jointly developed the next-generation Faropenem- (Integrated the R&D Laboratory for High-Functional Materials 1984 sodium antibiotic together with Suntory Ltd. and and the Production Technology Department of the Chiba Plant) Established the R&D Yamanouchi Pharmaceutical Co., Ltd. (currently Astellas Laboratory for Functional Pharma Inc.), and started production of Faropenem- Materials (Ichihara City, sodium antibiotic. 2011 Chiba Prefecture) Established Nisso Namhae Agro Co., Ltd., a joint venture manufacturing company for active agrochemical Established the Odawara ingredients, in South Korea Changes in Research Center (Odawara net sales City, Kanagawa Prefecture) Purchased Alkaline SAS, a French chemicals manufacturer * Due to a change in accounting 2018 1991 standards, net sales changed from Purchased the plant health non-consolidated (Nippon Soda Co., Participated in the business of Zoetis Japan Ltd.) to consolidated as of 1999. establishment of Novus Corporation International, Inc. (USA) Faropenem-sodium VP-POLYMER antibiotic

1920 1945 1970 1995 2020

Founding Period Early Period Growth Period Development Period (1920 to 1944) (1945 to 1969) (1970 to 1994) (1995 to 2020) Changes at the Nippon Soda As the demand for In order to respond to social changes Looking to the future, Group domestic chemical products during the period of high economic We promoted product development increased, Nippon Soda growth, Nippon Soda embraced utilizing technology and established new the Nippon Soda Group creates new value and solutions, adapted to the progress the challenge of development and growth fields in an uncertain era. of science and drove the commercialization in various fields, and promotes further globalization. industrialization of research. including existing and new fields.

1914 to 1918 1929 1939 to 1945 1954 to 1973 1973 1978 1985 2008 2012 2020 Social Trends World War Great World War Period of high First oil Second oil Plaza Financial crisis European COVID-19 I Depression II economic growth crisis crisis Accord currency crisis pandemic

02 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 03 Message from the President

First of all, as the world continues to be impacted by recovery of people infected by COVID-19 and the end of COVID-19, I would like to offer my heartfelt sympathy to the pandemic. the families of those who have died. I pray for the early

Deep Gratitude for the Last 100 Years and Determination for the Next 100 Years

Nippon Soda celebrated its 100th anniversary in 2020. This our company as being comprised of “Good people doing milestone was made possible thanks to the support of all good work.” As embodied by this statement, Nippon stakeholders, including shareholders, investors, business Soda has overcome adversity through the united efforts partners, employees including those of Group companies, of all executives and employees. Even in the midst of and local communities. For this, I am extremely grateful. adversity, we have actively adopted innovative technology. Moving forward, as a chemical manufacturer with operations We are proud of how we have advanced our research and that are essential for achieving a more prosperous life, we development and used the power of chemistry to support will strive to increase our corporate value with renewed the development of society. determination. Even upon having reached our 100th anniversary, we Since our founding in 1920, Nippon Soda has expanded will never become complacent; instead, we will invigorate its business in various fields such as agriculture, healthcare, our activities and continue to contribute to society through the environment, and information, and has launched diverse chemical technology. As we start the next 100 years, we products that meet the needs of the times. Starting with have formulated the Nippon Soda Group Long-Term Vision caustic soda, which was our main product at the time of “Brilliance through Chemistry 2030.” This Long-term Vision our founding, we have used the power of chemistry to incorporates the future as envisioned by the Group and create new value and have contributed to society through strategies for achieving that future. our products. Our founder Tomonori Nakano described

Reflecting on the Previous Medium-Term Business Plan

During the three-year period from the fiscal year ended of 6.5%) and ROE (return on equity) was 4.8% (compared March 31, 2018 to the fiscal year ended March 31, 2020, to the target of 7.0%), so we didn’t achieve either target. sales of some products fell due to the impact of trade This was due to an increase in costs for the commissioned friction between the US and China. The tightening of testing of new pesticides, lack of progress in initiatives such The Nippon Soda Group has evolved over 100 years of environmental regulations in China has also significantly as M&A and other projects, and a decrease in the profits affected the Nippon Soda Group. For example, operations of Novus International, Ltd., which had contributed to the turbulent change and has contributed to society through were suspended at many plants in China, and the supply of improvement of our financial structure and the Group’s products and materials has stopped. business performance. the power of chemistry. This experience will serve as Regarding the planned investment of ¥50 billion over a Furthermore, in response to the COVID-19 pandemic three-year period, we made growth investments to increase that began to spread from the beginning of 2020, our Head an invaluable asset for our Group going forward. the production of the pharmaceutical additive NISSO HPC Office, branch offices, and research institutes implemented and semiconductor photoresist material VP-POLYMER, both measures such as teleworking and staggered commuting We will continue to create new value for the of which sell well. In terms of investing in maintenance and times. At our manufacturing sites, we have taken necessary renewal, we decided to make decisions based on a careful measures in accordance with the guidelines of each next 100 years while responding flexibly to the examination of business feasibility. Even so, we ultimately applicable prefecture. Our sites have been operating almost made investments that were essentially on the same scale as as planned. Moving forward, there is an urgent need for changing times. the initial plan. Regarding M&A, we acquired the plant health business reforms that utilize AI and IoT, and for Company- business of Zoetis Japan Corporation. wide workstyle reform. In response, we established the Although sales were strong overall, ROS (return on sales, DX Promotion Group in April of this year and plan to do Akira Ishii or operating margin) was 5.6% (compared to the target research into more efficient workstyles. Representative Director, President

04 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 05 Although developing agrochemicals is a time-consuming profitability and efficiency. Furthermore, the Nippon Soda Formulation of New Long-Term Vision: Megatrends and Business Domains process, we have been able to launch three new products* Group will invest ¥30 billion in new businesses and conduct in succession. Because of the new launches and the capital investment for increasing production. We will work Until now, from time to time the Nippon Soda Group has products and high added-value service functions in celebration of our 100th anniversary, a big milestone, we to achieve a dividend payout ratio of 40%, with an annual used the slogan of “speed and change.” Today, society multiple domains. In view of these strengths, it is time for took the opportunity to announce our Long-Term Vision. dividend of ¥80 per share as the lower limit for shareholder and economies worldwide are undergoing drastic changes. the Group to capture business opportunities in a broader First, in our Medium-Term Business Plan “Brilliance returns. We also plan to promote shareholder returns Amidst such trends, every company needs to adapt with range of fields. through Chemistry Stage I” which started from April of through the flexible acquisition of treasury stock. rapid speed. In addition, in the face of numerous issues When formulating our new Long-Term Vision, we began 2020, we are targeting profit of ¥7 billion and ROE of 5% * The fungicide PYTHILOCK (picarbutrazox) (also known as NAEFINE and such as global environmental problems including food by considering how to decipher various global trends. As in in the period under review. By using the ROIC (Return on QUINTECT), the acaricide DANYOTE (acynonapyr), and the fungicide MIGIWA (ipflufenoquin) were all developed in-house. shortages due to population growth, abnormal weather the past, we remain committed to our policy of accurately Invested Capital) tree analysis, which we introduced in the due to climate change, and marine plastic waste, we need ascertaining people’s needs and delivering the required previous Medium-Term Business Plan, each department to rethink all styles of life and increase our awareness in the products and services to the world. We have also assessed will work to achieve its goals by continuously improving face of threats such as the COVID-19 pandemic. the way in which the Group’s businesses should operate When examining domestic conditions in Japan, it is amidst global trends, and identified the importance of clear that a number of diverse issues need to be addressed. creating and providing new value in all domains based on Initiatives for the Four Materialities: Responding to New Needs These issues include the declining birthrate and aging the advantage of our proprietary technologies. The Group population, the growing problem of medical expenses, and has identified the following four megatrends: 1) population Among the four materialities to be addressed in our Long- advantage of being applicable and essential to various an increase in health consciousness. Moreover, it is highly growth and global warming, 2) improvement in living Term Vision, our goal in the agriculture field is to contribute fields. In Japan, labor shortages have created the need probable that values and lifestyles will continue to change standards and social security cost issues, 3) achievement to ensuring food safety and security, and to achieving to improve the efficiency of agriculture. It is believed and diversify with even greater speed. Concurrently, there of a sustainable society, and 4) progress in information and sustainable agriculture. Although Japan has a declining that trends for utilizing ICT technology in agriculture will will be a significant increase in demand for ICT (information communication technologies. We have also positioned the birthrate, the worldwide population is increasing. Higher continue to advance. and communication technology) that supports this four fields of agriculture, healthcare, the environment, and safety is required for agrochemicals applied to crops. Of course, as a manufacturer, the Nippon Soda Group diversification. Even though its main focus is on chemicals, ICT as materialities (important issues) for increasing the However, at the same time, highly effective fungicides, has been engaged in environmental measures during the Nippon Soda Group possesses high-performance corporate value of the Nippon Soda Group. pesticides, and herbicides are needed to secure more the manufacturing process of all its products. In the food. The Nippon Soda Group has established a structure environmental domain, we provide environmental solutions that enables all processes to be performed in-house, from that utilize technologies for adsorbing and removing Transitioning to Management That Emphasizes Efficiency Our Vision 10 Years in the Future: research and development aimed at pursuing new compounds, harmful substances, including the water treatment establishment of manufacturing methods, and production/ technology and resource recycling technology obtained The Long-Term Vision defines our vision 10 years in the to steadily implement measures for achieving our targets formulation of active ingredients utilizing organic synthesis through our environmental measures. future as fulfilling the mission: “Create new value through and goals. The Nippon Soda Group possesses a variety of technology. Demand for agrochemicals is expected to remain Although the Nippon Soda Group has several unique the power of chemistry and increase corporate value by businesses backed by its proprietary technology, and has a strong in the future, and the Nippon Soda Group will continue technologies, the failure to fully utilize those technologies contributing to society.” As a basic strategy, we decided profit base that can withstand various risks. In order to make its ceaseless efforts for developing new active ingredients in has been an issue. In responding to needs in a broad to emphasize investment efficiency (ROI). We are working further use of this strength that we refer to as “Nippon Soda order to contribute to the worldwide food supply. range of areas, we have handled numerous themes. There to reform our business portfolio with the aim of creating Group Technology,” I want to enhance our R&D and expand In the healthcare field, we possess the pharmaceutical have been times in which we took on new challenges a highly efficient business structure through growth it to peripheral development of existing technology. additive NISSO HPC, a product that is highly regarded in without delving sufficiently into the business aspects of investment and structural reform. By accelerating the We will work to thoroughly increase the efficiency of the industry. The cellulose derivative that is a component technology utilization. From the perspective of improving expansion of high added-value businesses with high profit our management, research, production, sales, and supply of NISSO HPC possesses excellent safety specifications. As profit efficiency, which is the basic strategy of the Long- margins and the liquidation of unprofitable businesses, chains in an effort to strengthen cost competitiveness. We such, the application of NISSO HPC has begun in the food we will promote thorough management efficiency. The will also strive to further expand our overseas businesses by products field (supplements), and Nippon Soda is preparing Nippon Soda Group’s strategy is to generate stable cash in promoting the development of new markets. Our overseas to increase production capacity to meet the demand. In our existing businesses, create new value in growth fields, sales ratio has always been high, coming in at 33% (fiscal conjunction with rising health consciousness, there are and raise our profit efficiency to more than double the year ended March 2020). Nevertheless, in the future, we increasing expectations for technologies that make it current level. Furthermore, we will increase corporate value will select target areas for expansion in anticipation of easy to take supplements, thus meeting the needs of the by proactively implementing measures that emphasize further market growth. Furthermore, in order to promote healthcare field for a “healthy life to all people.” a balance between investment in growth fields and innovation and increase our sophistication, we intend to In the ICT field, we utilize precision polymerization shareholder returns. The management indices that we strive actively cooperate with external parties, as well as deepen technology and organic synthesis technology to provide to achieve by 10 years from now are ROS of 10% or higher, and integrate our proprietary technologies. high-performance resins for communication equipment ROA of 7% or higher, and ROE of 8% or higher. We had already begun to consider these strategies materials and semiconductor photoresist materials. In the The Nippon Soda Group plans to divide the 10 years of while promoting the previous medium-term business plan. future, there are expectations for heightened demand our Long-Term Vision into three stages, Stages I to III, to We have been making preparations while keeping track as full-scale introduction begins for the next-generation formulate a Medium-Term Business Plan for each stage, and of trends in the business environment and current issues. communication system 5G. Additionally, ICT has the

06 Nippon Soda Group Integrated Report 2020 07 Term Vision, we will not insist on self-reliance; instead, we technologies in partnership with other companies. I also Nippon Soda is implementing personnel measures that mid-career hires attend the entrance ceremony of newly will explore the utilization and development of technology believe that it is important to make more effective use of will trigger a change in thinking; for example, dispatching hired graduates. The fluidity of human resources is expected in collaboration with external parties, and will increase the our proprietary technologies by strengthening their linkage engineers to university laboratories to engage in industry- to increase in the future. By flexibly responding to diversity, sophistication of technology by incorporating peripheral to the development of our business. academia collaboration and giving them the experience the Nippon Soda Group aims to create a bright and vibrant of being stationed overseas for work from a young age. workplace environment, where ideas can be shared across Furthermore, we are working to secure the required human organizations, and where vitality is the norm. Building on the Intertwined Concepts of Corporate Value and Social Value resources through mid-career hires. Additionally, in order to instill our Long-Term Vision, it Our overseas sales ratio is high, and we are actively hiring is necessary for all Group companies to work together to foreigners in light of future overseas expansion. We are heighten their ability to execute. I would like to enhance In a changing society and global environment, the Nippon activities that emphasize safety, the environment, and also hiring an increasing number of women. The number the sense of unity in our Group by promoting personnel Soda Group aims to conduct management based on the quality. From there, we developed CSR activities that are of employees with diverse educational backgrounds and exchanges and standardizing paperwork between Nippon two concepts of increasing social value and increasing based on social contribution. life experiences is increasing. Therefore, I believe that it is Soda and each consolidated company, and among corporate value through business growth. At first glance, it At present, ESG, which includes corporate governance necessary to cultivate a sense of unity and cooperation; for consolidated companies. may seem contradictory to focus on improving business in addition to CSR, is listed as an investment index. There example, facilitating the building of relationships by having efficiency while also considering the environment and is now a need for corporate management from a broader providing value to society as a whole. However, if either of perspective. As a matter of course, the Group is responding these concepts is not fully pursued, the Nippon Soda Group to these changes in accordance with the Corporate will not be able to realize its management philosophy nor to Governance Code. From 2020, to further enhance our Inheriting Tradition and Achieving New Growth through Change achieve its Long-Term Vision. It is important for the Nippon governance activities, we have transitioned to a company Soda Group to expand businesses by developing the with an audit and supervisory committee. Although 100 years is a major milestone, it is also just a City in Toyama Prefecture, it is not uncommon for many products that will contribute to society, and in so doing lead The same also applies to the Sustainable Development point in time. As a company, it is important to continue generations of the same family to work as employees for the to increased corporate value. Goals (SDGs). The SDGs consist of 17 goals. Multiple goals to grow while embracing new challenges. There is no Nippon Soda’s Group. High loyalty to the Company is an Japanese chemical manufacturers have contributed to can be applied to a company that engages in a range guarantee that our business will continue just because invaluable asset. We will continue to meet the expectations the development of the Japanese economy since the end of business activities. This means that the appropriate we have survived the last 100 years. In order to continue of local communities and contribute to their development. of World War II. Conversely, these manufacturers are also perspective must be implemented from the development contributing to the creation of a sustainable society in which We will respond to shareholders and investors by working responsible for causing environmental issues in conjunction stage. The perspective cannot be incorporated at a later each individual can live with peace of mind, all officers to improve capital efficiency, with the aim of securing both with the growth of their businesses. For more than 20 years, stage. Regardless of how outstanding or technologically and employees must work together. We must all strive to growth investment and returns to shareholders. With this in the Nippon Soda Group has been working on measures innovative the developed product may be, we must never increase corporate value while creating businesses and mind, it is extremely important to use the three years of the as a manufacturer. One example is responsible care (RC) overlook this perspective. products that will contribute to society with the perspectives new Medium-Term Business Plan to establish a firm foothold of SDGs and ESG. for achieving our Long-Term Vision. Based on the sense of In addition to the production technology that has been urgency inherent in the expression “without change, there Reform of Employee Awareness is Essential for Achieving Goals inherited as a company tradition, the relationships of trust is no future,” the Nippon Soda Group will make the utmost that the Nippon Soda Group has cultivated with the local efforts to achieve its goals. community are an important intangible asset. In areas Please expect great things during the next 100 years of In addition to achieving our Long-Term Vision, it is most these concepts, reflecting those concepts at the actual where factories are located, such as Nihongi City in Niigata the Nippon Soda Group. important that we respond to social demands in areas such business site, and working toward goals. We have set Prefecture (the birthplace of our company) and Takaoka as ESG and the SDGs by harnessing the power of each ambitious goals in our Long-Term Vision. It is important that employee, making sure they understand the meaning of all employees share the spirit of those goals and recognize their role in achieving the goals. In particular, I would like the employees who will guide us in the future era to work with the spirit of taking the initiative for laying a foundation for the next 100 years. Representative Director, President Naturally, I will serve as a leader for the Nippon Soda Group. Creating an environment for all employees to work on this effort together is an important issue. In particular, in regards to human resource development, we have been reviewing the education system centered on OJT (on-the- job training) over the past four years, and are promoting a system to support career development. In this system, the employee and the Company work together to set goals for careers. If a business requires innovation, the organization also needs human resources who are capable of innovation.

08 Nippon Soda Group Integrated Report 2020 09 Value Creation Model

Based on our mission, “Create new value through the power of chemistry and increase corporate value by contributing to society,” the Nippon Soda Group will improve its corporate value and social value by providing chemicals and related services for resolving social issues, and will build value creation processes that achieve sustainable growth. Local Business Shareholders communities Customers partners and Investors Long-term trust Safety and Fair environmental Increase transactions protection social value

P. 42

Megatrends Input capital Business activities Output Outcome

ROS Financial capital Stage I Medium-Term Business Plan Our Vision 10 Years in the Future “Brilliance through Chemistry” Stage I P. 16 to 17 10.0% or more · Ability to create stable “Brilliance through P. 18 to 23 Mission Numerical Targets cash flow Chemistry 2030” P. 20 · 24-27 · Resilient and healthy ROA Create new value through the Net profit ¥7.0 billion financial structure [Basic Strategy] 7.0% or more power of chemistry and increase Through growth investment that emphasizes ROI · Owned capital corporate value by contributing and thorough structural reforms, ”Transition to a Highly ROE Stage II Stage III to society. ¥141.3 billion 5% Efficient Business Structure—Raise Our Profit Efficiency ROE Population growth (March 31, 2020) to More Than Double the Current Level” Increase in food and ¥30.0 billion yen for new 8.0% or more feed production Capital businesses and increased [Main Issues] Manufacturing capital expenditure Agriculture and improvement of production · Enhancement of cost competitiveness and efficiency Expansion of high- production efficiency · Capital investment for · Expansion of overseas businesses added-value businesses Shareholder Dividend payout ratio 40% · Promotion of new product development and entry and liquidation of Securing food and Global warming new businesses and (However, the lower limit is an annual return into new businesses Increase in the incidence increased production dividend of ¥80 per share) unprofitable businesses sustainable agriculture of crop pests and diseases ¥30.0 billion Overseas sales ratio (Medium-Term Business Plan: Target for March 31, 2030 Stage 1) Improvement in living P. 12 to 13 40% standards Increased demand for Intellectual capital pharmaceuticals and A sincere and flexible Sophistication of core improved QOL · Research and development organizational culture technologies Social security cost for creating high added- issues value products Promotion of new Healthcare Increasing health · Production technology / product development consciousness and awareness Unique proprietary core P. 14 to 15 Creating products and entry into new of preventive medicine businesses technology with real value Healthy life to all people · Owned patents Agro Products Providing products and Chemicals Research and services required by 2,549 P. 30-33 P. 34 to 37 customers and the social (March 31, 2020) development Achievement of Agriculture Healthcare environment in the 2020s a sustainable society capability Reduction of environmental burden Responses to climate Building a resource Human capital change issues recycling-based society · Number of employees (Consolidated): Environment ICTICT Environment Preservation of 2,744 biodiversity (As of March 31, 2020) Toward a resource Dialogue with recycling society Progress in information Social capital consumers, business and communication Other Other businesses Trading partners, and local technologies · Overseas sales ratio: P. 14 to 15 communities Popularization of smart devices P. 39 P. 38 Rising needs for technological 33.4% Transportation Construction and Promotion of diversity, innovation Production technology Warehousing work-life balance, and Resource capital capabilities that create safety, P. 39 P. 38 career program security and stability · Energy consumption (in Hold constructive dialogue with crude oil equivalent) shareholders and investors, and disclose information in a timely ICT 93,100 kL and appropriate manner (Year ended March 31, 2020) * Nippon Soda (Non-consolidated) Applying the · Amount of water Enhancement of functionality of corporate governance consumption Increasing Corporate Value chemicals to IT devices 16,700,000 tons ESG Management (Year ended March 31, 2020) P. 42 to 43 Promotion of *Four domestic plants of Increasing Social Value compliance Nippon Soda management

10 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 11 Source of Value Creation—DNA of Nippon Soda

The source of value creation at the Nippon Soda Group is found in our research and development, our technical capabilities that have responded to changing market demands with the times, and the human resources who have supported the aforementioned work. When thoroughly examining our achievements, you can see that the strength and concepts of our founding spirit have been inherited and continue to thrive. Even in today’s era of diverse change and the never-ending wave of issues, growth at the Nippon Soda Group is supported by our DNA of having confidence in our ability to determine the correct path forward without wavering from our convictions, and by our passion for research and technology aimed at solving difficult challenges one by one.

Origin of the Company Emblem The Company emblem for Nippon Soda is a snow rabbit. Specifically, it is a white hare surrounded by a hexagonal snowflake. The emblem is based on the following episode. In the winter of 1920, shortly after the Company’s founding, a meeting was being held at the Nihongi Plant in Niigata Prefecture in regards to the logo to be used on product containers. Suddenly, a pure white rabbit jumped into the room, ran around, and then disappeared outside. At that time, our Company’s main products were caustic soda and bleaching powder. In the case of these products, a higher purity results in a purer white color. Therefore, the pure white rabbit represented the high quality of our products. Furthermore, rabbits excel at running up mountains but not running down. This was a perfect symbol of Nippon Soda at that time, in terms of how we were striving to become a growth company with high-quality chemical products that are not affected by recessions. The six sides of the hexagonal snowflake represent the following ideals: honesty, industriousness, originality & ingenuity, cooperation, service, and gratitude. This is a perfect anecdote for Nihongi City, Niigata Prefecture, which receives some of the heaviest snowfall in Japan. Furthermore, this episode is linked to the world of chemistry, where facts, chance and ideas are all linked together. Heritage from the History of Our Company Although favorable conditions did not exist at the time of our founding,

we were able to overcome adversity thanks to our people. From our founding to the present, a large number of forced to abandon the plan. The plan was ahead of its Nippon Soda was founded in 1920, a period of great recession after World War I. Furthermore, many more difficulties were outstanding engineers have supported the growth of time and was eventually recognized and highly evaluated lying ahead. Conversely, it was also an era when Japanese industry was heading for development. The unceasing efforts for Nippon Soda and enabled us to come back from difficult as having played a leading and enlightening role in the improvement, innovation, and research and development led to the development of today’s Nippon Soda Group. These predicaments. Of course, Nippon Soda contributed to petrochemical industry. the rapid expansion of business in the era when the Nisso After that, Japan entered a period of high economic efforts were supported by our people. The spirit of “Good people doing good work” is still alive even today. Konzern was formed in the 1930s. Afterwards, we were growth. Even though Nippon Soda’s sales grew, we placed under military supervision as Japan moved toward continually failed to secure profits due to the interest Words from our founder Tomonori Nakano World War II. We also experienced an era in which we were burden associated with large capital investments. Under forced to respond to development requests in various fields. these circumstances, engineers focused their research and “In no way does the Nihongi area present any advantages for industry in terms of transportation, terrain, One such example was the construction and operation of development in a new direction; namely, on fine chemicals a caustic soda and bleaching powder factory in Malaysia. such as pesticides and polymer fields centered on urethane. or supply and demand. Furthermore, during one-third of the year, the area suffers from heavy snow that There is an anecdote that says when the German airship We promoted a shift from quantity to quality. These completely buries homes. Shortly after our founding, Nippon Soda faced the Great Depression after World Zeppelin flew to Japan and landed in Kasumigaura City efforts eventually led to the creation of high added-value (Ibaraki Prefecture), Nippon Soda was responsible for the products. The products developed in this era included the War I. There was no conglomerate backing our company. Indeed, Nippon Soda was founded in a very emergency supply of depleted high-purity hydrogen. At long-selling large-volume product TOPSIN-M (thiophanate- disadvantageous era. Nevertheless, we were blessed with one thing—the human element. Our employees that time, only Nippon Soda was able to supply such a large methyl), which is used as a fungicide all over the world, and joined together and worked with great devotion. Even though I was a managing director, the factory amount of high-purity hydrogen. the liquid polybutadiene NISSO-PB, which attracted the After World War II, GHQ (Supreme Commander for the attention of the industry due to the novelty of its proprietary manager and I would don dirty clothes and crawl under the machines. We worked both day and night. Allied Powers) permitted Nippon Soda to restart through manufacturing method and still enjoys expanding use Thanks to these efforts, we were able to build outstanding products and launch them on the market. It division of the company. The Company continued to face even today. Furthermore, we started producing the difficulties because it was not clear which products and pharmaceutical additive NISSO HPC (hydroxypropyl was also fortunate that we worked in the chemical industry, which had the highest demand of any industry business fields would replace munitions, and large-scale cellulose) on a small scale. in Japan. It can also be said that we possessed an exceptional spirit toward business and policy toward personnel reductions were necessary. However, even The Nippon Soda Group has been willing to invest in management. under these circumstances, the Company was committed technology even in difficult times, and our engineers have to launching new businesses. In 1950, we submitted worked hard to develop new products, strengthen cost The chemical industry must constantly adapt to advances in science and evolve into more efficient Japan’s first petrochemical business plan to the Ministry competitiveness, establish overseas production technology, methods. We have always maintained our commitment to improving and innovating our equipment and of International Trade and Industry (currently the Ministry and reduce environmental burdens. This spirit has been of Economy, Trade and Industry). Our plan to produce inherited as the DNA of the Group and is the driving force operation, and to researching and industrializing new products. In some areas, our business moved ahead petrochemicals such as ethylene oxide and ethylene glycol behind all that we have accomplished. of the science. Even when the existence of our company was in danger due to extreme financial difficulties, via the naphtha decomposition method was approved The Nippon Soda Group will “contribute to society by the Ministry of International Trade and Industry. through the power of chemistry” and realize a future of we actively encouraged these kinds of technological advancements. “Good people doing good work.” This Nevertheless, due to the pioneering nature of the plan, “Brilliance through Chemistry” based on technological was the greatest strength of Nippon Soda. As a result, we were able to overcome our inconvenient location, we were unable to receive financing from banks and were capability and passion. damage from snow, and industry stagnation.

“Celebrating the 20th Anniversary of Our Company” (Nippon Soda Company Newsletter; May 1940)

12 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 13 Source of Value Creation—Power of R&D and Production

The Nippon Soda Group is embracing the challenge of creating new businesses that solve global issues. We have Toward the Creation of New Themes positioned the four fields of agriculture, healthcare, environment, and ICT as priority fields. Based on the keywords of “fusion of knowledge,” “fusion of technology,” and “global,” our two core research institutes and the production technology research centers located in each plant serve as important bases that support value creation. Nippon Soda is constantly exploring new research themes. In Research Theme Selection Process 2019, we established a Theme Council which cooperates closely with research departments and sales departments in order to review the possibility of commercialization while considering market trends, etc. In this way, we decide on the selection of research themes. Regarding the progress of research, based on factors such as changes in the external environment, discussions are held on the continuation and acceleration of research at the Theme Evaluation Meeting. Moreover, we are promoting the search for future themes in Consider theme collaboration with external institutions such as other industries by management

and academia, based on the recognition that it is necessary Business decision made (Theme Evaluation Meeting)

to utilize not only internal resources but also external research Select theme (Theme Council) resources and technologies. of research Discuss the progress

Toward the Application Development of Core Technologies

The Nippon Soda Group possesses many excellent core technologies. However, when considering future market Establish/strengthen needs and changes in the social environment, it is essential to introduce new technologies, as well as to establish and further strengthen core technologies. Therefore, we will strengthen our technological marketing capabilities, broaden our assessment and understanding of new needs, and establish a system that Introduction can respond more flexibly. Technology of external marketing Research and Development Production We analyze the patent trends of other companies and technology search for new possibilities while staying alert to trends in even more areas. For example, we examine whether or not there By effectively utilizing the fundamental are any aspects of commercially available products that can be technologies and core technologies We have built a safe, stable, and efficient Core substituted by the Group’s technology. On top of that, we will technologies that we have accumulated over production system It is based on create new value by improving and increasing the sophistication the past 100 years, our research the development of proprietary of our proprietary technologies, and by developing new and development handles the following manufacturing technologies through technologies while cooperating with external parties. three areas: 1) development of the repeated improvement of the new products, 2) the technological production technology we have Promotion of Digital Transformation improvement of existing products, and cultivated over a century. 3) the development of peripheral markets. Nippon Soda has launched an AI working group to consider construction of databases. The Odawara Research Center, which plays a central We have production technology research centers at various initiatives for digital transformation. In terms of In terms of production, Nippon Soda is working to rationalize role, promotes research and development centered on our Nihongi, Takaoka, Mizushima, and Chiba plants. In material development, we are striving to create a system for work, save labor, and create a system that will enhance safe and agrochemicals, while the Chiba Research Center conducts addition to establishing mass production technology for efficient research and development by introducing materials stable operation. We will also promote the development of AI research and development in the field of chemicals such as newly developed products, we are engaged in various informatics* with the aim of using AI to strengthen data human resources that can support these technologies. functional materials and electronic materials. technological developments and engineering research. science. Regarding the development of agrochemicals, we In the development of agrochemicals, we For example, one of our strengths is how we improve have been working on machine learning for supporting the are accumulating a track record of technological existing production processes and develop proprietary * Efforts in which informatics methods that utilize statistical analysis, etc., are used to improvements that will lead to the development of new manufacturing technologies with high productivity in creation of new chemicals. In order to further strengthen these search for new materials from a large amount of data products. The Nippon Soda Group possesses a research collaboration with research departments. initiatives, we will proceed with digital transformation and the system that can advance all phases from basic research to In 2019, in opening a new research building that field experiments. We have the major advantage of being consolidates and integrates research facilities at the COLUMN able to carry out highly efficient and swift research and Takaoka Plant, we established a system to enable development, and product development that combines efficient use of testing equipment and human research MOF development together with Rikkyo University Passing on production technology evaluation and exploration. resources. The Nippon Soda Group is also accelerating For the development of chemical products, we have product development by strengthening synergies with In July 2020, as a result of an industry-academic collaborative project Over a period of 100 years, the Nippon Soda Group has accumulated established an integrated system for all stages from the manufacturing process knowledge and manufacturing with Rikkyo University (group with Dr. Mao Minoura from the Chemistry various production technologies and know-how. We believe that it is development of functional chemical products that make know-how, and by improving operational efficiency. Department of the College of Science), we were able to announce the important to pass down technology and know-how while continuing full use of our proprietary technologies to research for Each research center supports a safe and stable development a new material with a metal-organic framework (MOF) to make further improvements. Additionally, for more than 10 years commercialization and streamlined improvements. production system and complies with all applicable laws that is functional and porous. This new material is attracting great now, we have provided opportunities for each technical department Both of the aforementioned centers conduct research and regulations, while paying attention to occupational attention. The Nippon Soda Group has been developing agrochemicals to cooperate and exchange information in the form of manufacturing and development in cooperation with various departments safety and health. using hydroxamic acid derivatives for many years. This technology was process research meetings and production technology research such as marketing, technical services, and manufacturing, also used in this industry-academic collaborative project. The mass meetings. These meetings also provide an opportunity to discuss while working to improve the technological capabilities of production of new MOFs with less environmental impact is expected. production technology and are held throughout the entire Group. each department. Our Group will promote industrial application.

14 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 15 Explanation of Strategy

efficient business structure. peripheral businesses. However, management decisions From the perspective of the forecasted future demand regarding the caustic potash business were made from the and the investment required for maintenance and renewal perspective of transforming to a highly efficient business of equipment, there are products and businesses for which structure, which is the basic strategy of the Long-Term Vision. difficulty in achieving medium- to long-term growth is In parallel with the liquidation of such unprofitable businesses, expected, even though those products and businesses were Stage I will include growth investment of ¥30 billion with the With a financial strategy that developed according to market needs. In Stage I, the Nippon aim of achieving high profitability. The core of these initiatives Soda Group will make decisions on the liquidation of such is investment in equipment to increase production of the emphasizes investment efficiency, products and businesses, thus making a major shift toward pharmaceutical additive NISSO HPC and mass production we will aim for “Brilliance through asset efficiency. In August 2020, we announced that we would equipment for the new fungicide MIGIWA (ipflufenoquin) implement fundamental reforms to the business structure of at the Nihongi Plant. Furthermore, it also includes regular Chemistry.” the caustic potash business including the discontinuation of maintenance and renewal investment. Therefore, the capital production. The caustic potash business started with production investment for Stage I will be quite large. These are investments at the Nihongi Plant (Joetsu City, Niigata Prefecture) in 1929 that will enable us to achieve restructuring into a highly efficient Kiyotaka Machii and supplied products for over 90 years while strengthening business, which is the subject of Stage I. Director Executive Managing Officer CSR Promotion, and Internal Control & Audit Dept., Secretariat Dept., General Affairs Dept., Capital Policy in Stage I is Aggressive Investment for Growth and Shareholder Returns Finance & Accounting Dept., Responsible Care Management Dept. and Manager, Trade Administration As discussed above, the plan for Stage I calls for growth payout ratio at 40%. Also, Nippon Soda set a dividend lower investment of ¥30 billion. This is a significant increase from limit for the first time. During Stage I, the lower limit for the the ¥10 billion in the previous medium-term business plan. annual dividend will be ¥80, regardless of earnings results. However, I believe that this investment is necessary in order Furthermore, we began purchasing treasury shares to a to steadily implement our strategy and achieve our Long- maximum of ¥5 billion from February 2020. Moving forward, we Term Vision. Furthermore, from the perspective of investment plan to proceed flexibly with implementation. efficiency, we plan to reassess assets, including cross-held Continuing on from the previous medium-term business Toward a Financial Strategy That Emphasizes Investment Efficiency shares, and manage the balance sheet appropriately. Also, plan, we are proceeding with efforts to identify issues and in Stage I, we will take active measures to return profits to implement countermeasures by performing tree analysis During repeated discussions and reviews held when formulating Looking at our shareholder composition, the ratio of foreign shareholders. Previously, the shareholder return policy was of the ROIC (return on invested capital) index, and then to the Long-Term Vision “Brilliance through Chemistry 2030,” we shareholders is increasing, and we need to respond to their based on the total return ratio, which included the acquisition use the analysis results to improve ROE through continuous referred back to the previous medium-term business plan, as demands. of treasury stock. However, in Stage I we set the dividend improvement of profitability and efficiency in each department. well as to past management strategies and their results. By First, in order to instill ROI orientation in the awareness of all doing so, we reconsidered what management indices require our employees, we focused on the concept of ROA. In other words, Numerical Targets attention. Until now, we have been developing measures using we will improve business operations from the perspective Indices Numerical Targets (FY 2023) a P&L orientation that centered on sales and profit. However, of whether or not assets are generating appropriate profits upon returning to the starting point for increasing corporate from investment, and whether or not we are improving profits value, we arrived at the conclusion that the concept of “investing through efficient utilization of assets. The result of these efforts Net profit ¥7.0 billion (¥6.76 billion for FY 2020) and earning profits,” that is, ROI (return on investment), should is improved ROE. Investment efficiency means we will revise be our basic strategy when formulating our Long-Term Vision. our business and product portfolios from the perspective of We also decided on the need to execute measures based on asset efficiency, and as we improve operational efficiency, our ROI to realize a management plan that provides the ROE (return balance sheet will be streamlined, resulting in higher ROS and ROE 5% (4.8% for FY 2020) on equity) that is demanded by today’s economic society and increasing ROA. Moreover, we will raise ROE by proactively by investors. We will divide the 10 years covered by the Long- implementing policies that emphasize the balance between Investing ¥30.0 billion in capital investment Term Vision into three parts. We will then formulate and execute growth investment and shareholder returns, while giving Capital expenditure medium-term business plans for each part based on activities consideration to financial soundness. In “Brilliance through in new businesses and to increase production for improving ROI. Of course, unpredictable situations will arise. Chemistry Stage I,” we plan to achieve ROE of 5%. Then, in our However, we will achieve improvements through trial and error. Long-Term Vision, we will achieve an ROE of 8% in 10 years. Dividend payout ratio 40% Shareholder returns Our final goals for 10 years in the future are ROS (operating We seek to increase asset efficiency and manage the Company (However, the lower limit is an annual dividend of ¥80 per share) margin) of 10% or more, ROA (operating profit ÷ total assets) of even more efficiently, thereby promoting a shift to a highly 7% or more, and ROE of 8% or more. efficient business structure and increasing corporate value. * Each department will improve ROIC (return on invested capital) by continually improving profitability and efficiency, thereby improving ROE.

Stage I for Solidifying the Foundation of the Long-Term Vision The first step of the current Long-Term Vision “Brilliance The capital policy in Stage I also incorporates unprecedented through Chemistry 2030” is the Medium-Term Business Plan shareholder return measures. First of all, in preparation for In the Long-Term Vision, the first Medium-Term Business Plan will solidify our foundation for increasing corporate value. “Brilliance through Chemistry Stage I.” The strategy of this achieving our goals over the three years, all officers and (FY 2021 to FY 2023) is entitled “Brilliance through Chemistry In Stage I, we will begin by liquidating unprofitable stage is clearly distinct from past management strategy, and employees will work together and reaffirm their conviction. Stage I.” As the first step in achieving our Long-Term Vision, we businesses and establishing a system for adoption of a highly indicates our strong aspiration and conviction as a corporation.

16 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 17 Long-Term Vision

“Brilliance through Chemistry 2030”

The Nippon Soda Group celebrated its 100th anniversary promote thorough management efficiency. Additionally, the Medium-Term Business Plan “Brilliance through in February 2020. As a chemical manufacturer that will by generating stable cash in existing businesses and Chemistry Stage I,” which begins from FY 2021. We achieve sustainable growth during the next 100 years, we creating new value through growth investment, the aim to achieve an ROE of 5% by aggressively investing will engage in management to increase both corporate Nippon Soda Group will vigorously transform its business in products and businesses that increase our ability value and social value. portfolio into one that is resilient to changes in the to generate cash flows by liquidating products and In April 2020, we started Nippon Soda Group’s Long- business environment and that generates stable profits. businesses that are inferior in investment efficiency, and Term Vision “Brilliance through Chemistry 2030.” In The Nippon Soda Group has identified four fields as by building an appropriate balance sheet. this Long-Term Vision, we have made a clear transition materialities (important issues) for increasing corporate from P&L management to ROI management via the value: 1) agriculture, 2) healthcare, 3) environment, and basic strategy of “Transitioning to a Highly Efficient 4) ICT. We will provide products and services required Business Structure—Raise Our Profit Efficiency to More for customers and the social environment in the 2020s. Than Double the Current Level.” We aim to gradually At the same time, we will engage in ESG management March 2030 increase our level throughout Stage I to Stage III of through CSR activities to improve corporate value and ROE target Our Vision 10 Years the Long-Term Vision. By reforming our structure and CSR activities to protect corporate value. expanding our high added-value businesses, we will In Stage I of our Long-Term Vision, we will focus on in the Future (%) 8.0% Mission 10 Create new value through the power of Stage I Stage II Stage III chemistry and increase corporate March 2023 April 2020 to March 2023 April 2023 to March 2026 April 2026 to March 2030 ROE target value by contributing to society 8.0 March 2020 ROE 5.0% Basic Strategy 6.0 % Through growth investment that emphasizes ROI 4.8 and thorough structural reforms, “Transition to a Highly Efficient Business Structure— Raise Our Profit Efficiency to More Than Double the Current Level”

Capital Policy 4 We will proactively implement policies that emphasize the balance Expansion of revenue from chemicals between growth investment and shareholder returns, Liquidation of unprofitable businesses Expansion of revenue from new agrochemicals and agrochemicals while giving consideration to financial soundness.

ESG Management 2 Expansion of overseas business centered on agricultural and pharmaceutical additives We will contribute to society by providing products and services required by customers and Cultivation and establishment of core the social environment in the 2020s Sophistication of core technologies Creation of new value/solutions technologies

0 Management Indices (KPI) Secure stable profits Create new value Seek management that emphasizes investment efficiency in order to increase corporate value Generation of cash • Enhancement of cost competitiveness and efficiency Growth investment • Promotion of new product development • Expansion of overseas businesses and entry into new businesses ROS (March 2020: 5.6%) (Operating margin) 10.0% or more

ROA (March 2020: 3.8%) (Operating profit ÷ 7.0% or more Total assets) → Improvement of profit margin and total asset turnover ROE (March 2020: 4.8%) (Net profit ÷ 8.0% or more Equity capital) → Appropriate balance sheet control

In order to ensure that the Nippon Soda Group realizes its mission and achieves sustainable growth, we will engage in management for We will generate stable cash flows in existing businesses and create increasing both corporate value and social value. new value through growth investment. Increasing Corporate Value Increasing Social Value

18 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 19 Megatrends and Materiality for Increasing Corporate Value

Increase Corporate Value The 21st century is called the “environmental century,” and we are directly facing issues worldwide including global warming, population growth, and resource depletion. Basic Through growth investment with an emphasis on ROI and thorough Strategies In Japan, there are concerns regarding the significant impact on social systems caused by problems such as the structural reforms: “Transition to a Highly Efficient Business Structure declining birthrate, aging population, and increase in social security costs. The Nippon Soda Group is responding to —Raise Our Profit Efficiency to More than Double the Current Level” such conditions by contributing to the creation of a sustainable society in which each person can live with peace of mind through chemistry and related services. The Nippon Soda Group has created multiple businesses in competitiveness and efficiency, 2) expansion of overseas niche chemical fields backed by its proprietary technological businesses, and 3) promotion of new product development strengths and maintained a profit base that is resilient to various and entry into new businesses. In Stage I, as the first step in risks. As a result, as a chemical manufacturer aiming to increase achieving our Long-Term Vision, we will implement policies corporate value, we have achieved a profit base capable of that emphasize the balance between growth investment and withstanding various risks. The main issue of our Long-Term shareholder returns while giving consideration to financial Since our founding in 1920, the Nippon Soda Group has contributed to the development of society Vision is to utilize the strengths we have cultivated thus far soundness, and will enhance asset efficiency through by providing new value to the world through chemistry. to further increase our corporate value. This will be done appropriate control of our balance sheet. through the three basic strategies of 1) enhancement of cost The Group supports people’s everyday lives by delivering a range of chemical products and services to the agricultural, healthcare, environmental, and ICT fields. Main Issues Measures

Enhancement of cost • Promote expansion of high-value-added businesses and liquidation of unprofitable businesses competitiveness and • Work to achieve even greater efficiency at each department Mission of the Nippon Soda Group chemistry efficiency (management, research, production, sales, supply chain)

Creating new value through the power of chemistry and realizing increased corporate value • Promote the expansion of existing businesses and market development for new products and new businesses. through our contributions to society. Expansion of • Consider collaboration with other companies overseas businesses • Overseas sales ratio: The target is 40% for the fiscal year ending March 31, 2030 (33% for the fiscal year ended March 31, 2020)

Promotion of new • By deepening and fusing proprietary technologies and by creating synergy through the introduction of Megatrends product development external technologies, strive to enhance core technologies and actively inject resources and entry into new businesses • Create new businesses with an eye to customers in the 2020s and beyond Progress in Improvement in Population growth Achievement of information and living standards Global warming a sustainable society communication Social security cost issues technologies

Increase in food and feed Increased demand for Reduction of Popularization of Increase Social Value production and improvement pharmaceuticals and improved QOL environmental burden smart devices of production efficiency Increasing health consciousness Building a resource Rising needs for ESG We will contribute to society by providing products and services required Increased outbreaks and awareness of preventive recycling-based technological Management of crop pests medicine society innovation by customers and the social environment in the 2020s.

As a chemical manufacturer that contributes to society, the activities, and governance. CSR activities to improve corporate Nippon Soda Group aims for sustainable growth through value are focused on the four fields of agriculture, healthcare, Materialities of Increasing Corporate Value products and services required by customers and the social environment, and ICT (as materialities). These activities Value Creation of the Nippon Soda Group environment in the 2020s. Regarding the increase of social contribute to the creation of a sustainable society by providing value in our Long-Term Vision, we are engaged in CSR activities new value. The Nippon Soda Group aims to realize its mission • We are contributing to the world’s food supply by creating new agrochemicals that satisfy to protect corporate value. Specifically, we are working to and achieve sustainable growth through management that Agriculture even more sophisticated safety requirements and by supplying highly effective fungicides, pesticides, and herbicides. provide even greater value to stakeholders in society as a achieves increases in both corporate value and social value. Securing food and achieving • With a focus on improving the efficiency of agricultural production, we are supporting the use whole from the three aspects of environmental initiatives, social sustainable agriculture of information and communication technology (ICT) to achieve labor saving in control work and production of high-quality agricultural products. CSR Activities to Protect Corporate Value CSR Activities to Improve Corporate Value

• The cellulose derivative supplied by the Nippon Soda Group is widely used domestically and Main Issues Measures Healthcare abroad as a binder for pharmaceutical tablets that makes medicine easier to take. Pursuing four material issues to realize a • As a form of food processing, we provide technology that makes it easy to take supplements. • Address climate change issues sustainable society. Healthy life • We contribute to human health through the creation of high-performance products and (Participation in the “Commitment to a Low Carbon Society” of the to all people Environmental Ministry of Economy, Trade and Industry) support services for pharmaceutical formulation technologies. Initiatives • Address preservation of biodiversity (Promotion of preservation activities for forests and water resources) • We are developing various environmental solutions by utilizing water treatment technology, Environment resource recycling technology, and technology for the adsorption and removal of toxic Agriculture Healthcare • Respond appropriately by promoting dialogue with consumers, Securing food and substances. Healthy life to achieving sustainable Toward a resource business partners, and local communities. all people • By utilizing our knowledge and experience, we are contributing to the achievement of a safe Social agriculture recycling society • Promote diversity, work-life balance and career programs and ecologically sound society. Activities • Hold constructive dialogue with shareholders and investors, and disclose information in a timely and appropriate manner • By utilizing the precision polymerization technology and organic synthesis technology that ICT we have accumulated, we provide high-performance resins for communication equipment Applying the materials of 5G communication base stations and for semiconductor photoresists. • Enhance corporate governance. (Transition to a company with an audit Environment ICT functionality of • In order to respond to needs for technological innovation, we support the development of an & supervisory committee) Applying the information society and focus on the development of new materials that are friendly to both Governance Toward a resource chemicals to IT devices functionality of • Promote compliance-oriented management (System improvement, recycling society people and the environment. chemicals to IT devices appropriate operations, education)

20 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 21 Business Strategy

Business Business Strategy We will generate cash in the healthcare field and expand our business by investing Strategy We will promote structural reforms aimed at improving investment efficiency through Research, Chemicals in the rapidly growing ICT field. We also aim to expand in the field of specialty production, work-style reforms and the utilization of a diverse range of human resources. chemicals by leveraging our technological strengths. management We will also work to increase efficiency by promoting digital transformation.

Our Chemicals Business includes a wide variety of products. and providing support services for formulation technology. In the research department, we will build an efficient research In production, we will focus on promoting digital However, based on our core chlor-alkali business for products Through these measures, we will promote expansion of the system by integrating new business creation functions, and transformation and improving profitability through reforms of such as caustic soda and chlorine, we will expand the lineup business in the medium- to long-term. by reorganizing, integrating, and enhancing the functions of business structure. of highly profitable products such as specialty chemicals and In the ICT field, we will focus on expanding sales of the resin research institutes. Furthermore, we will strengthen our own In management, we will strengthen IT infrastructure for pharmaceuticals as priority fields. Through these measures, we additive NISSO-PB, which possesses various characteristics, as a technology and technology marketing, and will introduce supporting structural reform of our entire Group, improve are aiming at a further increase in business earning power. material for 5G communication equipment. We will also use the external technology through alliances and collaborations. We will efficiency by centralizing management operations, and In the healthcare field, we will work to expand sales of the Group’s unique technology to commercialize new products. also promote full-scale entry into the environmental field, engage develop human resources and next-generation leaders who pharmaceutical additive NISSO HPC, which enjoys wide support We will also work to transform our business portfolio in peripheral development in priority fields such as ICT and will support sustainable growth in our Long-Term Vision. both in Japan and overseas as a binder for pharmaceutical by expanding high-added-value businesses, liquidating healthcare, and create new businesses in those fields. tablets. Other sales expansion measures will include launching unprofitable businesses, and entering peripheral fields through new pharmaceutical additives, enhancing product functionality, M&A and alliances.

Relevant Departments Main Activities

Measures Main Activities • Build an efficient research system (Restructure organizations/enhance functions) • Promote peripheral development and creation of new businesses in focused areas • Accelerate sales expansion of the pharmaceutical additive NISSO HPC by targeting the Research department (Strengthen our own technology and introduce external technology through M&A, alliances, and Healthcare field expanding global pharmaceuticals market collaboration) • Expand our product lineup by launching new pharmaceutical additives • Promote digital transformation (AI, IoT, MI, etc.)

• Expand sales of the resin additive NISSO-PB as a material for 5G communication equipment • Improve profitability by reforming our business structure ICT field Production department • Aim to commercialize new products using the Group’s unique technology • Promote digital transformation (AI, IoT, etc.)

• Group sharing of our IT platform, and promote digitalization Transformation • Enter peripheral fields through M&A and alliances • Cultivate human resources and next-generation leaders who support sustainable growth. of business portfolio • Expand high-added-value businesses and liquidate unprofitable businesses Management department • Promote streamlining by centralizing management operations

Business We will work to maintain and expand sales of existing products and new Business Strategy Strategy agrochemicals, and focus on the development of next-generation agents. We will improve the corporate value of the entire Group by promoting business Agro Other Products We will also work to improve profitability by improving the efficiency of our businesses activities that leverage our strengths. business structure.

In the Agro Products Division, we will promote the development ingredients for agrochemicals to major overseas corporations In the Trading Business, Transportation and Warehousing Business, Construction Business, and Other businesses, the Nippon Soda of global niche products for fruit and vegetables. By expanding and will strengthen alliances in both Japan and overseas. Group will work together to achieve sustainable growth. This includes the expansion of existing products and services. the application of existing pesticides to grains, we will increase We will also focus on expanding the sales of new sales volume and prolong the product life cycle through agrochemicals and aim for early entry into full-scale increasingly diverse product usage and pest application. development of next-generation agents. Relevant Business Main Activities At the same time, we will promote the establishment and Moreover, we will strive to reduce costs by improving construction of a sales system aimed at expanding and increasing supply chain infrastructure and streamlining operations, and by • Focus on growth strategy fields and evolve into a trading company with strengths that ensure sales in the global market. For example, we will supply active focusing on improving and increasing business profitability. sustainable growth Trading • Strengthen overseas business based on our own network with outstanding suppliers • Develop a solutions business that utilizes specialized and advanced information and proposal capabilities Measures Main Activities • Develop a business specializing in high added-value cargo based on expertise in the storage and • Maintain sales by taking measures against generic products and performing appropriate Transportation and Warehousing transportation of dangerous goods, poisonous and deleterious substances, and pharmaceuticals Maintain and expand sales of procedures for re-registration existing products • Work toward further efficient use of the assets that we own • Expand sales through expansion of range of application • Advance core technologies such as powder handling technology and pharmaceutical GMP • Increase sales of the fungicide PYTHILOCK (picarbutrazox) validation • Launch and expand sales of the acaricide DANYOTE (acynonapyr) and the fungicide MIGIWA Expand sales of new agrochemicals Construction • Promote the development of proprietary technologies and new technologies such as milli-scale (ipflufenoquin) Develop new agents devices for chemical reaction • Aim for early entry into full-scale development of pipeline agents that are currently under • Utilize AI and IoT technology to improve engineering capability and business productivity development

Increase the efficiency • Increase profitability by improving the efficiency and enhancing the management of production • Contribute to the formation of a recycling-oriented society by strengthening our recycling business Other of business structure and sales systems based on technology for the treatment of high-difficulty waste Consider forming alliances • Strengthen alliances in Japan and overseas

22 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 23 Materiality Feature

Securing food and Healthy life to achieving sustainable Agriculture Healthcare all people agriculture

The world population is expected to reach ten billion in 2050, and a large amount of food and feed will be required. In advanced nations, health consciousness and awareness of preventive medicine are increasing due to social security Also, the global warming megatrend will increase the outbreak of agricultural pests. cost issues and the sustainability of healthcare systems, and the demand for pharmaceuticals is increasing in emerging The Nippon Soda Group supplies safe and effective agrochemicals that are highly rated around the world. We nations as well due to improvement in living standards. The cellulose derivative supplied by the Nippon Soda Group expect needs for higher levels of safety to continue increasing, so we will create new agrochemicals that are safer is widely used domestically and abroad as a binder for pharmaceutical tablets that make medicine easier to take, and and more effective by using advanced synthetic technology to contribute to the world’s food supply. Additionally, it is also being developed for use in food processing for supplements, etc. In the future, we will continue to develop we will utilize information and communications technology (ICT) and other technologies to support labor-saving pest support services for high-performance products and formulation technology and actively research and develop control work and the production of high-quality crops. products that contribute to improving people’s health and life.

Achieving Sustainable Agriculture Improving Access to Healthcare

The aging population and shortage of labor are becoming advantage of its many years of experience in agrochemical Pharmaceutical additive NISSO HPC has been well received outside of pharmaceuticals. Because of its safety and superior greater problems for agriculture in Japan, but worldwide, development, the Nippon Soda Group is pushing forward with worldwide as an additive essential for formulating pharmaceuticals. performance, it is also sold under the name CELNY in food securing crops for food and feed to support population registering single agrochemicals that can be used for a variety In India and China, where economic growth has been significant, product markets such as supplements. Because we can growth is becoming a major issue. There is a need to of crops to make spraying more efficient. the demand for pharmaceuticals has increased with improvement formulate tablets with a high content of natural materials such introduce smart agriculture* and develop safe agrochemicals Also, because of the global increase in awareness of in living standards, and NISSO HPC has become widely used. as turmeric, glucosamine, and mulberry leaf, it is possible to that can be used on diverse crops from the perspective of environmental protection, there is a focus on biopesticides In addition to our offices in Europe and North America, we achieve the intake of active ingredients in a small dose. In protecting crops in order to ensure yields and reducing the that use microbes, etc., to eliminate crop diseases and established an office in India in 2017 and hired local staff for response to increasing health consciousness and awareness of labor burden on farmers. harmful insects. Reducing the impact on ecosystems is a major technical support. We are increasing awareness of NISSO HPC preventive healthcare, we are contributing to people’s daily Agrochemicals can only be used with specific crops and in issue, and we are engaged in a range of activities including by working with research institutes around the world and health by providing an environment where high-quality health specific ways, and in cases like Japan, where multiple crops developing and supplying internally developed biopesticides. enhancing our system for providing technical services to foods and supplements that are not detrimental to the body

are cultivated together on a small field, the use of different * Modern agriculture that achieves significant labor savings and high-quality pharmaceutical manufacturers. can be taken efficiently. agrochemicals increases the workload and costs. Taking production through the use of robotics technology and ICT The market for NISSO HPC is also expanding into fields

Continually Releasing New, Internally Developed Agrochemicals on the Market The Cellulose Technical Application Center, a Place for Creating Value Alongside Customers

Because agrochemicals must be effective and very safe, new global licensing agreements with major overseas manufacturers. In order to demonstrate the superior performance of NISSO from analysis to evaluation. We face the issues and needs of agrochemicals require about ten years for development. While Next is the acaricide DANYOTE (acynonapyr), which we also HPC, the Cellulose Technical Application Center (CTAC) was customers with dedication and provide solutions using NISSO Nippon Soda Group development also requires a long time, based started developing overseas in addition to advancing sales established in the Chiba Research Center in October 2019. HPC, and we have now established an innovative place to on our ability to accumulate advanced technology and our extensive and promotion strategies for domestic sales in 2020. A third CTAC is positioned as a facility for creative collaboration further improve the quality of pharmaceuticals, etc. experience, we recently developed three new agrochemicals, and product, the fungicide MIGIWA (ipflufenoquin), will go on sale alongside customers. Prototypes are made there based on CTAC is gaining attention not only in Japan, but around the they have been launched successively, starting in 2017. in Japan in 2021. It has great potential due to its effectiveness ideas and discussions in the meeting area, and the facility world, and sales of NISSO HPC are expanding more rapidly in The fungicide PYTHILOCK (picarbutrazox), which was against fungi that are resistant to existing fungicides, and can boasts cutting-edge equipment that can perform processes the global market, increasing corporate value. launched in Japan and South Korea in 2017, is now being be used against a wide range of pests. It is being simultaneously developed as a seed treatment following the conclusion of developed in Europe and the United States.

24 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 25 Materiality Feature

Applying the Toward a resource functionality of Environment recycling society ICT chemicals to IT devices

Tackling environmental problems such as global warming and resource depletion, the resolution of which will help Smart devices are becoming more popular around the world as the progress in information and communication achieve a sustainable society, is a goal shared around the world. Corporations are increasingly expected to lead technologies accelerates. This market is expected to grow significantly in the future. that effort. The Nippon Soda Group uses the precision polymerization technology and organic synthesis technology that it The Nippon Soda Group utilizes the water treatment technology, resource recycling technology, technology for has developed to provide high-performance polymers for use in materials for next-generation 5G communications adsorbing and removing harmful substances, and other technologies developed over its long history, to come up with devices and photoresists for semiconductors. In order to meet the needs of future technological innovations, we are various environmental innovations and develop business. For sustainable plant preservation, we are also contributing focusing on developing new materials for use in a wide range of fields. to the protection of the pine forests that are a feature of the beautiful, unique natural landscapes of Japan.

Achieving Sound Resource Recycling and Sustainable Plant Preservation Copper Clad Laminates for Next-Generation Communications

Our internally developed heavy metal stabilizer HIDION is preservation of biodiversity through its protection of plants and In 2020, products such as smartphones that use the next- radio waves containing large amounts of data. Also, the Nippon mixed into fly ash; the heavy metal is immobilized, preventing forests. Pine trees, an iconic symbol of the Japanese landscape, generation mobile communication network 5G have Soda Group is currently focusing on providing technical services lead and other heavy metals from scattering and liquating. For have played important roles in communities as sand breaks and appeared one after another, and the need for remote work, to properly convey the potential applications of our materials this reason, it is used at many waste incinerators. In Japan, the windbreaks, but pine forests have been shrinking due to pine teleconferencing, and online classes has suddenly increased and to create demand not only in Japan, Europe and the U.S., insolubilization treatment of heavy metals in fly ash generated wilt disease, which has become a nationwide concern. GREEN due to the spread of COVID-19. This change has resulted in a but also in emerging markets. during incineration is legally mandated, and HIDION is highly GUARD, an agent for preventing pine wilt that is sold by the rapid increase in communication base stations and servers that The provision of high-functional materials to the information regarded as an agent for reducing environmental burden. Group, has been used for business purposes such as public provide the infrastructure for a stable digital environment. and electronics fields will continue to be an important theme in Also, Group company Nisso Metallochemical Co., Ltd. is works, contributing to the greening of streets and parks as well The characteristics of the Nippon Soda Group’s NISSO- the future, and we will focus on developing new materials and contributing to the creation of a recycling-based society as landscape conservation. Additionally, we hold workshops on PB, which boasts low dielectric properties and high insulation supporting technological innovation. through its recycling business. plant preservation, mainly for local municipalities. in high frequency domains, are utilized in the copper clad The Nippon Soda Group is also contributing to the laminates used by 5G communication base stations that receive

Promoting Future Research and Development Themes VP-POLYMER, Which Supports the Foundation of a Digital Society

While deepening the proprietary technology that we have new MOF can selectively absorb carbon dioxide (CO2), which The remarkable progress and spread of IT will have a significant Demand for VP-POLYMER is increasing as the demand for accumulated over many years, the Nippon Soda Group will is a greenhouse gas, and can also internally store hydrogen impact on demand for semiconductors. To draw an electric larger-capacity and higher-speed semiconductors increases. In increase the sophistication of its core technologies by synergizing gas, which is expected to become a clean energy source. The circuit on a semiconductor substrate, a photosensitive polymer order to secure a stable supply, the Group completed construction them for the introduction of new, external technologies to Group’s hydroxamic acid derivative technology, developed called a photoresist is used. The Nippon Soda Group’s VP- to expand the production capacity of the Chiba Plant (Ichihara develop new products and create new businesses. through many years of research on agrochemicals, contributed POLYMER, the first product of its kind in the world, was city, Chiba Prefecture). As a part of these activities, in an industry-academia to this achievement. successfully commercialized as the base polymer of a KrF We are aiming to expand the functional polymers business, collaborative project with Rikkyo University (a group led by Because the new MOF has the characteristic of being able photoresist by using a living anionic polymerization technique which includes VP-POLYMER, by positioning it as a growth Dr. Mao Minoura from the Chemistry Department of the to easily store hydrogen gas, which is difficult to handle, its use developed for NISSO-PB. This contributes to the manufacture driver. We will continue to respond to further expansion of the Colledge of Science) aimed at creating environmentally as a safe storage material is being considered. We are aiming of semiconductor structures, which requires advanced information and communications fields while developing new friendly molecules, we developed a new material with a metal- for its practical application as a “molecular gas cylinder” for fuel microfabrication techniques. polymer materials that meet customer needs. organic framework (MOF) that is functional and porous. This cell vehicles (FCV).

26 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 27 The Nippon Soda Group’s Businesses

The Nippon Soda Group is a corporate group that uses chemistry to create superior products and services around the world, and contributes to the realization of a sound society. The Chemicals and Agro Products businesses are the core of the Group. They primarily involve the manufacture and sale of chemicals, and the provision of services.

Industrial chemicals Fine chemicals Specialty chemicals Trading Refer to P. 38 Net Sales by Segment (Fiscal year ended March 2020) (Billions of yen) Domestically sold and imported and exported products such as chemicals, functional products, synthetic resins, Chemicals Manufacture and sale of industrial Caustic soda Other Liquid chlorine industrial devices, and construction-related products chemicals, fine chemicals, specialty Sodium metal 7.4 Hydrochloric acid chemicals, eco business products, Alcoholate Net Sales Operating Profit Construction Caustic potash healthcare products, Color developers for NISSO-PB (Billions of yen) (Billions of yen) 14.4 36.9 Potassium carbonate 34.9 35.0 Transportation pharmaceutical intermediates, and thermal paper VP-POLYMER Sodium cyanide and Chemicals Refer to P. 30-33 industrial fungicides Specialty isocyanates TITABOND 0.7 0.7 0.6 Warehousing Potassium cyanide 40.4 Secondary battery BISTRATOR 1.9% 4.2 Aluminum chloride 1.8% 1.8% materials anhydrous Organic titanate 144.7 Phosphorus oxychloride

Phosphorus trichloride 2018/3 2019/3 2020/3 2018/3 2019/3 2020/3 Trading Operating profit Net Sales Operating Profit Operating margin 35.0 Eco business products Pharmaceuticals and industrial fungicides (Billions of yen) (Billions of yen) Transportation and Warehousing Refer to P. 38 Agro Products 39.5 41.3 40.4 2.5 43.4 2.2 Warehousing and transportation services NISSO HPC 1.6 NISSO HI-CHLON Net Sales Operating Profit (Fiscal year ended March 2020) 5.9% NISSO DAMN Operating Profit by Segment 5.5% NISSO MELSAN (Billions of yen) (Billions of yen) (Billions of yen) Faropenem-sodium antibiotic HIDION 4.3 4.1% BESTCIDE 4.1 4.2 0.5 TAKE-ONE 0.4 0.5 BIOCUT Adjustments Slime removing agents MILLCUT 0.2 10.8% 10.8% 11.7% 2018/3 2019/3 2020/3 2018/3 2019/3 2020/3 Other 0.6 Operating profit Operating margin Chemicals Construction 2.2 2018/3 2019/3 2020/3 2018/3 2019/3 2020/3 1.7 Operating profit Operating margin 8.1 Fungicides Insecticides and acaricides Construction Refer to P. 39 Transportation Plant construction, civil engineering and construction and Warehousing TOPSIN-M (thiophanate-methyl) 0.5 Agro Products PANCHO TF (cyflufenamid-triflumizole) BEFRAN (iminoctadine triacetate) Net Sales Operating Profit Manufacture and sale of Trading Agro Products BELLKUTE (Billions of yen) (Billions of yen) 0.6 2.2 fungicides, pesticides, (iminoctadine tris (albesilate)) acaricides, herbicides, etc. MOSPILAN (acetamiprid) 12.0% 11.6% PYTHILOCK (picarbutrazox) 14.4 NISSORUN (hexythiazox) 12.2 9.6% TRIFMINE (triflumizole) 11.7 1.4 1.7 Refer to P. 34-37 ROMDAN (tebufenozide) AGRI-MYCIN 1.2 GREEN GUARD (morantel tartrate) Net Sales by Region (Fiscal year ended March 2020) (oxytetracycline, streptomycin) KOTETSU (chlorfenapyr) (Billions of yen) AGROCARE (bacillus subtilis) PHOENIX (flubendiamide) MASTERPIECE VERIMARK (cyantraniliprole) North America Other (pseudomonas rhodesiae) 2018/3 2019/3 2020/3 2018/3 2019/3 2020/3 8.6 5.4 FANTASISTA (pyribencarb) Operating profit Operating margin Europe Net Sales Operating Profit ETHOFIN (ethaboxam) 22.4 MONSIEUR BORDEAUX (Billions of yen) (Billions of yen) (basic copper sulfate) Others Refer to P. 39 43.1 43.4 43.2 Herbicides Other Net Sales Operating Profit 2.3 2.2 2.0 (Billions of yen) (Billions of yen) 8.8% 7.9 144.7 7.8 7.5% Asia 7.4 0.6 12.1 5.3% 5.2% 6.0% 4.6% NABU (sethoxydim) 0.6 0.5 CONCLUDE (flupoxam) Smoking agents ALPHARD (topramezone) EIGEN (pyributicarb) Japan 2018/3 2019/3 96.3 2020/3 2018/3 2019/3 2020/3 2018/3 2019/3 2020/3 2018/3 2019/3 2020/3 Operating profit Operating margin Operating profit Operating margin

28 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 29 The Nippon Soda Group’s Bussinesses

Chemicals Healthcare

Trends in the Healthcare Market and Our Main Product, NISSO HPC

Pharmaceutical additive NISSO HPC is a derivative obtained of NISSO HPC. As health consciousness and interest in preventive healthcare increase, environmental problems such as global warming are by reacting propylene oxide with cellulose. It is used as a The worldwide market for pharmaceuticals is growing also increasing. At the same time, the creation of a recycling-based society, as well as progress in information and binding agent to form tablets primarily for pharmaceuticals. about 4% a year. The demand for NISSO HPC is increasing communication technologies that support the popularization of smart devices, etc., are becoming worldwide trends. In this As one of the few additives that dissolves in water and not only in Japan, Europe, and the United States, but environment, the Chemicals Business considers the materiality (major issues) of the market to be “healthcare,” “environment,” alcohol, it provides high performance for pharmaceuticals also in the markets of emerging countries like India and and “ICT.” By concentrating on applying the technologies and services that we have developed over many years in these through its binding power that increases the hardness of China, where living standards continue to improve. Also, in domains, we can contribute to healthy living, help achieve environmentally sound recycling of resources, and innovate tablets, leading to the gradual, sustained release of active addition to pharmaceuticals, it is being used more in food technology in the information and communication fields. ingredients. For these reasons, it has been well received as an product fields, such as supplements. additive essential for the manufacture of pharmaceuticals. To meet the increasing demand for NISSO HPC, the Group The Nippon Soda Group possesses manufacturing facilities has invested about ¥5 billion in construction to increase Healthcare ICT Environment and management systems that conform to very high quality- the production capacity of the Nihongi Plant (Joetsu City, control standards. Our trust in “quality” is the brand power Niigata Prefecture) by 30%. Pharmaceuticals Specialty chemicals and pharmaceutical Eco business products ■ Applications and Characteristics of NISSO HPC — Main products — intermediates — Main products — Resin additive NISSO-PB, Manufacture of granules — Main products — Heavy metal stabilizer Photoresist material for making tablets HIDION Pharmaceutical additives VP-POLYMER About NISSO HPC Granulating 50 years of experience

Net Sales Industrial / Pharmaceuticals / (Fiscal year ended March 2020, Paints Foods non-consolidated basis) Pharmaceuticals Surface coating Overseas sales Sintering of Sintering Coating Domestic top- and industrial metal powder HPC Film substrate ratio fungicides level industry penetration rate About % 18.5% Industrial chemicals 50 Cosmetics / Personal Care Eco business 34.8% 14.2% Thickening • High performance Specialty Characteristics chemicals Fine chemicals • One of the few additives that Thickening of liquids dissolves in water and alcohol 13.2% 19.3%

■ Value Chain Providing Functionality Based on Issues Related to Use

The Chlor-alkali Business That Forms the Foundation Industrial chemicals The Chemicals Business of the Nippon Soda Group comprises many different products, — Main products — Issues related to use but the chlor-alkali business, which includes products that we have continued to supply Caustic soda, Manufacturer Nippon Soda since our founding, such as caustic soda and chlorine, provides the foundation. These sodium cyanide, potassium (pharmaceuticals, food, High performance chemicals are used as raw materials for the Group’s chemicals and agro products, and cyanide, personal care, and Production technology they are supplied to companies in various industrial fields, fulfilling a major role in the phosphorus oxychloride industrial domains) Quality control technology development of Japan’s economy. Even now, they play an important role in stably meeting the core infrastructure needs that support people’s lives.

30 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 31 Growth Strategies of Healthcare Business Photoresist Material VP-POLYMER

The Nippon Soda Group focuses its efforts on ensuring helping to achieve a social environment in which health VP-POLYMER is a polymer derived from the living anionic photoresists and the popularization of 3D NAND memory. healthy lives for people in all age groups and helping all foods and supplements that place a lighter burden on the polymerization technique used for NISSO-PB, and it is In 2018, construction to expand the Chiba Plant (Ichihara people enjoy good health through medicine. By providing body are easily available. used in Krf photoresist materials for semiconductors. As city, Chiba Prefecture) was completed, providing a stable effective NISSO HPC-based medicines that are easy to take, Additionally, we are focusing on research and the need increases for larger-capacity and higher-speed supply system. the difficulty of taking medicines is reduced, improving development to expand the uses of NISSO HPC. We are semiconductors, demand is increasing for VP-POLYMER We will continue to provide new polymer materials to people’s quality of life. working out a policy to promote the development of because of the transition from i-Line photoresists to KrF meet customer needs in the future. Also, because the safety and superior functionality of applications using NISSO HPC through open innovation, NISSO HPC are applicable in food products, we will expand and we have established the Cellulose Technical sales by selling it under the brand name CELNY in food Application Center (CTAC) to promote this initiative. The product fields such as supplements. CELNY demonstrates Nippon Soda Group positioned CTAC as a hands-on high performance in the preparation of tablets for natural facility where we can create new value for NISSO HPC ingredients such as turmeric, glucosamine, and mulberry alongside customers. By providing solutions to meet leaf. By increasing the content of natural materials, the customer needs, we are aiming to increase sales of NISSO Environment quantity of supplements that needs to be taken can be HPC over the medium-to-long term. reduced. We will contribute to a healthy daily life for all by

Developments in the Water Treatment Field

The Nippon Soda Group’s environmental business started partner, that removes slime from drains. ICT with agents for disinfecting and sterilizing water. In this field, The market for MITAGEN, an enzyme-microbe preparation one of the Nippon Soda Group’s strengths is technology to that improves the performance of wastewater treatment, control dissolution rate. This technology, which is the result has also been expanding, not only in Japan but also in countries of accumulated research, has much in common with that such as China, where there is increasing awareness of the need used for drug delivery systems (DDS)* for pharmaceuticals. to reduce the environmental burden of industrial wastewater. High-Performance Liquid Polymer NISSO-PB In the environmental business field, we have many examples of collaborative development of solutions for market Functional polymers are positioned as growth drivers has recently been increasing in the ICT field as a material for *Technology to control the transport of medicines within the body and maximize the needs that our partners such as manufacturers and trading effect of the medicine while minimizing side effects alongside cellulose derivatives. One example is resin touch panels for smartphones and tablets and as an companies understand. A representative example is a additive NISSO-PB, a proprietary liquid polymer that was additive in copper clad laminates used in base stations for kitchen product, which is being jointly developed with a developed from our living anionic polymerization technique. wireless communications. It does not deteriorate much as it ages, and has various The electronic materials field has generated demand superior characteristics such as water resistance, chemical for various applications in the transition to communications Product Name Main Use resistance, and electrical properties. Its demand as a resin technologies such as 5G. By accurately understanding needs modifier of printing materials for use in flexographic printing in this field, we aim to have our materials adopted as the Higher-level bleaching powder Sterilizers and disinfectants for hot bath water; bleaches for cotton, pulp, etc. plate, which is expanding worldwide, is firm, and demand industry standard while creating new businesses. NISSO HI-CHLON Sterilizers and disinfectants for swimming pool water and tap water

■ Applications and Characteristics of NISSO-PB NISSO MELSAN Sterilizers and disinfectants for septic tank discharge water, drainage, and sewage TAKE-ONE Removes and prevents urolith attachments in toilets, detergents for pipes

TOPSEN Treatment agent for waste in trains with circulation systems

HIDION Chelating agent that prevents the liquation of heavy metals in fly ash at waste incineration plants Resin additive Adhesive MITAGEN Enzyme-microbe preparation for treating wastewater Characteristics and Properties BALKICK Bulking inhibitor for treating wastewater • High-performance liquid polymer obtained through our proprietary living anionic polymerization NISSO-PB technique • Possesses various characteristics such as little deterioration with age, water resistance, chemical resistance, electrical characteristics, etc. Paint and Electronic coatings materials

32 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 33 The Nippon Soda Group’s Bussinesses

Agro Products Market Environment for Agrochemicals

Although the demand for food will increase with population markets with comparatively low competition with major growth, the amount of arable land remaining worldwide overseas manufacturers and generic products, and there is limited. Therefore, the demand for agrochemicals that is no competition with genetically modified seed varieties make it possible to ensure crop yields and reduce labor that reduce the need for agrochemicals. is expected to grow mid-to-long term. However, the However, by expanding the application of existing barrier is high to bring products to the market that are products to the grain market, we intend to reduce costs safe and environmentally friendly to the water, soil, etc., through increased sales volume and economies of scale. As a result of the increase in meat production due to worldwide population growth and economic growth, there are and various aspects must be considered from the research Additionally, by supplying agrochemical ingredients concerns about an increase in crop pests caused by global warming, at the same time as the need to optimize the and development stage. The development costs of new to major overseas manufacturers and developing mix production of food and feed becomes an issue. The Nippon Soda Group considers contributions to ensuring food safety and chemicals are increasing due to stricter safety standards, and formulations, we can expand globally while differentiating security and sustainable agriculture using agrochemicals as materiality (key issues), and will contribute to solving agricultural large, international agrochemical manufacturers that focus our products from generic products. and food-related problems under the themes of increasing production of food and feed worldwide, diversifying crop especially on the grain market are becoming even larger. protection, and improving safety for users of agro chemicals. The Nippon Soda Group is developing specialized products for fruit and vegetables. These are two very niche

Agriculture The Value Chain and Our Strengths

Increasing sales in niche markets around the world, particularly fungicides, insecticides, The sales staff of the Nippon Soda Group are knowledgeable through repeated evaluation and analysis. and acaricides for fruit and vegetables about agriculture technology, and they conduct awareness- In terms of production, our comprehensive system raising activities and hold seminars domestically and abroad means that all processes from the manufacture of to give farmers and community members an accurate ingredients to the formulation of chemicals can be Main Products and Features understanding about the safety and usage of agrochemicals. performed within the Group. We have created a value They also exchange information with farmers and pay chain that can be consistently managed within the Group. Promoting development for Product development specializing in fruit and vegetables attention to even their smallest needs while providing It encompasses synthesizing chemicals for development, lawns and non-agricultural fields in Expanding the applications of existing agrochemicals for use with grains feedback to the research and development department. In biological research, safety research, formulation research, addition to crops addition, they contribute to the improvement of existing field evaluations, manufacturing, and sales, which allows us products and the development of new agrochemicals to develop and manufacture agrochemicals efficiently. Fungicides Herbicides — Main products — Insecticides and acaricides — Main products — TOPSIN-M (thiophanate-methyl), — Main products — ■ NABU (sethoxydim), Streamlined Internal System PANCHO TF (cyflufenamid-triflumizole), MOSPILAN (acetamiprid), CONCLUDE (flupoxam), BEFRAN (iminoctadine triacetate), NISSORUN (hexythiazox) ALPHARD (topramezone) BELLKUTE (iminoctadine tris (albesilate)) Specific site needs Sales Ratio by Product Category Overseas Sales Ratio (Fiscal year ended March 2020, non-consolidated basis) (Fiscal year ended March 2020)

Herbicides Research and development % 8.1 Sales Biological research Production (technology sales) Japan Synthesizing chemicals Safety research Field evaluation Fungicides for development research 41.3% % Overseas Formulation Insecticides and 48.8 research acaricides 58.7% 43.1% Possesses equipment with Close manufacturing technology for cooperation both ingredients and formulation

34 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 35 Promoting Global Expansion Agrochemical Research and Development Policy

The Nippon Soda Group started expanding overseas early Brazil as a major market, and through local sales companies We develop new, safer agrochemicals with the motto of Also, taking advantage of its many years of experience on, and in FY 2020 the overseas sales ratio reached about we are collecting requests and information from customers “food safety and security” by investigating and analyzing in agrochemical development, the Nippon Soda Group 59%. Because we are developing products specifically for to develop products and further expand sales. Also, we are the actions of metabolites and degradants in animals, aims to obtain registration for single agrochemicals that can fruit and vegetables, our sales ratio in Europe is increasing, focusing on promotion and awareness-raising activities in plants, and the environment while rigorously estimating be used for a variety of crops. Agrochemicals can only be but as we are also expanding the application of our countries in Asia such as India, Indonesia, Thailand, and and evaluating the effect of the agrochemical on the registered for use with specific crops. If multiple crops are products for grains, our sales in North and South America Vietnam to secure a higher food yield in the global market. human body based on toxicity and metabolism research. grown within a narrow area, it is necessary to use different have also been increasing recently. In particular, we see When it comes to selecting potential compounds for use pesticides depending on the crops, increasing farmers’ in new agrochemicals, with biodiversity in mind, we place workload and costs. Expanding the range of applicable top priority on efficacy only against pests that are causing crops an agrochemical can be registered for contributes to problems or may pose a future problem with local food optimizing spraying and reducing labor burden. NISSO CHEMICAL EUROPE production, low persistence, and activity with a low dose.

Certis Europe

Europe SUMI AGRO ¥13.04 billion Japan Agro Services (30.0%) Expanding the Applications of Existing Agrochemicals North America ¥3.35 To support our overall revenue capabilities, it is important and we intend to expand sales in the markets of emerging Japan billion (7.7%) that we maintain revenue for existing agrochemicals such as nations, with a focus on paddy rice in Asia. Also, MOSPILAN Asia ¥17.92 billion (41.3%) the fungicide TOPSIN-M (thiophanate-methyl) and pesticide (acetamiprid) has cleared strict usage standards in Europe, ¥3.89 NISSO AMERICA billion MOSIPLAN (acetamiprid), especially as generic products and opportunities for sales are increasing. (9.0%) are becoming popular. We are expanding the application of By diversifying the methods of application and pests the these products into grains in order to further increase sales. product can be applied to, we can register them in many NISSO TRADING (SHANGHAI) We intend to differentiate TOPSIN-M (thiophanate-methyl) countries and proceed with plans for long-term product NISSO BRASILEIRA NISSO KOREA from generic products by developing a mix formulation, lifecycles. IHARABRAS S/A NISSO Namhae Agro

NISSO Bangkok Of ce Product name Classification State of sales and promotion Market launch Others · Become established in North and South America for NISSO CHEMICAL INDIA ¥5.19 soybeans, consistent performance in Europe for wheat BHARAT INSECTICIDES billion TOPSIN-M · Expand sales in the markets of emerging nations, Fungicide 1971 (12.0%) (thiophanate-methyl) particularly for paddy rice in Asia SUMMIT AGRO VIETNAM · Differentiation from generic products by developing mixing agents Net sales of Agro Products Business for FY 2020: ¥43.39 billion

· Consistent performance with corn and nuts in the United NISSORUN States Acaricide 1985 (hexythiazox) · Become established in Asia for paddy rice, expand applications for vegetables Development and Sales Expansion of New, Internally Developed Agrochemicals · Expand sales of mix formulations for soybeans in Brazil · Aim to expand sales as a replacement for competitive At almost the same time that the Nippon Sales MOSPILAN Product name Classification State of development / characteristics Launch Pesticide products in Europe 1995 target (acetamiprid) ▲ Soda Group celebrates its 100th anniversary, Increase sales opportunities because of use · New modes of action, effective against fungi restrictions of competitive products we are developing three new agrochemicals, that are resistant to existing fungicides the first in 14 years. The fungicide PYTHILOCK · On sale in Japan and South Korea, under · Consistent performance in Europe for fruit, vegetables, development for vegetables for Europe and (picarbutrazox) went on sale in 2017. We have PANCHO TF and wheat PYTHILOCK the United States 2017 ¥3.0 Fungicide 2003 Fungicide (cyflufenamid-triflumizole) · Expand application to fruit and vegetables in the United a licensing agreement for this new fungicide (picarbutrazox) · Conclusion of global licensing agreement (on sale) billion States with Syngenta for product development and with Syngenta, under development as a new seed treatment agent ▲ registration of seed treatment technology for Target: registration in the United States in corn, soy beans, rapeseed, and wheat. We first 2020 · New modes of action, no cross-resistance aim to have the fungicide registered in North with existing acaricides America, and then we will develop it for release DANYOTE · Less impact on natural enemies of pests and 2020 ¥3.0 Acaricide in Europe and Brazil. Also, acaricide DANYOTE (acynonapyr) beneficial insects (planned) billion · In development in Japan and South Korea, Strategic Expansion into Fields Related to Agriculture (acynonapyr), which possesses new modes of development starting for the United States action, is planned for market release in 2020, · New modes of action, effective against fungi In related fields other than the target fields of fruit greening businesses, while focusing on synergy with existing and the market release of fungicide MIGIWA that are resistant to existing fungicides and vegetables, the Nippon Soda Group is utilizing its products. In response to increasing global awareness of · Effective against a wide range of pests, (ipflufenoquin), which is effective against a MIGIWA expected to become a major fungicide 2021 ¥4.0 development and marketing resources to strategically environmental protection, while placing major emphasis on Fungicide wide range of pests, is planned for 2021. (ipflufenoquin) · In development in Europe and the United (planned) billion expand the business. In addition to expanding the product the chemical pesticides business, the Nippon Soda Group is States · Marketability under evaluation in Asia and portfolio through business acquisitions, the Nippon Soda also focusing on developing biological pesticides. South America Group is expanding into fields beyond agriculture, such as

36 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 37 The Nippon Soda Group’s Bussinesses

Highly specialized trading, transportation and warehousing, construction, and other businesses

Trading Construction

Provides solutions using sophisticated information and proposal Provides advanced plant engineering to meet the increasing needs capabilities based on an information network with suppliers of an evolving industry

Nisso Shoji Co., Ltd. is a trading company that As technology in all industrial fields evolves, engineering specializes in handling materials with various unique functions at manufacturing sites continue to diversify characteristics such as functional products, synthetic and become more sophisticated. Nisso Engineering resins, industrial devices, and environment-related Co., Ltd. provides engineering services for systems and products. Since its founding in 1939, it has expanded equipment for all types of plants, and also handles the domain of its business as industry developed in maintenance and energy savings after delivery. Japan. It has created strong ties with quality suppliers In particular, it has knowhow for manufacturing in each field, and possesses specialized, advanced equipment and engineering technology for handling information. It is currently actively expanding not only in specialty chemicals and pharmaceuticals, and has Japan, but also overseas, primarily into Asia and India, accumulated both experience and achievements and is quickly advancing strategies by region that are with powder handling technologies, making it appropriate for each market. highly trusted. It has set “pharma / healthcare,” “plant solutions,” In the future, it intends to improve its engineering and “life innovation” as three strategic fields for capabilities and work productivity by utilizing AI and IoT. growth, and in the future, it will continue to enter other new business fields.

Transportation and Warehousing Others

Expands businesses specialized in freight with high added value, Enhances recycling businesses that support a recycling-based society, and provides safe and high-quality logistics services provides consignment production services to meet sophisticated needs

Sanwa Soko Co., Ltd. was established as a separate, Going forward, it will continue to contribute to Nisso Metallochemical Co., Ltd. utilizes technologies independent transportation and warehousing creating a rich society by providing high-quality and such as chemical manufacturing technology, alloy department of Nippon Soda in May 1950. As a safe logistics services. manufacturing technology, and treatment technology specialist that handles goods such as chemicals and for difficult waste. These technologies were developed pharmaceuticals, which, among other properties, may over many years to create environmental solutions be dangerous, poisonous and deleterious, it develops related to “recycling” in order to contribute to the and provides optimal logistics systems through creation of a recycling-based society. Also, Nisso logistics facilities that boast cutting-edge equipment Fine Co., Ltd. manufactures functional products, has and expertise, knowledge and experience developed a resin-forming business, and provides consignment over many years. production services. As the business environment continues to change, Sanwa Soko has constructed a high-quality logistics system to respond to the various needs of business partners in real time, and with the motto “safe and reliable,” it provides a total logistics service that encompasses everything from searching for optimal logistics sites to delivery in and out of warehouses, storage, customs, distribution processing, and final delivery.

38 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 39 Foundations for Value Creation

The Nippon Soda Group will continue to generate innovations fulfilling 42 ESG Management 54 Relationship with Local Communities 44 Human Resources Strategy and Dialogue with Society the dreams of the next generation and contribute to achieving a 48 Environmental Protection 55 Corporate Governance sustainable society. 50 Process Safety and Disaster 60 Compliance Prevention 61 Internal Controls 51 Occupational Safety and Health 62 Business and Other Risks The Nippon Soda Group aims not only to increase its corporate value through business growth, but also to create social 52 Logistics Safety and Quality Assurance 63 Messages from Outside Directors value that contributes to society’s changing needs and the global environment. To achieve this, we are working on a 53 Chemicals and Product Safety 64 Directors and Executive Officers variety of themes as a foundation to support value creation. These initiatives are introduced in the following pages.

40 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 41 ESG Management

ESG Management Concept Materiality

The Nippon Soda Group’s mission is to create new value through growth, it is important to increase both its corporate value and its the power of chemistry and to realize “increasing corporate value” social value. The practice of ESG management is the embodiment through our “contributions to society.” We will contribute to society of increasing social value, and we will promote initiatives from the by providing the products and services demanded by customers two perspectives of ”CSR Activities to Protect Corporate Value” and CSR Activities to Protect Corporate Value* CSR Activities to Improve Corporate Value and the social environment of the 2020s. We believe that in order “CSR Activities to Improve Corporate Value.” for the Nippon Soda Group to realize its mission and sustainable As a corporate organization that lives up to the trust Aiming for the realization of a sustainable society, Increasing Corporate Value Increasing Social Value of society, we will address three key issues: we are working on four material issues: Initiatives for the environment, Social activities, Agriculture, Healthcare, Environment, and ICT. Transformation of our business portfolio into one that CSR Activities to Protect Corporate Value and Governance. is resilient to changes in the business environment and • Responses to climate change issues and preservation of generates stable earnings biodiversity P. 20-23 Capital policies that value financial soundness and • Delivering deeper value to all stakeholders in society emphasize a balance between growth investment and CSR Activities to Improve Corporate Value shareholder returns • Tackling climate change (participation in the “Low • Four materialities (creation of new value) for realizing a Initiatives Carbon Society Action Plan” of the Ministry of Agriculture Achievement of key performance indicators (KPI) sustainable society for the Economy, Trade and Industry) Environment • Tackling the preservation of biodiversity (promoting Ensuring food safety and security activities to preserve forests and water sources) using agrochemicals and contribution • Promoting dialogue with consumers, business to sustainable agriculture partners and local communities and responding (1) Increasing production of food and feed Materiality Concept appropriately worldwide Social • Promoting diversity, work-life balance and career Since its establishment in 1920, the Nippon Soda Group has ■ Materiality Identification Process Activities programs (2) Diversification of crop protection contributed to the development of society and provided new value Sustainable growth and relevance in our Long-Term Vision was discussed • Conducting constructive dialogue with shareholders (3) Improvement of user safety to society through “chemicals,” and has supported people’s everyday and investors and disclosing information in a timely (Chemicals and Product Safety) and materiality was identified through the following steps: and appropriate manner lives by delivering a range of chemical products and services. • Enhancing corporate governance (transition to a In May 2020, we identified new materialities (important issues) company with an audit and supervisory committee) Step 1 Extracting “Megatrends,” “Risks” and “Opportunities” Governance in the four areas of agriculture, healthcare, environment and ICT • Promoting compliance management (enhance and to contribute to the creation of a sustainable society and increase properly operate systems and conduct training) Extracting materiality for sustainable social development and Healthcare corporate value in the Group’s Long-Term Vision, “Brilliance Step 2 increasing corporate value (See “Megatrends and the Value P. 40-61 Contribution to providing health for through Chemistry 2030,” and its Medium-Term Business Plan Provided by the Nippon Soda Group” below.) * As a chemical manufacturer, the Group’s RC (responsible care) activities 2020-2022 “Brilliance through Chemistry Stage I.” As a framework form the foundation of its CSR activities. all people through pharmaceuticals Confirmation of conformity with management policy (1) Easy-to-take, effective medicines for increasing the effectiveness of the Group’s materiality initiatives, Step 3 and business strategy for the extracted materiality through NISSO HPC we will utilize the monitoring functions of “CSR Activities to Protect Corporate Value” and “CSR Activities to Improve Corporate Value.” Management Process Safety Step 4 Approval by the Management Council System and Environmental and Disaster Organizational Protection Prevention/ Governance BCP Environment ■ Megatrends and the Value Provided by the Nippon Soda Group Contribution to ensuring the environmentally sound recycling of resources through chemicals Megatrends The Value Provided by the Nippon Soda Group Logistics Safety (technological expertise) Occupational Chemicals and (1) Steady supply of water resources and Safety and Health Product Safety (2) Reduction of environmental burden Population growth Increase in food and feed production and Securing food and achieving Quality Assurance improvement in efficiency of production Agriculture from waste Global warming sustainable agriculture Increase in crop pests and diseases Contribution to sustainable plant conservation Improvement in living Increased demand for pharmaceuticals and improved QOL (1) Protection of precious trees such as standards Increasing health consciousness and Healthcare Healthy life to all people pines from harmful insects Social security cost issues awareness of preventive medicine Together with Together with Our Together with Our Our Customers Employees Business Partners Reduction of environmental burden (Human rights and (Fair operating Achievement of a (Consumer issues) Building a resource recycling-based Environment Toward a resource recycling society labor practices) practices) ICT sustainable society society Contribution to the development Progress in information of information equipment friendly Popularization of smart devices Applying the functionality of chemicals and communication Rising needs for technological innovation ICT to IT devices to the environment and people technologies Together with Our Local by supplying high-performance Together with Shareholders Communities materials and Investors (Community Involvement (1) Supply of high-performance materials and Development, Social Dialogue) friendly to the environment and people Stakeholders

The management philosophy of the Nippon Soda Group is to meet expectations from stakeholders, including shareholders, Global environment Business As part of our efforts to conduct “CSR activities to improve the corporate value,” the Nippon Soda Customers partners investors, business partners, employees and local communities, Long-term trust International society Fair transactions Group states in the basic CSR policy that the Company will make contributions through business and to promote environmentally conscious business practices Employees and toward resolving social issues to help achieve the development of a sustainable society. In line with people who work and activities. The Nippon Soda Group will continue to play a with our Group the CSR policy, the Nippon Soda Group is addressing efforts to meet the Sustainable Development significant role in realizing the sustainable development of our Nippon Goals (SDGs) that allow us to make such contributions through our products. Soda One company cannot tackle all of the SDGs alone, but if many different companies throughout society. At the same time, the Group is continuing to develop as a Group the world do what they can toward resolving these issues, we believe that the combined efforts will sought-after chemical group that meets 21st-century social needs result in the realization of a sustainable society. by continuing to contribute to the creation of a prosperous society Local Shareholders communities by fulfilling the dreams of the next generation through its unique and Investors Safety and For more information on the Nippon Soda Group’s CSR concept, please refer to the following website: technologies and products. environmental Improve protection corporate https://www.nippon-soda.co.jp/e/environment/management/ value Continuous communication

42 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 43 Human Resources Strategy

The Nippon Soda Group’s Long-Term Vision, “Brilliance through Chemistry 2030,” has identified “Enhancement of cost competitiveness and efficiency,” “Expansion of overseas businesses,” Career Development Support Program and “Promotion of new product development and entry into new businesses” as key issues. In implementing these strategies, our people are one of our most important management resources. At Nippon Soda, we believe that it is imperative that each and every develop human resources who can create value with a view to the We need to transform ourselves into an organization that further promotes innovation while fully employee continues to develop their skills with a high degree of future of the Company as well as their own, based on three key awareness in order to achieve sustainable growth in today’s rapidly elements: “Career training,” as an opportunity to improve their utilizing the strengths we have built up over the years. We are committed to promoting diversity, changing society. To support the realization of these goals, the awareness of career development, “Career vision sheets,” as an developing human resources, and creating a rewarding workplace that employees can be proud Career Development Support Program mainly targets young to opportunity for employees to draw and review their ideal image of, with the aim of building an environment and organization that allows each and every one of our mid-career employees, helping each one of them to envision where once a year, and “Career interviews,” to further clarify their vision by diverse employees to maximize their abilities, to grasp changes in society’s circumstances, and to they want to be in five to ten years’ time and to manage their own communicating their thoughts. work with a positive mindset. skill development plans to achieve this goal. Specifically, it aims to

Basic Policy Acceptance of Diversity (Women and Disabled Persons)

We place emphasis on employing diverse candidates regardless their outlook and change their viewpoint. • Respect for the dignity and human rights of all people. of gender, age, nationality, ability or disability, and regardless of Workplace diversity training programs designed for directors and • Understanding the diversity of cultures, customs, and values and no tolerance for actions that result in discrimination. whether they are new graduates or mid-career hires, so as to create executive officers, as well as other specific positions, with the aim of • With particular emphasis on promoting diversity and the creation of a rewarding workplace that all Nippon Soda a more diverse organization. A group consisting of people with raising their diversity awareness are provided to help them recognize Group employees can be proud of, we proactively review our personnel and operation systems to ensure the different values should give its members the impetus to broaden diverse values and to empower individuals and organizations. constant improvement of these systems. ■ Number of Hired Persons (by Gender) and Retention Rate ■ Number of Disabled Persons Employed and Ratio of 採用者数（男女別）・定着率 障がい者雇用率Disabled Employees (Persons) (%) eron 60 120 2

100 100 100 50 100 92.9 2.19 22 89.2 100 2 2 Promotion of Diversity 40 94.1 80 2 84.6 84.6 33.0 30 60 20 34 (6) 34 (8) Diversity is one of our primary strategies for maintaining a high level their individual abilities to the fullest extent, to grasp changes in the 66.7 32 (6) 0 45 (5) 0 20 of global competitiveness and sustainable growth. We believe that environment, and to work with a positive mindset will lead to the 20 40 the creation of such a diverse work environment and organization creation of new innovation. 48 (13) 2 0 20 10 20 2 that allows each and every one of our employees to demonstrate 2 0 0 2 2016/3 2017/3 2018/3 2019/3 2020/3 20 20 20 20 2020/3

Number of college graduate hires: Retention rate at three years after hiring (male) (%) Nuer o diaed peron epoed Ratio o diaed epoee Diversity Policy Number of women shown in ( ) Retention rate at three years after hiring (female) (%)

The aim of our Diversity Policy is to develop the Company by As part of these efforts, we are building a foundation with bringing together diverse people, regardless of gender, age, both tangible and intangible measures, including a shift to a nationality and presence or absence of disability, while providing personnel system that makes the most of diverse human resources, Acquired Eruboshi Certification Based on the Act on Promotion of Women’s opportunities to gather and exchange different ideas. improvement of organizational climate, and improvement of the Participation and Advancement in the Workplace We believe that having a workforce with diverse values is workplace environment. We aim to be a company where motivated essential for generating new innovations and increasing global and capable people from around the world can thrive and shine, In August 2018, Nippon Soda was awarded Eruboshi certification managers,” and “diversity in career courses,” and was awarded the competitiveness. In this context, we recognize the promotion of and grow and develop on a sustainable basis. by the Minister of Health, Labour and Welfare. It is awarded to Level 2 Eruboshi certification, out of the three levels. In our action diversity as an important management strategy. companies with excellent implementation of initiatives to promote plan, we formulate and implement the active participation of women. This certification system is plans to increase the success of based on the Act on Promotion of Women’s Participation and our female employees with the aim Advancement in the Workplace, and companies with an excellent of increasing corporate value and Three Pillars of Promoting Diversity implementation status that have formulated an action plan for the sustainable growth through diversity. Increase Promote diversity in the organization promotion of women’s participation and submitted a notification to that effect are eligible to receive certification. The Company met the Promote improved productivity and Eruboshi certification mark added value criteria in four items, including “hiring,” “working hours,” “ratio of (Level 2 certification)

Reform Reform systems and awareness framework Enhanced Recruitment Efforts Support the development of Reform Promote work-life balance With an eye on Nippon Soda’s next generation, we are introducing female employees on our website and participating individual abilities Utilize ways of Continue Support the achievement of Management support working balance in work and private life focusing on strengthening our recruiting activities to create an in recruitment seminars overseas. At the same time, we shall Countermeasures against environment in which employees with diverse values can engage continue to expand employment opportunities for a diverse harassment in friendly competition without being limited by past experience. range of human resources, including mid-career hiring and For newly hired graduates, we are working to attract as many employment of people with disabilities. people as possible, regardless of gender, age or nationality, by

44 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 45 ■ Total Annual Working Hours per Employee Human Resources Development Scheduled working hours Early start and overtime Holiday working hours Paid annual leave days Other paid leave days Total annual working (hours) hours (hours) (hours) taken (days) taken (days) hours per person (hours) In order for Nippon Soda to continue to grow in the future, the Company conducts a variety of programs, including position- development of human resources is essential. The foundation based training, management training, specialized training by job 1,822.9 110.9 6.8 14.9 2.2 1,825.2 of human resources development is education and training. type, and support for self-development to improve language skills In addition to on-the-job training (OJT) at the workplace, the and obtain qualifications as well as other programs.

■ Educational Programs (Position-based Training) Promoting Work-Life Balance and Health Maintenance Training for Position Age Position-based training Career development support Self-development support line managers (1) Promoting work-life balance • Physical health We are working to create a workplace environment where our We implement health programs jointly with the corporate health Executives Executives training employees can continue working despite various lifestyle changes, insurance society. Specifically, with the cooperation of occupational such as childbirth, raising a child, and providing nursing care for physicians, we conduct specific health examinations, specific health 50s Level 3 training Division managers training ailing family members. We are revising our work regulations and guidance, and health checkups for lifestyle-related diseases. Managers Level 2 training Department advancing working style reforms in order to create a workplace 40s Level 1 training managers training where our employees can pursue their work without compromising • Mental health their health, and achieve a good balance between their work and Nippon Soda conducts stress checks for all employees and has a Assistant Assistant managers Section managers Correspondence Language 30s managers training training training training private lives. consultation service available through specialized doctors, clinical e-Learning psychologists, and external organizations. Staff 30s Career training (advanced) (at 10 years of employment) (2) Measures to maintain health employees 20s Follow-up training Career training (basic) (at 5 years of employment) Nippon Soda conducts various initiatives related to health management and promotion in order to ensure our employees work New Tutor instructions (Specialized work) with healthy bodies and minds. 20s Orientation On-site practical training (Administrative work) employees training

Labor-Management Relations and Improvement of Working Conditions Overseas Study and Training of Research and Development Personnel The Company views negotiations with labor unions as an ■ Number of Labor Union Members (Nippon Soda) With the aim of acquiring cutting-edge technology and forming undergoing practical training at overseas affiliated companies. opportunity to engage in dialogue with its employees, and to Number of labor global human networks, we conduct overseas research, and Based on the broad view and career Average age Average length of Percentage of discuss how to create working conditions that are consistent with FY union members dispatch researchers to laboratories in organic synthesis, polymers perspectives obtained from this experience, (years) service (years) members (%) the times. We are creating an environment in which employees and (persons) and molecular biology. Friendly rivalry with overseas researchers these employees are active in various management can discuss issues and problems in the workplace with 2015/3 845 40.6 19.3 65.0 has led to a higher level of research, and collaboration with the departments. each other. 2016/3 844 40.4 18.9 64.8 institutions to which they are dispatched can be anticipated. 2017/3 820 39.3 17.6 63.3 In addition, we have established an overseas training program 2018/3 824 37.9 15.8 62.7 so that employees can experience what it takes to conduct business Trainee (right) with a supervisor (left) 2019/3 840 37.7 15.6 63.7 within different cultures. After passing a selective examination, who is a trainee educator in exhibition support in overseas training at Novus 2020/3 853 37.9 15.8 65.0 the trainees spend a year studying foreign languages abroad and International Inc.

Rewarding Workplaces That Employees Can Be Proud Of Business Reform through Digital Transformation

The Nippon Soda Group focuses proactive efforts on creating on what systems and work environments are desirable to In April 2020, the “DX Promotion Group” was established in in R&D, we are working to create a system for efficient research a work environment in which each and every employee has a support employees’ growth, encourage autonomous career the Corporate Strategy Department to formulate and execute a and development and to accelerate the pace of new product vision for the future of the Group’s digital infrastructure from a development using machine learning. In the area of production sense of fulfillment and can maximize their abilities. We aim to development, and help them to balance work and private life, management perspective. We will enhance our competitiveness activities, we are currently focusing on digital transformation to build a better workplace environment by gathering feedback and by taking measures to address these issues. by improving research and technology through the use of digital ensure safe and stable operations, but we are also looking ahead to from workplaces through the labor union and other channels technology, and by improving operational efficiency. Specifically, future initiatives to streamline operations and save labor. ■ Number of Employees Who Take Childcare and Nursing ■ Number of Employees Taking Maternity and Childcare Care Leave Leave and the Return to Work/Retention Rate Employees taking Employees taking Rate of employees Employees taking maternity childcare leave family care leave returning to work Retention rate FY and childcare leave FY (%) Men Women Men Women Men Women Men Women Men Women 2015/3 0 6 0 0 2016/3 1 2 0 0 2015/3 0 (1,144) 5 (137) — 100 — 83.3 2017/3 2 3 1 0 2016/3 1 (1,137) 2 (142) 100 100 100 100 2018/3 3 4 0 0 2017/3 2 (1,138) 3 (152) 100 100 100 100 2019/3 5 10 1 0 2018/3 3 (1,130) 6 (159) 100 75 100 100 2020/3 4 4 0 0 2019/3 5 (1,143) 12 (168) 100 100 100 100 2020/3 4 (1,143) 4 (170) 75 100 100 100 *The number of employees who have taken the leave is counted in the fiscal year in which they started maternity/postpartum leave and childcare leave. The numbers in parentheses are the total numbers of men and women, respectively, at the end of each fiscal year. Retention rate is for employees who in that fiscal year were in their third year since returning to work.

46 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 47 Environmental Protection

The Nippon Soda Group conducts environmental protection activities to minimize the environmental footprint of its business activities. Protection activities include striving to conserve energy, reduce Effective Use of Resources and Reduction of Industrial Waste greenhouse gas emissions, conserve resources, reduce the emissions of industrial waste, recycle, reduce We participate in the Voluntary Action Plan on the Environment Zero emissions emissions of hazardous substances, and reduce our impact on biodiversity and ecosystems. promoted by the Japan Business Federation (Keidanren). Under the Nippon Soda has achieved zero emissions* for nine consecutive years.

action plan, we promote industrial waste reduction to achieve the * When the ratio of the amount of final disposal of industrial waste at landfill target amount of reduction in the final disposal of industrial waste compared to the amount transported to the industrial waste disposal facility is at landfill. small. We define “Zero emissions” when the ratio of landfill waste is 2% or less. Basic Policy Proper management of industrial waste and reduction of the final PCB waste • Continuing efforts to prevent environmental pollution, complying with laws and regulations, and promoting other environmental activities. disposal of industrial waste to landfill Each Nippon Soda site properly stores and manages condensers, • Reduction of environmental burden associated with business operations (prevention of global warming, and reduction in the As one of our efforts to help build a recycling-based society, Nippon transformers, mercury lamp ballasts, and other items at each amount of waste generation and amount of final disposal at landfills). Soda reduces the amount of industrial waste emissions from a long- business site and disposes of them appropriately one by one in • Development of products and processes with less environmental burden. term perspective and, at the same time, promotes the recycling of accordance with the Act on Special Measures concerning Promotion industrial waste items and implements other measures to reduce • Implementation of an environmental management system. of Proper Treatment of PCB (polychlorinated biphenyl) Wastes, the final disposal amount of industrial waste going to landfill. Reduction in the amount of energy consumption while maintaining productivity. which was revised in 2016. • Water resources conservation. Reduction of impact on biodiversity and ecosystems. Atmosphere and Water Area Protection

Nippon Soda implements various measures to protect the Reduction of air pollutant emissions atmosphere and water quality, such as reducing the amount of Nippon Soda promotes the reduction of emissions of sulfur oxide Environmental Protection Goals of the Nippon Soda Group chemical substances specified by the Act on Special Measures (SOx), nitrogen oxide (NOx), and soot and dust. Emissions of these (New Medium-Term Activity Goals for FY 2021–2023) concerning Promotion of Proper Treatment of PCB Wastes substances from stationary sources are controlled under the Air and measures to reduce toxic substance emissions to water, in Pollution Control Act. Goal Initiatives accordance with the Air Pollution Control Act, the Water Pollution (1) Environmental Zero events Implement measures for reducing risks by evaluating environmental impact Prevention Act, and the latest regulatory trends. Actions to conform to the Fluorocarbons Emission Control Act abnormalities Plan and implement measures to prevent problems caused by human error To comply with the Fluorocarbons Emission Control Act, we (2) Energy Reduction of chemical substances specified by the Act on Special implement periodic inspections by those with expertise, simplified (1) Energy consumption Annual improvement of 1% and a 3% improvement in With an eye to meeting the reduction target, focus on improving the energy rate comparison to FY 2020 at the completion of the new consumption rate through setting, implementation, and evaluation of themes Measures concerning Promotion of Proper Treatment of PCB Wastes inspections by the Inspection Manager, measures to prevent medium-term plan for improvement. We are making efforts to reduce emissions into the environment of Class fluorocarbon emissions, and other required activities at one worksite (2) Energy consumption Annual improvement of 1% and a 3% improvement in With an eye to meeting energy-saving logistics targets, focus on improving I Designated Chemical Substances specified by the Act on Special at a time. rate in logistics comparison to FY 2020 at the completion of the new the energy consumption rate in logistics through setting, implementation, and medium-term plan evaluation of themes for improvement. Measures concerning Promotion of Proper Treatment of PCB Wastes.

(3) Reduction of greenhouse CO2 emissions will be reduced by 1% for the year, and by 3% With an eye to meeting the reduction target, implement improvement Reduction of toxic substance emissions into rivers and other gas emissions in comparison to FY2020 when the new medium-term plan measures in conjunction with energy-saving activities. Conduct periodic is completed. Eliminating trouble of fluorocarbon leakage inspections and maintenance of equipment using Freon Reduction of emissions of harmful substances into the atmosphere bodies of water from equipment Twelve chemicals among those categorized as priority substances Nippon Soda has made its voluntary standards stricter than the (4) Water resources Monitor water resources and promote efficient water use Improve the maintenance of water quality in wastewater from business sites under the Air Pollution Control Act are designated as voluntarily national regulatory values and the standard values agreed with conservation and consider reducing water consumption controlled chemical substances by the Japan Chemical Industry local municipalities. Based on these strict values, we manage water (5) Industrial wastes Association (JCIA). Of the 12 chemicals, our Company currently quality through the monitoring of pollutants and purification at the (1) Amount of final Annual reduction of 3% in amount of final disposal at landfill With an eye to meeting the reduction target, focus on improving the waste deals with the following six substances: chloroform, dichloromethane, wastewater treatment plant. disposal at landfill 9% reduction versus FY 2020 when the new medium-term plan generation rate, through the setting, implementation, and evaluation of is completed themes for improvement 1,2-dichloroethane, ethylene oxide, 1,3-butadiene and benzene. (2) Zero emissions Continuation of zero emissions Continue to achieve zero emissions at all worksites by reducing the amount of We are implementing measures to reduce the emissions of these final disposal at landfills and amount transported to the industrial waste six substances. disposal facility (6) Emission of toxic Annual improvement of 1% and a 55% improvement in Plan and implement measures to reduce emissions of hazardous substances substances into the air comparison to FY 2015 at the completion of the new medium-term plan Preservation of Biodiversity (7) Reduction of impact on Continue activities to reduce the impact on biodiversity and Contribute to the preservation of biodiversity by reducing environmental biodiversity and ecosystems burden through environmental protection activities. Strive to enhance, Nippon Soda has been taking measures to reduce the environmental Supporting the protection of himekomatsu (Japanese white pine) ecosystems collaborate, and cooperate in the field of biodiversity through communication with relevant organizations burden, use water resources effectively, and prevent pollution of a critically endangered species (Chiba Plant) air, water, and soil, mainly in areas where its production sites are Chiba Plant launched the “Himekomatsu Supporter” project to protect located. In recent years, we have added conservation of biodiversity himekomatsu, an endangered tree species in Chiba Prefecture. as priority issues and have been carrying out viable activities that Responses to Climate Change Issues can be implemented at each of our worksites.

Efforts to prevent global warming are critical. Nippon Soda Promotion of energy saving by the Logistics Department Breeding of killifish originating from the Sakawa river system participates in the Commitment to a Low Carbon Society, a voluntary Nippon Soda has been making efforts to improve logistics (Odawara Research Center) action plan promoted by the Japan Business Federation (Keidanren). efficiency and reduce environmental burden through measures Odawara City, Kanagawa Prefecture, has been promoting Under the action plan, we are promoting energy saving to achieve such as modal shifts in transportation, reducing the frequency protection activities for killifish, which are listed as an Endangered the CO2 emissions reduction targets. of trips by using larger transport containers, and adjusting Species Category II by the Ministry of the Environment. In 1999, distribution routes. we conducted the “Medaka-no Otosan Okasan Sato-oya Seido” Reduction of energy consumption and greenhouse gas emissions (“Killifish Fosterparent Program”), in order to protect their habitat Nippon Soda strives to reduce the amount of greenhouse gas and genes and pass them on to the next generation. emissions by implementing energy-saving measures to reduce Breeding of killifish of the Sakawa river system Himekomatsu the energy consumption rate such as improving production processes and introducing energy-saving equipment. Environmental Protection Activities through the “NISSO Group Forest”

Use of renewable energy On the occasion of the 100th anniversary of our establishment, the location of the Company’s origin, and made a donation At the Nihongi Plant, small-scale hydroelectric power is generated we began initiatives to protect greenery and water sources as a to the National Land Afforestation Promotion Organization in and effectively used for production activities at the plant. contribution to the achievement of the SDGs. The Nisso Group order to contribute to the creation of a forest of biodiversity and established the “NISSO Group Forest” within the “Joetsu environmental protection. Small-scale hydroelectric power facilities at the Nihongi Plant KUWADORI Community Forest” in Joetsu City, Niigata Prefecture,

48 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 49 Process Safety and Disaster Prevention Occupational Safety and Health

The Nippon Soda Group places emphasis on ensuring process safety and disaster prevention in The Nippon Soda Group strives to create a workplace in which employees can feel the joy of their order to prevent serious accidents at all plants and ensure the continuation of safe and stable work. To achieve this goal, we are working to achieve and sustain zero occupational accidents and to production. We are also constantly improving our business continuity plan (BCP) to ensure a stable promote employee health. supply of products and services.

Basic Policy Basic Policy

• Regular inspections, repair and renewal of equipment and training of operators at each manufacturing site. • Introduction of an Occupational Safety and Health Management System (OSHMS or ISO 45001), and implementation of risk assessments. • Improvement of our risk management system through emergency drills and education to prepare employees for possible accidents • Continuous implementation of PDCA (Plan-Do-Check-Action) to ensure safe and healthy workplaces with the aim of achieving the goal and disasters. of zero occupational accidents. • Safety reviews are conducted by our internal experts to verify safety when facilities are constructed or renovated. • Provision of health guidance based on medical examination results and implementation of measures to reduce incidents of personal Regular diagnoses of our disaster prevention capabilities are provided to external specialists. injury or illness to help employees maintain and improve their health. • We conduct regular reviews and improvement of our business continuity plan (BCP), which is designed to help us be prepared for • As mental health care service, we perform stress tests and provide consultation services by qualified mental health specialists. We have natural disasters such as large-scale earthquakes and other emergencies that could result in extensive damage. established and are operating a system that allows us to take appropriate action.

Risk Management Implementation of Risk Assessment We conduct risk assessments related to safety and disaster prevention for facilities, machines and Risk assessment of process We are systematically improving the achievement and performance also place emphasis on OSHMS risk assessment. Each office (plant manufacturing processes. Identified risks are prioritized and, accordingly, measures to ensure the safety of safety and disaster prevention of the targets we have set through the PDCA cycle set out in the or research center) periodically identifies and assesses occupational facilities are implemented and inspections are conducted in sequence. Occupational Safety and Health Management System (OSHMS). accident risks and, if they are not acceptable, takes measures to Establishment of an We give the highest priority to preventing accidents and disasters. On the other hand, to prepare for To integrate OSHMS and responsible care activities effectively, we reduce them to permissible levels. emergency risk management unavoidable accidents and disasters, we have established an emergency risk management system and system conduct periodic drills and exercises to maintain the system in a sound condition. The Standards on Emergency Response have been developed to ensure prompt and appropriate Standards on Emergency communication, response, and instruction in the event of a disaster or accident, and their effectiveness is Efforts to Prevent Occupational Accidents Response reviewed and revised periodically, and confirmed through training. Activities to reduce occupational accident risks Efforts to prevent human error by workers Mainly in accordance with activity plans set forth in OSHMS, we are The 5Ss—seiri (sorting), seiton (setting-in-order), seiso (shining), reducing risks through the elimination of near-miss incidents and seiketsu (standardizing) and shitsuke (sustaining the discipline)—and Safety Management by drawing on examples of disasters at other worksites and other the 4 Safety Cycles (KY* before starting operation → Pointing and companies. When new plants are constructed or when plants are vocalizing during operation → Mutually directing attention during expanded, we require safety reviews and audits to reduce disaster operation → Identifying hiyari-hatto [near miss] accidents after Safety audit to confirm the safety of plants risk to an acceptable level before starting test operations. operation) are the concepts that form the basis of safety activities To ensure the safety of processes in the construction and for the Nippon Soda Group. In addition, senior management at renovation of facilities, the Nippon Soda Group undergoes each business site takes the initiative in promoting safety awareness safety reviews and audits by managers and internal experts for among employees so that safety activities are improved through the the inspection of facilities and operations in terms of safety, work continuous application of the PDCA cycle. environment, quality and other factors. Facilities of Group manufacturing companies undergo periodic *A combination of the first letters of two Japanese words, K kiken“ (risk)” and Y RC audits to assess the management conditions of manufacturing “yochi (prediction).” The KY system is designed to identify latent risks associated with work and take preventive measures before they occur. facilities and these results have been incorporated into activities to Pre-safety audit of safety measures Safety audit before trial operation of the improve process safety and disaster prevention. for specialty chemical production foundation of the plant for chlor-alkali equipment reagent tank (before business infrastructure (Nihongi Plant, construction) (Takaoka Plant, July 2019) October 2019) Health Management

Nippon Soda considers the maintenance and promotion of health Education and Drills for Disaster Prevention to be an important management issue. In March 2020, Nippon Soda was recognized again in the “2020 Certified Health & Productivity Nippon Soda provides a variety of process safety and disaster Disaster prevention system working in cooperation with local Management Organizations Recognition Program (White 500)” prevention training for employees to acquire the knowledge and communities for the third year in a row under the recognition program jointly skills to ensure their safety. We will continue to promote safety and Each Nippon Soda site implements regular disaster drills, which undertaken by the Ministry of Economy, Trade and Industry and disaster prevention activities with the aim of further improving our include drills conducted in cooperation with other nearby plants Nippon Kenko Kaigi. Nippon Soda, in cooperation with the Health safety and disaster prevention activities to achieve the target of “no and local governments. Insurance Association and the labor union, promotes efforts geared major accidents at facilities.” toward supporting physical and mental health of employees.

Group training Each department conducts regular education and training in accordance with the RC activity plan. We provide new employees with new employee training on safety and basic operations.

Experiential group training (at NISSO Comprehensive emergency drill Takaoka Academy) (Chiba Plant, May 2019) (Takaoka Plant, May 2019)

50 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 51 Logistics Safety and Quality Assurance Chemicals and Product Safety

The Nippon Soda Group promotes efforts to reduce risks associated with the distribution of products The Nippon Soda Group takes into consideration the potential environmental, safety and health to prevent logistics accidents. We also enhance customer satisfaction by providing a safe and secure impacts of chemical substances and the hazards and toxicity of its products, complying with laws environment in which our customers can use our high-quality products in a stable manner. and regulations and international standards, while also complying with regulations based on social demands, so as to earn the trust of customers and society.

Basic Policy Basic Policy

• Comply with domestic laws and regulations, international standards, and treaties etc., giving due consideration to the • Reduce the risk of hazards, toxicity and accidents during transportation of products. environmental, safety and health impacts caused by the hazards and toxicity of chemical substances and products. Ensure the safety of our customers, those involved in the distribution process and local residents, and protect the environment. • Comply with social restrictions that are not covered by law to maintain and ensure trust from customers and the general public. • Provide information that helps customers use high-quality products safely, comfortably and in a stable manner. • Conduct specific measures to ensure the safety management of chemical substances, including activities and periodic educational programs regarding chemicals and product safety.

Logistics Safety Safety of Chemicals

Measures to ensure safe transportation of dangerous goods Distribution safety in value chains Strengthening management of chemical substances using ExESS, Regular training programs on chemical substance control • Logistics risk assessment • Proposals for improvement of customers’ facilities a chemical substance control system We provide employees who The Nippon Soda Group takes measures to reduce risks from various In the event that there is a problem with the safety of the transport We are strengthening the management of chemical substances handle chemical substances perspectives to prevent accidents involving workers and products company or the customer’s workers at the customer’s product receiving through the use of the SDS*1 and the Yellow Card chemical with education on how to caused by traffic accidents during forklift loading, unloading and facility, or if there is a potential risk of foreign matter entering the facility substance management system (ExESS). We revise SDSs and Yellow comply with Japanese and trans-shipment of products, as well as during truck transportation. or spills, the Nippon Soda Group makes proposals for improvement Cards to comply with revisions to laws in Japan and overseas. We overseas laws and regulations and work to prevent accidents and disasters. also support the adoption of GHS*2 for SDS and product labels for regarding the management of 1 • Promotion of Yellow Card* and *1 A Yellow Card is an emergency information card with information about Europe, the United States, China, Taiwan, South Korea, Southeast chemicals. Educational session for new/transferred Container Yellow Card (product labels)*2 procedures that drivers, fire and police personnel, and other concerned parties Asia, Turkey, and other countries as well as Japan. employees on chemical substance laws and regulations (Head Office, May 13, 2019) The Nippon Soda Group promotes the use of Yellow Cards and should take in the event of a spill, fire, explosion or other incident that may occur during transportation. It also contains emergency contacts. The issuance and Container Yellow Cards mainly for products that are classified as carrying of Yellow Cards is required by the Poisonous and Deleterious Substances *1 SDS (Safety Data Sheet) documents describing information on chemical *2 Globally Harmonized System of Classification and Labelling of Chemicals (GHS): A hazardous materials. Product labels are revised to reflect the latest Control Law and other laws. substances, product names, suppliers, hazards, precautionary safety measures, worldwide system for the international standardization of classification and labeling legal information, including revisions to relevant laws, in a timely *2 A Container Yellow Card is a label that is affixed to containers with the United emergency response, etc. chemicals which was agreed upon by the United Nations Economic and Social Nations number and guide number defined by the Emergency Response manner. We constantly implement wording that complies with the Council. This refers to the system of international hazard classification standards Guidebook GHS*3 requirements and appropriate pictograms and take other and labeling methods (product labeling and SDS) for chemical hazards. *3 Globally Harmonized System of Classification and Labelling of Chemicals (GHS): measures so that we are prepared in the event of a disaster to A worldwide system for the international standardization of classification and respond quickly to prevent damage from spreading. labeling chemicals which was agreed upon by the United Nations Economic and Social Council. This refers to the system of international hazard classification standards and labeling methods (product labeling and SDS) for chemical hazards. Product Safety

Actions to comply with laws and regulations Communication of safety information on chemicals The Nippon Soda Group takes actions to comply with domestic The Nippon Soda Group Quality Assurance and overseas laws and regulations (including the EU REACH participates in GPS/JIPS*4. We regulation*3) and conducts audits of poisonous and deleterious have prepared safety summary Efforts to ensure quality management Efforts to achieve zero product-related complaints substances at sales offices and branches. reports on four substances, Quality risk assessment To eliminate product-related complaints, we conduct quality risk including caustic soda and Nippon Soda actively engages in quality risk assessment with the assessments to identify and reduce risks. We are also working to hydrochloric acid, which have goal of preventing the occurrence of product-related complaints reduce product-related complaints due to human error through been registered on the ICCA*5 and the recurrence of such complaints. We make continuous efforts human error prevention training for employees. portal page and made publicly Explanatory session on revision of laws and to identify quality-related risks from each manufacturing site and available. regulation (Head Office, February 12, 2020) reduce the risks, especially the high-risk A and B grades. *3 REACH (Registration, Evaluation, Authorization and Restriction of Chemicals): *4 GPS (Global Product Strategy): A voluntary industry initiative based on risk European chemicals regulations. European regulations state that businesses assessment and risk management with a global product strategy as the basic that manufacture or import one ton or more of products per year are required concept, taking into account the supply chain to register the substances they handle and submit safety test data, and that JIPS (Japan Initiative of Product Stewardship): ICCA’s Product Stewardship (PS), an substances for which data is not submitted (registered) cannot be sold. international initiative *5 ICCA (International Council of Chemical Associations)

Consideration in Animal Experiments

Odawara Research Center of Nippon Soda established its own Basic Policy on Animal Experimentation Performed at Research regulations for animal experimentation and other relevant Institutions,” and the Science Council of Japan’s “Guidelines for standards based on the “Act on Welfare and Management of Proper Implementation of Animal Experiments.” These activities Animals,” the Ministry of the Environment’s “The Standard for are validated by an external organization (Japan Health Sciences Care and Management of Laboratory Animals and Alleviation of Foundation) and the facility was certified in June 2018 as a facility Pain,” the Ministry of Agriculture, Forestry and Fisheries’ “The that conducts animal experiments in a proper manner.

52 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 53 Relationship with Local Communities and Corporate Governance Dialogue with Society

Corporate Governance Highlights The Nippon Soda Group participates in a variety of activities with regard to environmental protection and safety, and engages in dialogue with stakeholders on the environment, safety, and health with the aim of improving public trust in the Group. Directors who are members of the Audit and Directors Supervisory Committee Ratio of outside directors Ratio of female directors

Basic Policy persons persons 8 3 % 18.2% (Average duration of 36.4 • Based on the concept of “contributing to the sustainable development of society through our business tenure: 2.25 years) activities,” we promote CSR activities from the viewpoints of “contributing to resolving global environmental issues,” “a harmonious relationship with local communities,” and “contributing to the development of local communities.” • Develop good relationships with local residents through various activities that meet the needs of local communities and that are designed and implemented by each business site and Group company. Nomination and Number of meetings Number of meetings Remuneration of the Board of of the Board of Number of Management Number of meetings held Advisory Committee Directors held Auditors held Council meetings held with investors

3 persons 16 15 38 203 (President and Harmonious Relationship with Local Communities two outside directors) Nippon Soda contributes to creating local employment opportunities cleaning activities around our worksites and actively participate in through its worksites throughout Japan. In order to fulfill our role local cleaning activities conducted by community residents. and responsibility as a corporate citizen, we regularly carry out local Basic Concept

Dialogue with Local Communities Nippon Soda places primary importance on sound and transparent business management in compliance with the law. Our management philosophy is to contribute to social development by providing superior products through chemistry, to meet Nippon Soda holds local gatherings and regularly conducts tours of are located in order to provide information on CSR activities and expectations from stakeholders, including shareholders, investors, business partners, employees and local communities, and to plants and research centers for residents in areas where worksites exchange views and comments. promote environmentally conscious business practices and activities. Under this philosophy, we are committed to growing into a technology-oriented group that develops high-added-value products by making best use of its proprietary technologies and expands its business with a global point of view and a focus Major Social Activities of Nippon Soda on chemistry. In addition, we recognize that the enhancement of corporate governance is an important management issue for realizing Nippon Soda conducts social activities from the perspective of living in harmony with local communities and for the development of local our management philosophy and responding quickly and appropriately to rapid changes in the business environment. communities. Each of our worksites is engaged in a variety of activities that match the needs of the community and strive to build good ▲ relationships with local residents. Corporate Governance Report https://www.nippon-soda.co.jp/environment/pdf/governance_report_200626.pdf

A History of Strengthening Governance

FY 2013 Established a CSR Administration Meeting Abolished the executive retirement benefit system. Aiming to Strengthen FY 2014 Introduced an executive officer system (number of directors reduced Governance from 14 to 7) Environmental Beautification Activities A Festival of Science for Children Nisso “Thanking Local Residents” event (Mizushima Plant, May 2019) (Nihongi Plant, July 2019) (Takaoka Plant, November 2019) Nominated 1 outside director · Strengthen management supervision and improve FY 2016 Nominated 2 outside directors (increased by one person, including operational agility one woman) Stakeholder Engagement Started effectiveness assessment of the Board of Directors · Increase the diversity of the Board FY 2017 Reviewed the executive compensation system (introduced We are engaged in stakeholder engagement to deepen our DBJ Environmentally Rated Loan Program of Directors understanding of society’s needs and values through dialogue with a performance-based stock compensation plan, board benefit our stakeholders, and to promote business activities that meet the trust (BBT)) 2019 Highest Rank · Enhance management transparency expectations of local communities. FY 2018 Established Remuneration Advisory Committee In March 2020, we were awarded the highest and fairness rank in Development Bank of Japan Inc.’s FY 2019 Established Nomination and Remuneration Advisory Committee “DBJ Environmentally Rated Loan Program.” · Strictly comply with laws and We were given the highest rating for our Utilized external organization for effectiveness assessment “environmental management systems and regulations and corporate ethics of the Board of Directors initiatives, including our especially progressive 2019 approach to environmental awareness.” FY 2021 Transitioned to a company with an audit and supervisory committee (from 9 directors and 4 auditors to 11 directors, including 2 women)

54 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 55 Corporate Governance System Director Nomination Policy

The Nippon Soda Group is fully aware of its fiduciary responsibility in accordance with Japan’s Corporate Governance Code and is committed Decisions on the nomination of director candidates and the Candidates for outside directors are nominated in accordance to enhancing its corporate governance structure. selection and dismissal of senior management are made by with the requirements of the Companies Act and the Tokyo resolution of the Board of Directors based on the advice and Stock Exchange, and include those with expertise and extensive recommendations of the Nomination and Remuneration Advisory experience who can be expected to provide constructive and ■ Corporate Governance Structure Diagram Committee. Also, candidates for the position of director, who are candid views and comments on the Company’s management. members of the Audit and Supervisory Committee, are determined In the event of any impropriety or significant violation of relevant General Meeting of Shareholders by the Board of Directors after obtaining the consent of the Audit laws, regulations or the Articles of Incorporation in the performance

Noination iia and Supervisory Committee. To ensure that they are suitable for of duties by senior management, or any other reason that makes Noination Reporting their responsibilities, candidates for directors and senior it difficult for them to properly perform their duties, they shall be iia Reporting Nomination and Reporting The Board of Directors management are selected in accordance with the following criteria: removed from their position. Remuneration Advisory Committee The Board of Directors Audit and Supervisory Committee Eight members Directors who are members of the Audit and (1) Extensive business experience (of which two are outside directors) uditing Supervisory Committee Three people (2) Excellent managerial sense Reporting Superiion (of which two are outside directors) (3) Leadership, drive and planning skills itane (4) Have the proper character and insight Reporting Audit and Supervisory (5) Be healthy in body and mind Committee Office Seetion Reoa ppointent Interna Reporting Ste Reporting ooperation Noination iia Compliance Representative Director Noination iia Committee iretion ontro Superiion Internal Control Diversity of Directors Audit Department Corporate Social Candidates for the position of director are nominated based on In addition, on the basis of a third-party opinion of the Responsibility Administration Meeting the nomination process described above, taking into account the effectiveness of the Board of Directors, we increased the number of Executive Director Auditing / ooperation Management Supervision ooperation balance of each function (e.g., sales, planning and management, and outside directors and female directors in June 2020. Execution Council research technology) and their ability to cover each business area. Departments Executive Officer

uditing Third-party evaluation of the effectiveness of the Board of Directors (implemented in May 2019) iretion Superiion Accounting auditors · The Company should consider increasing the number of outside directors in order to “appoint outside directors with different skills and Operating Departments and Group companies experience to boost the supervisory function of the Board of Directors” and “increase the ratio of outside directors to one third.” · Although the current composition of the Board of Directors is composed of a well-balanced group of people from each organization and department, the Company currently relies on one outside director (woman) to address gender and internationalism, and the Company should focus on developing this group. General Meeting of Shareholders Nomination and Remuneration Advisory Committee The Nippon Soda Group holds an ordinary general meeting of In order to enhance the fairness and objectivity of executive personnel shareholders in June every year, viewing it as an important opportunity to and executive compensation, we have established a Nomination and engage in direct dialogue with our shareholders. We deliver the notice Remuneration Advisory Committee consisting of two outside directors of convocation of the General Meeting of Shareholders at an early date and the President, which advises and makes recommendations to the so that our shareholders may acquire a good understanding of the issues Board of Directors on executive personnel and compensation. Outside Directors that will be reported and the matters for resolution at the shareholders’ meeting. We also provide pre-delivery disclosure of information on Management Council Nippon Soda has four highly independent outside directors, requirements of the Companies Act and the Tokyo Stock Exchange Nippon Soda’s website and at the Tokyo Stock Exchange website, before In accordance with the Management Committee Operation Rules, including two directors (who are also members of the Audit and regarding independence, the Company nominates individuals who the notice of convocation of the General Meeting of Shareholders is sent Nippon Soda’s Management Council, consisting of executive officers Supervisory Committee) in an effort to enhance the ability of the are unlikely to have conflicts of interest with general shareholders out. Voting rights may be exercised not only in writing but also via the who concurrently hold the position of director as well as others Board of Directors to contribute to the Company’s sustainable and who are able to ensure objectivity and rationality in the Internet. requested by the President to attend, generally meets once a week (with growth and to increase medium- and long-term corporate value. Company’s decision-making and contribute to increasing corporate auditors). It discusses important issues involving business execution other Board of Directors than issues that must be discussed by the Board of Directors, in order to Regarding independent outside directors, in accordance with the value. Specifically, none of the following must apply to the person: The Board of Directors is responsible for making important management make quick decisions on issues related to business management. decisions (based on clear standards, such as amounts above a certain level) as stipulated by laws and regulations, the Articles of Incorporation, Compliance Committee and the Board of Directors Rules, as well as supervising the execution Nippon Soda operates a Compliance Committee, which reports directly (1) A person who does business with the Company or its subsidiaries as a principal customer or an executive person thereof of each director’s duties. The tenure of directors (excluding directors to the President, to ensure corporate activities in compliance with laws, (2) A primary business partner of the Company or its subsidiaries or an executor of such business who are members of the Audit and Supervisory Committee) is set at regulations and corporate ethics throughout the Group. The Compliance one year to ensure that they are able to respond quickly to changes Committee comprises executive officers as its members. At each (3) A consultant, certified public accountant, lawyer or other professional who has received a large amount of money or in the environment and to clarify their management and operational department, branch, worksite and Group company, a staff member in other assets from the Company or its subsidiaries in addition to director’s remuneration responsibilities. charge of compliance is appointed. (4) A person who has fallen into any of the above categories (1) to (3) in the past year Audit and Supervisory Committee Corporate Social Responsibility Administration Meeting (5) The spouse or a relative within the second degree of kinship of the following persons: Two of the three directors who are members of the Audit and Supervisory Chaired by the President, the Corporate Social Responsibility Committee are outside directors. Directors who are also members of the Administration Meeting serves as a Company-wide decision-making 1. a person who falls under (1) to (4) above Audit and Supervisory Committee not only attend Management Council body to promote CSR activities, including RC. It sets annual targets meetings, but also inspect important documents (approval requests) to help the PDCA cycle “spiral up” and provides a management- 2. a person who is, or has been in the past one year, an executive of the Company or its subsidiaries and receive explanations of important matters directly from the relevant level review of CSR activities. Held twice a year, the Corporate Social 3. a person who is currently, or has been in the past one year, a non-executive director of the Company or a subsidiary of directors, executive officers, department, or subsidiary, in an effort to Responsibility Administration Meeting is attended by directors, the Company gain an accurate understanding of corporate information throughout executive officers, worksite managers, and Group companies for a the Group while also monitoring and verifying whether or not related review by the management. departments are handling and responding to the situation and whether or not internal controls are being legally and appropriately executed. In addition to this, they work closely with the accounting auditors to ensure the reliability of our financial statements, in particular, by receiving regular reports from them and attending some of their on-site audits.

56 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 57 ■ Reasons for Nomination of Outside Directors

Attendance at meetings of the Board of Directors and the Board of Auditors a. Fixed remuneration The amount is determined based on the role and position of the director. Name The Board of The Board of Reason for nomination b. Performance-linked remuneration Calculated by the following formula, using an index that shows the results and performance of the relevant fiscal year. Directors Auditors Prior-fiscal year performance-linked remuneration + adjustment of performance-linked remuneration for the relevant fiscal year1 * = performance-linked (held 16 times) (held 15 times) remuneration for the relevant fiscal year We believe that by having her apply her practical experience in sales and development *1 Performance-based adjustments for the fiscal year are calculated based on two indices: (1) increase or decrease in consolidated ordinary profit and (2) increase Junko obtained through her experience at other companies as well as her experience as or decrease in non-consolidated operating margin. These two indices are selected as performance-linked remuneration indicators because they measure 12 times* - Yamaguchi a corporate auditor to the management of our Company, she will be able to further the degree of achievement of consolidated and non-consolidated performance and are suitable for assessing the level of achievement and the level of strengthen our management system. contribution of each director. In addition to these indices, the performance of the departments for which they are responsible is taken into account for the directors of sales departments. We believe that by having him apply the knowledge and experience he has gained (newly over many years in the banking business and his involvement in the management of The changes in consolidated ordinary profit and non-consolidated operating margin are as follows: Mitsuaki Tsuchiya - appointed) other companies, he will be able to further strengthen the Company’s management Numerical targets Actual values Increase / decrease structure. (Previous fiscal year results) (fiscal year ended March 31, 2020)

He has a wealth of knowledge as an accountant, including international experience, Consolidated ordinary profit ¥8,888 million ¥10,312 million ¥1,424 million and although he has never been directly involved in corporate management, we Shigeo Ogi 16 times 15 times Non-consolidated operating margin 3.1% 4.5% 1.4% believe that he can apply his extensive knowledge and experience to auditing the Company’s management. c. Evaluation remuneration Calculated based on the level of achievement of the targets set by each officer at the beginning of the term. Although she never been directly involved in corporate management, we believe that d. Stock-based remuneration We have introduced a board benefit trust (BBT). It is based on a point system based on position and points are awarded (newly (newly she can use her extensive knowledge and insight on corporate law as an attorney and according to the following formula: At the 151st Ordinary General Meeting of Shareholders held on June 26, 2020, the Company Yoko Waki appointed) appointed) her experience as an outside director of other companies to audit the Company’s transitioned to a company with an Audit and Supervisory Committee and at the same meeting of shareholders, a resolution was management. passed to reintroduce a stock-based compensation plan for directors (excluding directors who are members of the Audit and Supervisory Committee and outside directors). * Since June 27, 2019, when Ms. Junko Yamaguchi was appointed as a director of the Company, the Board of Directors has met 12 times. Standard points based on position x Index coefficient for the fiscal year2 * (%) = Points granted for the fiscal year *2 The index coefficients are determined by using a matrix table that measures (1) the fiscal year’s ROE and (2) the increase/decrease in consolidated operating profit (the amount of increase/decrease in the current fiscal year’s actual results compared to the average of the previous three years) as indicators, with a range of 0% to 150%. Executive Remuneration

Policy on decisions not exceed ¥350 million and ¥100 million per year, respectively. ■ Total Amount of Remuneration by Officer Category, Total Amount of Remuneration by Type, and Number of Eligible Officers Nippon Soda’s executive compensation is determined based on a In conjunction with the transition to a company with an Audit Total amount of remuneration by type (millions of yen) balance of global standards, company performance and employee and Supervisory Committee, a resolution was passed on June 26, Total amount of Number of Officer Performance- Performance- salaries. 2020 at the 151st Ordinary General Meeting of Shareholders to remuneration Fixed Retirement eligible officers classification linked Bonus based stock (millions of yen) remuneration benefits (persons) Director remuneration shall be determined within the limits of abolish the provision concerning the total amount of remuneration remuneration remuneration the total amount of remuneration approved by the General Meeting for directors and corporate auditors and to set the total amount of of Shareholders, and shall be discussed and decided by the Board remuneration for directors (excluding directors who are members Directors of Directors based on the advice, recommendations and findings of the Audit and Supervisory Committee) and directors who are (Excluding 217 133 67 — — 15 10 outside directors) of the Nomination and Remuneration Advisory Committee to the members of the Audit and Supervisory Committee at no more than Board of Directors. ¥350 million and no more than ¥100 million per year, respectively, Auditors Corporate auditor remuneration shall be determined by the after the transition to a company with an Audit and Supervisory (Excluding 25 25 - - — — 1 Board of Auditors in consultation with the shareholders, within the Committee. Also, as stipulated in the Articles of Incorporation, outside directors) limits of the total amount of remuneration approved by the General the number of directors (excluding those who are members of the Meeting of Shareholders. It was resolved at the Annual General Audit and Supervisory Committee) is limited to 10 persons, and the Meeting of Shareholders held on June 28, 2012 that the total number of directors who are members of the Audit and Supervisory Outside officers 69 69 - — — — 6 amount of remuneration for directors and corporate auditors shall Committee is limited to 5 persons.

*The number of directors (excluding outside directors) who are eligible for performance-based stock compensation is nine. Decision process Activities of the Nomination and Remuneration Advisory Committee Activities of the Board of Directors In consultation with the Board of Directors, the members shall The Board considers and decides upon the findings of the deliberate on the policy on executive remuneration and other Nomination and Remuneration Advisory Committee. With respect Effectiveness Assessment of the Board of Directors matters, and provide advice, recommendations and findings to to executive remuneration for the fiscal year ended March 31, the Board of Directors. Executive compensation for the fiscal year 2020, directors’ compensation and share benefit trust points to be Nippon Soda has been conducting self-assessments of all directors assessment as in the past and examined and discussed our current ended March 31, 2020 was discussed on June 21, 2019. granted were discussed and decided on June 27, 2019. and corporate auditors in the form of questionnaires every year understanding of effectiveness. As a result, it was confirmed that since the fiscal year ended March 2016, with the purpose of overall, the Company’s Board of Directors has been effective. Remuneration system that outside directors and corporate auditors are paid only fixed improving the Board of Directors’ decision-making and supervisory However, the transition to a company with an Audit and Supervisory Remuneration for directors, excluding outside directors, consists remuneration and are not subject to performance evaluation. functions in the appropriate execution of duties. In the fiscal year Committee was recognized as an opportunity to strengthen of (1) fixed remuneration, (2) performance-linked remuneration, Following the transition to a company with an Audit and Supervisory ended March 2019, the fourth year of the project, we conducted an governance through the effective use of the Audit and Supervisory and (3) evaluation remuneration, the ratios of which are shown Committee, directors and outside directors who are members of the analysis and evaluation based on an interview survey commissioned Committee’s oversight and supervisory functions, and we will in the table below (ratios for each position). In addition, we have Audit and Supervisory Committee are paid only fixed remuneration by an external organization. Based on this performance, in the continue to work on improving the operation of the Board of introduced a performance-based stock compensation plan. Note and are not subject to performance evaluation. fiscal year ended March 31, 2020, we conducted the same self- Directors to further enhance its effectiveness.

■ Ratio of Remuneration for Each Position (Units: %) Position Fixed remuneration Performance-linked remuneration Evaluation remuneration Representative director / Director 62–70 23–30 6–8 (excluding outside directors / part-time directors) Outside director / Part-time director 100 - - Auditors 100 - - Outside directors 100 - -

58 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 59 Compliance Internal Controls

Basic Policy Status of Internal Audit System (1) In accordance with the basic policy regarding system development necessary to ensure proper business operation, Nippon Soda establishes and implements systems that ensure compliance and efficient and sound company management, and provides information on relevant rules The Nippon Soda Group ensures corporate activities are undertaken in compliance with laws, regulations throughout the Company. and corporate ethics by making all employees aware of the Nippon Soda Group Code of Conduct. Our (2) We promote CSR (corporate social responsibility) practices in order to maintain the trust of society needed to continue our business efforts to ensure business management that emphasizes regulatory compliance include the establishment activities. of the Compliance Committee and proper implementation of the internal reporting system. Through these efforts, we enhance the internal control system and continue to be a company trusted by society. Regulations on the Risk Management of Losses and Other Systems

(1) We ensure corporate activities in compliance with laws, regulations and corporate ethics by ensuring all employees are fully informed of the Nippon Soda Group Code of Conduct. ■ The Nippon Soda Group Code of Conduct (2) We have established a “Corporate Social Responsibility Administration Meeting” chaired by the President to promote business activities 1. Compliance with laws, rules, taking into account environmental protection, occupational safety, product safety, and human rights. In addition, we implement risk (1) Fair behavior (2) Compliance with corporate ethics regulations and corporate management in accordance with Company regulations such as the “Environmental Management Regulations” and “Security Management (3) Prompt corrective action and strict disciplinary action in response to the violation of a law, rule or regulation ethics Regulations” to prevent accidents from occurring. (1) Contribution to society (2) Compliance with all applicable laws (3) Should a serious accident occur, an accident response headquarters is established in accordance with corporate rules, including the Security (3) Restrictions on political and other donations (4) Severance of relationships with antisocial forces 2. Relationship with society Management Regulations to address the accident in a cross-sectional and systematic way. (5) Environmental preservation and protection (4) If a natural disaster, such as a large earthquake, or any other crisis that could have disastrous consequences occurs, we shall respond (6) Compliance with laws and regulations related to security trade control and imports and exports appropriately according to the business continuity plan (BCP). (1) Safety of products (2) Compliance with the Antimonopoly Act 3. Relationship with customers, (3) Compliance with suppliers’ guidelines for fair transactions and the Subcontract Act (5) Other risks associated with business execution are appropriately addressed by responsible departments in accordance with response business partners and (4) Prevention of unfair competition (5) Business entertainment and gifts manuals and other documents. competitors (6) Prevention of bribery of foreign public officials (7) Appropriate advertising (6) The Internal Control & Audit Department has been established independently from business departments to assess the appropriateness 4. Relationship with and efficiency of business activities and the reliability of financial reports and to promote the appropriate functioning of the internal control (1) Disclosure of management information (2) Prohibition of insider trading shareholders and investors system in business processes. (1) Respect for human rights and prohibition of discrimination (2) Prohibition of harassment (3) Protection of privacy 5. Relationship with employees (4) Safety and hygiene at worksites (5) Compliance with labor laws (1) Compliance with working regulations (2) Proper accounting (3) Conflicts of interest 6. Relationship with the (4) Prohibition of political and religious activities (5) Management of corporate secrets Internal Audits Company and its assets (6) Appropriate use of corporate assets (7) Appropriate use of information systems The Company’s Internal Control & Audit Department, which is independent of the operating divisions, works closely with the directors who are (8) Protection of intellectual property also members of the Audit and Supervisory Committee, to assess the appropriateness and efficiency of business activities and the reliability (1) Scope of application of this Code of Conduct (2) Revision and abolition of this Code of Conduct 7. Supplementary provisions of financial reports. The directors who are also members of the Audit and Supervisory Committee keep abreast of developments throughout (3) Violation consultation hotline (4) Penalties the Nippon Soda Group and monitor and verify the proper execution of internal controls. Furthermore, to ensure the reliability of financial information and other information, they work in close cooperation with the accounting auditors, who report regularly and attend some of the audits conducted. Compliance Promotion System Nippon Soda has a Compliance Committee, which reports directly ■ Composition of the Compliance Committee Information Security Management to the President, to ensure corporate activities in compliance with laws, regulations and corporate ethics throughout the Group. Officers Appropriate management and protection of our information assets is one of the priority issues in managing our business. Nippon Soda The Compliance Committee comprises executive officers as promotes information security management under the supervision of the director in charge of corporate strategy. In addition to the its members. At each department, branch, worksite and Group development of internal regulations such as the Information Security Policy, we are working to raise awareness of the importance of information company, a staff member in charge of compliance is appointed. assets by advocating the appropriate use of information systems in the Nippon Soda Group Code of Conduct. We are taking measures to The Nippon Soda Group has established a consultation desk, strengthen the information security management system of the entire Nippon Soda Group, including training at group companies on how to whereby an employee of the Group who has committed an Committee Members deal with suspicious emails to prevent external viruses from infecting our computers. infraction or becomes aware of an infraction by another employee, can consult directly with the Compliance Committee Secretariat, an Departments Branches Worksites Group companies outside attorney or an Audit and Supervisory Committee member.

Compliance Managers

Compliance Promotion and Education

We have formulated the Nippon Soda Group Code of Conduct, regulations. We conduct legal education and training related to which specifies matters to be observed by the Nippon Soda our operations once a year or more, and in the fiscal year ended Group in order to carry out sound corporate activities. This Code March 31, 2020, we conducted a total of four major compliance of Conduct is distributed to the executives and all employees of training sessions for Nippon Soda and major Group companies. In Nippon Soda and its consolidated subsidiaries, and we provide addition, we conduct an annual compliance survey of all employees ongoing training to ensure thorough compliance with laws and to determine their understanding of the Code of Conduct.

60 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 61 Business and Other Risks Messages from Outside Directors

1. Market risks management, and in particular, we are striving to improve I will contribute to the creation of sustainable value by increasing both corporate value (1) Some of the Group’s businesses include products and services management based on ISO 9001. In addition, we conduct product that are subject to economic fluctuations. Therefore, if market liability (PL) risk assessments prior to the sale of new products and and social value. conditions fluctuate significantly due to changes in the economic make quality improvements in accordance with ISO 9001 to ensure environment, the Group’s results of operations could be that PL problems are avoided. However, there is no guarantee that all products will be defect-free and free of PL issues. For this I have experienced a period of management reform, including the privatization, significantly affected. spin-off and reorganization of Nippon Telegraph and Telephone Public reason, the Group carries product liability insurance to protect itself (2) In the Agro Products Division, earnings tend to increase in Corporation (now the NTT Group) against the backdrop of liberalization and in the event of an accident. However, if an unanticipated serious the fourth quarter due to the seasonal nature of demand. In increased competition in the information and telecommunications market. quality defect occurs, the Group’s business performance could be addition, the Group’s business results may be significantly I have been responsible for creating a framework that reflects the views of significantly affected. affected by weather fluctuations, as the Group’s businesses tend customers and society in our business, developing new fields and business to be susceptible to weather conditions. categories, creating and developing new services and markets, and conducting 7. Accident and disaster risks corporate sales. I would like to contribute to the Nippon Soda Group’s sustainable As a chemicals manufacturer, the Group is acutely aware of the growth by utilizing the experience I have gained through the simultaneous 2. Exchange rate risk risks associated with manufacturing. We engage in responsible realization of the “corporate” and “public” nature of the company, while at the (1) The Group operates on a global basis and foreign currency care activities with respect to quality, environmental protection, same time enhancing its corporate value and social value. fluctuations affect net sales and materials procurement costs occupational safety & health, process safety and disaster I was involved in the process of developing the Long-Term Vision presented here, in foreign currencies. For this reason, we seek to mitigate the prevention, logistics safety, chemicals and product safety, etc., and and I participated in the discussions from the draft stage. The process of formulating impact on operating results through foreign exchange contracts. strive to prevent accidents at our production facilities and chemical “Our Vision 10 Years in the Future” and numerical indices, while incorporating (2) Since the yen-translated figures in the consolidated financial product storage facilities. Nevertheless, if an unforeseen accident or the views and comments of outside directors, was very good because it ensured multiple perspectives. Although we have started in a difficult environment due statements of overseas consolidated subsidiaries and equity- a large-scale natural disaster were to cause damage to personnel or to the COVID-19 pandemic, as an outside director, I would like to focus on the method affiliates are influenced by foreign exchange rates, property at our manufacturing facilities, or if damage were to occur growth story from a long-term perspective and confirm themes such as whether dramatic fluctuations in foreign exchange rates may have a in the areas in the vicinity of our plants, there may be a significant management decisions and actions are consistent from a long-term perspective, significant impact on the Group’s performance. impact on our business results due to a loss of public confidence measures to determine where to focus allocation of management resources, in the Group, the cost of measures to deal with the accident and situations in which risks should be taken, and specific plans that will lead to ESG disaster, and lost opportunities due to the suspension of production 3. Materials procurement risks initiatives and contribution to the achievement of the SDGs, among other issues. activities. If the Group is unable to secure the materials used in its products, For the Nippon Soda Group to achieve sustainable growth, I believe it is or if the price of materials fluctuates drastically, the Group’s results important to create new value by providing a foundation that enables it to respond 8. Application of impairment accounting risks quickly and flexibly to environmental changes, and to expand the range of of operations could be significantly affected. For this reason, we Outside Director possibilities for solving social issues through chemicals in co-existence with society. strive to ensure stable procurement of materials and reduce the If the value of the Group’s business assets substantially declines, As an outside director, I will strive to evoke the views of society and the perspectives Junko Yamaguchi impact of rising material prices on our business performance by or if the Group does not expect to recover its investment due to a of investors, as well as support and encourage value creation by acting as a implementing measures such as lowering the cost of raw materials decline in profitability or other factors, recording an impairment loss champion for the Company and contributing to increasing its corporate value. and appropriately shifting the costs to sales prices. could have a material impact on the Group’s results of operations.

9. Retirement benefit obligations risks 4. Legal and regulatory risks As an “outsider,” I will contribute to the achievement of the Vision by presenting While the Group conducts its business activities in compliance with The Group’s employee retirement benefit costs and obligations are the laws and regulations in Japan and abroad in which it operates, calculated based on actuarial assumptions, such as the rate of return challenges and providing advice. there is a tendency for regulations on chemical products to be on plan assets and the discount rate, so if the actual results differ stricter due to increasing worldwide awareness of environmental substantially from the assumptions due to abrupt changes in the Drawing on my knowledge and experience in finance, industrial research and issues. Therefore, if environmental regulations become more market environment or other factors, the Group’s results could be corporate sales, I have been involved in the management of Mizuho Group stringent than expected and require substantial additional significantly affected. companies as a director and executive officer. Later, as an external auditor at the investments in the future, our business performance could be Japan Bank for International Cooperation (JBIC), I was involved in policy finance significantly affected. 10. Intellectual property infringement risks and worked to understand the operational status of overseas offices. As an outside The Group manages its intellectual property rights strictly. However, director of a manufacturing company, I have also seen the process of driving it may not be able to fully protect its intellectual property rights 5. Research and development risks business strategy closely. Drawing on these experiences, I hope to contribute to The Group invests a large amount of management resources in certain countries and may not be able to completely prevent the achievement of the Nippon Soda Group’s Long-Term Vision by advising on in the development of new products. However, in research and infringement by third parties, which could have a significant impact business strategies, including developing overseas markets, particularly from a development, particularly in the Agro Products Division, the on the Group’s business results. governance perspective. development and period for confirming the efficacy and safety of a Nippon Soda is a research and development-based chemical company that product may take a long time, and the research and development 11. COVID-19 pandemic risks produces unique technologies and products in a wide range of fields. In particular, and commissioning costs involved in up-front investment are As some of the Group’s businesses include products and services the Company is highly competitive in the worldwide market for its Agro Products significant, so if the research theme is not put to practical use, the that are affected by economic fluctuations, significant fluctuations Division, which produces highly effective and safe products, and its high- performance Chemicals Business Division, which offers a range of highly functional Group’s results of operations may be significantly affected. in market conditions due to changes in the economic environment caused by COVID-19 could have a significant impact on the Group’s and unique products. The Company has been consistently profitable through these businesses, and its financial position is at a healthy level. 6. Quality assurance or products risk business results. The Group’s Long-Term Vision, “Brilliance through Chemistry 2030,” which As a chemicals manufacturer, the Group is working on responsible was announced in May 2020, is an ambitious and highly practical vision that care activities (voluntary risk reduction activities) for quality clarifies the direction the Group should take over the next 10 years. In order to achieve the individual targets in the three stages, the Company must strengthen cost competitiveness and improve operational efficiency, while at the same time working quickly to strengthen overseas business development, develop next- generation products that are expected to grow in the medium to long term, and Outside Director create new businesses. In promoting each measure, I hope to make a significant contribution to realizing “Our Vision 10 Years in the Future” by presenting issues Mitsuaki Tsuchiya that only an independent outside director can identify and providing useful advice and suggestions.

62 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 63 Directors and Executive Officers

Directors Directors Who Are Members of the Audit and Supervisory Committee

April 1976 Joined the Company April 1983 Joined the Company April 1981 Joined the Company November 1974 Joined Deloitte Haskins & Sells April 2009 Manager, Personnel Dept. April 2013 Manager, Corporate Planning Dept. April 2010 Manager, Secretariat August 1979 Registered as a Certified Public Accountant June 2009 Director, General Manager, Corporate Planning April 2015 Executive Officer, General Manager, Corporate April 2014 Manager, General Affairs & Legal Group and July 1990 Partner, Tohmatsu & Co. (currently Deloitte Dept. and Affiliates Dept. and Manager, Planning Dept. and Affiliates Dept. Secretariat Group, General Affairs & Human Touche Tohmatsu LLC) Personnel Dept. April 2016 Executive Officer, Assistant to President Resources Dept. July 1997 Senior Partner April 2011 Director, General Manager, Corporate Planning (General Manager, Special Missions) June 2016 Full-time Audit and Supervisory Board member October 2003 Chief, Financial Industry Group (Deloitte Dept. and Manager, Personnel Dept. June 2016 Managing Director, NISSO ENGINEERING of the Company Touche Tohmatsu) June 2011 Director, General Manager, Corporate Planning CO.,LTD.(concurrent) (until March 2019) June 2020 Director and Audit and Supervisory Committee October 2013 Chief, IFRS Center of Excellence (COE) Dept. and Manager, Personnel Dept. member of the Company (current position) April 2019 Executive Managing Officer, General Manager, December 2015 Chief, Ogi CPA Office (current position) April 2013 Director, General Manager, Agro Products Div. Corporate Strategy Dept. June 2016 Audit & Supervisory Board Member of the June 2013 Director, Executive Managing Officer, General June 2019 Director, Executive Managing Officer, Company Manager, Agro Products Div. Supervision of Business Strategy & June 2020 Outside Director and Audit and Supervisory Administration (Corporate Strategy Dept. and June 2015 Representative Director, President (current Committee member, the Company Information Technology Dept.) and Internal position) (current position) Control & Audit Dept. Outside Auditor, ALCONIX CORPORATION April 2020 Director, Executive Managing Officer, Manager, (current position) Akira Ishii Nobuyuki Shimoide Corporate Planning Dept. (current position) Keichi Aoki Shigeo Ogi Representative Director, Director Director Director President Executive Managing Officer Audit and Supervisory (Outside Director) Manager, Corporate Planning Committee member Audit and Supervisory Dept. (Full time) Committee member

April 1984 Joined the Company April 1983 Joined the Company October 2002 Registered as attorney-at-law (Dai-Ichi Tokyo April 2005 Manager, Manufacturing Dept., Takaoka Plant April 2013 Group Leader, Overseas Sales 1 Group, Agro Bar Association) and joined South Toranomon April 2010 Manager, Production Planning & Management Products Div. Law Offices Dept., Production & Technology Div. April 2014 Manager, Overseas Sales 1 Dept., Agro January 2012 Partner (current position) April 2012 General Manager, Mizushima Plant Products Div. June 2019 Independent Director, HIGASHI TWENTY ONE April 2015 Executive Officer, General Manager, Takaoka April 2015 Manager, Corporate Planning Dept. CO.,LTD. (current position) Plant April 2016 Executive Officer, Manager, Corporate Strategy June 2020 Outside Director and Audit and Supervisory April 2018 Senior Executive Officer, General Manager, Dept. Committee member of the Company Research & Development Div. April 2018 Executive Officer, Manager, General Affairs & (current position) June 2019 Director, Senior Executive Officer, General Human Resources Dept. Manager, Research & Development Div. June 2019 Director, Executive Officer, Supervision of April 2020 Director, Executive Managing Officer, General Administration (General Affairs Dept., Human Manager, Research & Development Div. and Resources Dept. and Accounting Dept.) and General Manager, Production & Technology Corporate Social Responsibility Dept., and Div. (current position) Manager, General Affairs & Human Resources Dept. April 2020 Director, Executive Managing Officer, Supervision of Administration (Secretariat Dept., Human Izumi Takano Kiyotaka Machii Resources Dept., General Affairs Dept. and Yoko Waki Director Director Finance & Accounting Dept.), Corporate Social Director Responsibility Dept., Internal Control & Audit Executive Managing Officer Executive Managing Officer Dept., and Responsible Care Management Dept. (Outside Director) General Manager, Research CSR Promotion, and Internal June 2020 Director, Executive Managing Officer, CSR Audit and Supervisory & Development Div. and Control & Audit Dept., Promotion, and Internal Control & Audit Dept., Committee member Secretariat Dept., General Affairs Dept., General Manager, Production Secretariat Dept., General Affairs Dept., Finance & Finance & Accounting Dept., Responsible Care & Technology Div. Management Dept. and Manager, Trade Accounting Dept., Responsible Administration (current position) Care Management Dept. and Manager, Trade Administration

April 1985 Joined the Company April 1979 Joined Nippon Telegraph and Telephone Executive Officers April 2010 Manager, Fine Chemical Dept., Chemicals Public Corporation (currently NIPPON Business Div. TELEGRAPH AND TELEPHONE CORPORATION) February 2012 Executive Vice President, Alkaline SAS March 1993 Director, Corporate Business Division, Omiya April 2015 Manager, Business Strategy & Administration Executive Managing Officer Executive Officer Executive Officer Branch Dept., Chemicals Business Div. July 1999 Executive Manager, Consumer & Office April 2017 Executive Officer, General Manager, Chemicals Tateshi Tsujikawa Hiroshi Hamamura Atsuo Watanabe Business Department, NTT Communications Business Div. and Supervision of Osaka Branch Corporation Office President, NISSO CHEMICAL EUROPE GmbH and General Manager of Odawara Research Center, Takaoka Plant Manager April 2004 Vice President, Incubation Development Chairman, NISSO AMERICA INC. Research & Development Div. April 2018 Executive Officer, General Manager, Chemicals Department, NTT Resonant Incorporated Business Div. April 2007 Director, Info-Communications Research April 2020 Executive Officer, Supervision of Human Department, Foundation for MultiMedia Resources Dept. Communications June 2020 Director, Executive Officer, Supervision of June 2014 Audit & Supervisory Board Member, NTT Marketing & Sales, Human Resources Dept. EAST-MINAMIKANTO CORPORATION and Purchasing & Logistics Dept. (current position) June 2018 Senior Advisor, NTT EAST-MINAMIKANTO Executive Officer Executive Officer Executive Officer Eiji Aga Junko Yamaguchi CORPORATION Director Director June 2019 Outside Director, the Company (current position) Teruo Tachibana Shoichi Akagawa Masashi Mizoguchi Executive Officer (Outside Director) Nihongi Plant Manager General Manager, Chemicals Business Div. and General Manager, Agro Products Div. General Manager, Supervision Manager, Osaka Branch Office of Marketing & Sales, Human Resources Dept. and Purchasing & Logistics Dept.

April 1977 Joined The Industrial Bank of Japan, Limited April 1980 Joined the Company September 2000 General Manager, ALM Planning Dept., Mizuho April 2009 Deputy General Manager, Agro Products Div. Executive Officer Executive Officer Executive Officer Holdings Inc. and Group Leader, Overseas Sales 1 Group, April 2002 General Manager, Secretarial Office, Mizuho Agro Products Div. Osamu Sasabe Osamu Shimizu Kazunori Akatsuka Corporate Bank, Ltd. June 2009 Director, Deputy General Manager, Agro Products Group Leader, Corporate Strategy Group, Corporate General Manager, Finance & Accounting Dept. Deputy General Manager, Production & Technology April 2004 Executive Officer and General Manager, Div. and Group Leader, Overseas Sales 1 Group, Secretariat Office Agro Products Div. Strategy Dept. and Group Leader, DX Promotion Div. and Manager, Production Planning & Group, Corporate Strategy Dept. Management Dept. March 2006 Managing Executive Officer in charge of Sales April 2010 Director, Deputy General Manager, Agro Products Div. April 2008 Deputy President & Executive Officer, Mizuho Trust & Banking Co., Ltd. April 2011 Director, General Manager, Agro Products Div. June 2008 Representative Director and Deputy President April 2013 Director, General Manager, Corporate Planning Dept. and Information Systems Dept. and April 2011 Executive Officer and Vice President, Mizuho Manager, Purchasing & Logistics Dept. Financial Group, Inc. June 2013 Director, Executive Managing Officer, General June 2011 Director and Vice-President Manager, Corporate Planning Dept. and Executive Officer April 2012 President and CEO, Mizuho Research Institute Information Systems Dept. and Manager, Ltd. Purchasing & Logistics Dept. Nobuyuki Hori Mitsuaki Tsuchiya June 2012 Auditor (outside), The Japan Atomic Power Hiroyuki Uryu April 2014 Director, Executive Managing Officer, Director Company (current position) Director Supervision of Business Strategy & General Manager, Special Missions (and present (Outside Director) June 2017 Outside Corporate Auditor, Japan Bank for (part-time) Administration (Corporate Planning Dept., Managing Director, Nisso Fine Co., Ltd.) International Cooperation (current position) Affiliates Dept., Information Systems Dept.) Director, Audit and Supervisory Committee and Purchasing & Logistics Dept. member, ASAHI INDUSTRIES CO.,LTD. April 2015 Director, Executive Managing Officer, Corporate Auditor, Dai-ichi Leasing Co., Ltd. Supervision of Marketing & Sales and June 2019 Outside Director, Godo Steel, Ltd. (current Purchasing & Logistics Dept. position) June 2016 Director, Senior Executive Officer, Sanwa Soko June 2020 Outside Director, the Company (current position) Co., Ltd. June 2017 President, Representative Director, Sanwa Soko Co., Ltd. (current position) Director, the Company (current position)

64 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 65 10-Year Financial and Non-financial Highlights

2011/3 2012/3 2013/3 2014/3 2015/3 2016/3 2017/3 2018/3 2019/3 2020/3

Operating Results

Net sales (Millions of yen) 123,238 121,118 127,581 140,649 148,062 142,711 128,647 141,230 145,663 144,739

Operating profit (Millions of yen) 4,736 4,706 4,094 6,399 7,285 7,415 5,365 6,390 7,906 8,135

Operating profit on sales (ROS) (%) 3.8 3.9 3.2 4.5 4.9 5.2 4.2 4.5 5.4 5.6 Share of profit (loss) of entities accounted for (Millions of yen) 5,569 5,209 4,246 2,705 6,338 11,728 4,898 2,239 (1.0) 1,841 using equity method Ordinary profit (Millions of yen) 9,572 9,365 8,317 9,740 14,924 18,952 9,908 9,204 8,888 10,312 Profit attributable to owners (Millions of yen) 5,548 7,044 5,303 5,833 10,945 14,313 8,785 6,378 5,802 6,759 of parent Financial Position

Total assets (Millions of yen) 167,223 179,230 193,344 204,297 221,285 220,587 217,302 219,457 216,212 210,556

Net assets (Millions of yen) 85,723 91,671 100,246 108,224 127,181 131,489 138,069 144,801 144,916 144,440

Equity ratio (%) 48.4 48.1 48.9 50.0 54.6 58.5 62.3 64.6 65.6 67.1

Interest-bearing debt (Millions of yen) 48,673 49,529 50,985 50,696 49,343 49,847 39,240 31,939 26,116 29,220

Debt-to-equity ratio (Multiple) 0.60 0.58 0.54 0.50 0.41 0.39 0.29 0.23 0.18 0.21

Return on equity (ROE) (%) 6.9 8.4 5.9 5.9 9.8 11.5 6.6 4.6 4.1 4.8

Operating profit on assets (ROA) (%) 2.8 2.7 2.2 3.2 3.4 3.4 2.5 2.9 3.6 3.8

Cash Flows Cash flows from operating (Millions of yen) 13,425 9,867 9,836 11,260 9,588 10,639 41,236 12,085 11,677 12,449 activities Cash flows from investing (Millions of yen) (7,412) (7,949) (10,783) (11,805) (4,600) (9,424) (7,858) (8,327) (15,280) (10,399) activities Free cash flow (Millions of yen) 6,013 1,917 (947) (545) 4,988 1,215 33,377 3,758 (3,603) 2,050 Cash flows from financing (Millions of yen) (6,371) (554) 203 (1,888) (2,776) (1,323) (14,620) (9,485) (7,534) (1,161) activities Cash and cash equivalents (Millions of yen) 13,155 14,434 14,346 12,402 14,853 14,494 33,146 27,585 16,536 17,200 at end of period Per Share Indicators

Earnings per share (Yen) 182.38 231.56 174.35 191.79 359.80 464.03 287.04 211.35 192.27 224.28

Net assets per share (Yen) 2,659.07 2,831.29 3,105.82 3,362.05 3,971.73 4,144.56 4,485.10 4,698.59 4,698.10 4,734.24

Dividend per share (Yen) 30 30 30 40 50 60 60 60 60 80

Dividend payout ratio (%) 16.4 13.0 17.2 20.9 13.9 12.9 20.9 28.4 31.2 35.7

Others

Capital expenditure (Millions of yen) 6,286 5,061 9,412 6,115 7,987 6,764 6,512 8,589 8,026 8,824

Depreciation (Millions of yen) 6,098 6,092 5,761 6,480 6,436 6,242 6,397 6,532 6,966 7,578

R&D costs (Millions of yen) 5,650 5,738 5,941 6,480 6,343 6,670 6,495 7,250 6,241 6,127

Non-financial Indicators

Carbon dioxide emissions (10,000 tons) 17.7 18.4 21.7 22.2 22.3 21.4 21.8 22.6 20.7 20.3 Energy consumption (1,000 kL) 98.7 97.1 94.5 94.8 99.0 93.9 94.9 96.4 93.7 93.1 (in crude oil equivalent) Number of employees (Persons) 2,297 2,507 2,539 2,501 2,507 2,664 2,684 2,683 2,724 2,744 (consolidated)

This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translation and the Japanese original, the Japanese original shall prevail. Note 1: Figures shown have been rounded down to the nearest million. Note 2: The Company carried out a reverse stock split of its common shares on a one for five basis on October 1, 2018. All per share indicators are calculated on the assumption that the reverse stock split was executed. Note 3: Carbon dioxide emissions and energy consumption (in crude oil equivalent) are reports related to Nippon Soda. *1 Debt-to-equity ratio = Interest-bearing debt ÷ Equity capital* *Equity capital = Net assets − Share acquisition rights − Non-controlling interests *2 Free cash flow = Cash flows from operating activities + Cash flows from investing activities

66 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 67 Financial Review

Operating Results in specialty isocyanates. Herbicides suffered a drop in sales due to a decline in sales Specialty chemicals suffered a decline in sales due to for exports. decreases in sales of VP-POLYMER, a KrF photoresist material, The Japanese economy during the fiscal period under review Plan (FY 2018 to FY 2020). and resin additive NISSO-PB. Trading was on a mild recovery trend due to improvements in the In the fiscal period under review, net sales totaled The results of eco business products were roughly unchanged Net sales and operating profit for the fiscal period under employment environment and consumer spending. However, ¥144,739 million (basically unchanged from the previous period) from the previous year. review totaled ¥34,995 million (down 5.3% year on year) and the outlook remains unclear on the back of uncertainties in and operating profit totaled ¥8,135 million (up 2.9% year on Pharmaceuticals and industrial fungicides saw an increase ¥637 million (down 4.3% year on year), respectively, reflecting the overseas economy due to trade issues such as the US- year), reflecting an increase in plant construction work in the in sales due to robust performance of pharmaceutical additive weaknesses in urethane materials and inorganic chemicals. China trade friction, and exchange rate fluctuations. Economic Construction Division and a fall in sales in the Trading Division. NISSO HPC and raw materials for drugs. uncertainty was exacerbated by the novel coronavirus Ordinary profit totaled ¥10,312 million (up 16.0% year Transportation and Warehousing (COVID-19) pandemic. on year) absent the losses posted in the previous fiscal year Agro Products Net sales and operating profit for the fiscal period under review Under such circumstances, the Nippon Soda Group made at Novus International, an equity method affiliate. Profit While the sales of insecticide MOSPILAN (acetamiprid) grew totaled ¥4,195 million (down 1.6% year on year) and ¥492 million efforts to further improve corporate value by increasing attributable to owners of parent was ¥6,759 million (up 16.5% for exports, contract testing expenses increased due to the (up 6.7% year on year), respectively, on the back of the robust business earning power and creating new businesses, which year on year). development of new agrochemicals and the expansion of the warehousing business despite weakness in transportation. are the main themes of the previous Medium-Term Business range of applications of existing products. As a result, net sales and operating profit for the fiscal Construction period under review totaled ¥43,388 million (unchanged year on Net sales and operating profit for the fiscal period under Segment Results year) and ¥2,240 million (down 2.2% year on year), respectively. review totaled ¥14,423 million (up 18.5% year on year) and Fungicides saw a decrease in sales due to a drop in sales ¥1,677 million (up 43.2% year on year), respectively, due to an Chemicals under review totaled ¥40,385 million (down 2.2% year on year) of TRIFMINE (triflumizole) for exports, despite contribution increase in plant construction works. Although we began sales of secondary battery materials, and ¥2,217 million (down 9.6% year on year), respectively. from AGRI-MYCIN (oxytetracycline, streptomycin), which was sales of industrial chemicals declined. In addition, Industrial chemicals saw a decline in sales due to acquired in the previous year. Others consolidated subsidiary Alkaline SAS suffered decreases in weaknesses in caustic soda and sodium cyanide. Insecticides and acaricides experienced an increase in Net sales and operating profit for the fiscal period under review both sales and profit. Fine chemicals experienced an increase in sales due to the sales due to the growth of sales of insecticide MOSPILAN totaled ¥7,350 million (down 6.6% year on year) and ¥644 million As a result, net sales and operating profit for the fiscal period start of sales of secondary battery materials, despite a decrease (acetamiprid) for exports. (up 9.7% year on year), respectively.

Net売上、 ROSSales, ROS Operating営業利益、ROA Profit, ROA Consolidated Results for the Fiscal Year Ended March 2020 (By Segment)

(Billions of yen) (%) (Billions of yen) (%) (Billions of yen) 200.0 6.0 10.0 4.0 5.6 3.8 2018/3 2019/3 2020/3 5.4 3.6 5.2 3.4 Net Sales Operating Profit Net Sales Operating Profit Net Sales Operating Profit 8.14 4.5 Chemicals 39.50 1.63 41.29 2.45 40.39 2.22 150.0 4.2 145.66 7.5 2.9 3.0 142.71 144.74 7.91 4.0 7.42 2.5 Agro Products 43.22 1.98 43.12 2.29 43.39 2.24 141.23 128.65 6.39 Trading 34.94 0.66 36.94 0.67 35.00 0.64 100.0 5.0 2.0 5.37 Transportation and Warehousing 4.06 0.44 4.26 0.46 4.20 0.49 2.0 Construction 11.69 1.40 12.18 1.17 14.42 1.68 50.0 2.5 1.0 Others 7.83 0.47 7.87 0.59 7.35 0.64 Adjustments — (0.19) — 0.28 — 0.23 0 0 0 0 Total 141.23 6.39 145.66 7.91 144.74 8.14 2016/3 2017/3 2018/3 2019/3 2020/3 2016/3 2017/3 2018/3 2019/3 2020/3

Net sales (Billions of yen) Operating pro t on sales (ROS) (%) Operating pro t (Billions of yen) Operating pro t on assets (ROA) (%)

親会社株主に帰属する当期純利益Profit Attributable to Owners of Parent, ROE 1Earnings株当たり当期純利益 per Share Revenue Structure in the Fiscal Year Ended March 2020

(Billions of yen) (%) (Yen) 20.0 11.5 12.0 500 464.03

Chemicals Agro Products Trading Construction Others 400 Net Sales 15.0 27.9% 30.0% 24.2% 2.9% 10.0% 5.1% 8.0 14.31 6.6 300 287.04 Transportation and Warehousing 10.0 4.8 211.35 224.28 4.6 200 192.27 8.79 4.1 4.0 Operating Chemicals Agro Products Trading Construction Others 6.1% 5.0 6.38 6.76 5.80 100 Pro t 27.3% 27.5% 7.8% 20.6% 10.7%

Transportation and Warehousing 0 0 0 2016/3 2017/3 2018/3 2019/3 2020/3 2016/3 2017/3 2018/3 2019/3 2020/3

Pro t attributable to owners of parent (Billions of yen) Return on equity (ROE) (%)

68 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 69 Financial Position Research and Development Capital Expenditure

Total assets as of March 31, 2020 stood at ¥210,556 million, a In order to promote the development of high-added-value phosgene, hydrocyanic acid and metallic sodium, and the The Nippon Soda Group determines its capital expenditure decrease of ¥5,656 million from March 31, 2019, reflecting a products based on its characteristic, unique technologies, the development of new manufacturing technology. plan based on demand forecasts and investment efficiency. decrease in notes and accounts receivable - trade. Nippon Soda Group has been making efforts in R&D aimed at The R&D costs of Chemicals were ¥1,156 million. During the fiscal period under review, the Group made capital Total liabilities totaled ¥66,116 million, a decrease of developing various chemicals using functional materials and investments of ¥8,824 million, mainly in the development of ¥5,179 million from March 31, 2019, reflecting a decrease in precise synthesis technologies by the Chemicals Division and Agro Products high-value-added products and enhancing competitiveness. notes and accounts payable - trade. new agrochemicals by the Agro Products Division, based on the Amid growing interest in food safety and security, the Company The capital expenditure of each segment was as follows. Net assets decreased ¥476 million from March 31, 2019, keywords of “fusion of knowledge,” “fusion of technologies,” has been carrying out research mainly in agochemicals for totaling ¥144,440 million. As a result, the equity ratio at March and “global.” To prepare for expected changes in the business farming and gardening that show activity with a low dosage and Chemicals 31, 2020 was 67.1%. environment, the Group also seeks to reinforce and expand its have low persistence. The Chemicals Division made capital investments of existing products, forcefully push forward with the development It is also aggressively promoting development abroad, ¥4,632 million mainly in the enhancement, streamlining, of new products in areas related to existing businesses as well as including Europe and the United States, for PYTHILOCK maintenance and updating of the manufacturing equipment of focus areas, and enhance the technological strength of the entire (picarbutrazox), a fungicide that shows a prominent effect its products. Cash Flows Group through technological partnerships with affiliates, as well against downy mildew and Pythium blight. The applications as entering new technology areas and creating new businesses of the product include foliar spraying on cucurbits and leafy Agro Products Cash and cash equivalents for the fiscal year ended March 31, through the active use of its proprietary technologies. vegetables as well as seed treatment for major grain groups The Agro Products Division made capital investments of 2020 increased ¥664 million to ¥17,200 million. This was mainly The R&D situation of each segment during the fiscal year such as corn, etc. With regard to DANYOTE (acynonapyr), ¥3,153 million mainly in the enhancement, streamlining, attributable to profit before income taxes of ¥8,027 million under review was as follows. an acaricide that has a new mode of action, the Company maintenance and updating of the manufacturing equipment of (including ¥1,841 million of share of profit of entities accounted Total R&D costs were ¥6,127 million (4.2% of net sales). The is preparing for its domestic launch. The development of its products. for using equity method, a non-cash item), depreciation of number of R&D personnel was 325 for the entire Group (11.8% MIGIWA (ipflufenoquin), a fungicide that is effective against a ¥7,578 million and ¥1,350 million in interest and dividend of total employees). broad range of diseases, has been proceeding steadily, and Trading income received, as well as purchase of property, plant and various tests for registration are being carried out on a global The Trading Division made capital investments of ¥9 million equipment of ¥10,481 million. Chemicals basis. Furthermore, the Company is conducting research on mainly in streamlining, maintenance and updating. In the specialty chemicals area, the Company is carrying out subsequent promising compounds to advance them to the development that leverages its technological characteristics in next phase. Transportation and Warehousing fields such as new polymer materials using precise polymerization Apart from agrochemicals, biopesticides AGROCARE The Transportation and Warehousing Division made capital technology, new absorbents for collecting valuable resources, (bacillus subtilis) and MASTERPIECE (pseudomonas rhodesiae) investments of ¥454 million mainly in streamlining, maintenance and organic EL (electro-luminescence) materials. Furthermore, have been achieving steady sales. The Company will continue and updating. the Company is seeking to aggressively expand into new areas to make efforts to enhance its lineup of biopesticides that utilize while enhancing the competitiveness of existing products, the various functions of microorganisms. Construction including cellulose derivatives, liquid polybutadiene products, The R&D costs of Agro Products were ¥4,956 million. The Construction Division made capital investments of color developers, environmental chemistry-related products such ¥55 million mainly in streamlining, maintenance and updating. as eco business products, photocatalysts and biocides, and Others organic metals-related products. In the environmental development business, the Group is Others In the precision synthesis area, the Company aims to create engaged in research to improve the recycling process of Other divisions made capital investments of ¥520 million mainly new products through the development of key intermediates difficult-to-process industrial waste. in streamlining, maintenance and updating of equipment using its unique ability to handle raw materials such as The R&D costs of Others were ¥15 million. related to environmental development.

有利子負債、Owned Capital,D/Eレシオ Interest-bearing Debt, Debt-to-Equity Ratio R&D研究開発費 Costs Capital設備投資額 Expenditure Depreciation減価償却費

(Billions of yen) (Multiple) (Billions of yen) (Billions of yen) (Billions of yen) 200.0 0.39 0.4 10.0 10.0 10.0

174.61 173.75 8.82 167.89 170.51 8.59 178.83 8.0 8.0 8.03 8.0 150.0 0.29 0.3 7.25 7.58 6.97 6.67 6.50 6.76 6.53 6.24 6.51 6.24 6.40 0.23 6.0 6.13 6.0 6.0 0.21 100.0 0.18 0.2 4.0 4.0 4.0 128.98 135.37 141.81 141.77 141.29 50.0 0.1 2.0 2.0 2.0

49.85 39.24 31.94 26.12 29.22 0 0 0 0 0 2016/3 2017/3 2018/3 2019/3 2020/3 2016/3 2017/3 2018/3 2019/3 2020/3 2016/3 2017/3 2018/3 2019/3 2020/3 2016/3 2017/3 2018/3 2019/3 2020/3

Owned capital Interest-bearing debt Debt-to-equity ratio (Multiple)

70 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 71 Consolidated Balance Sheets

(Millions of yen) (Millions of yen)

As of March 31, 2019 As of March 31, 2020 As of March 31, 2019 As of March 31, 2020

Assets Liabilities Current assets Current liabilities Cash and deposits 16,565 17,229 Notes and accounts payable - trade 20,933 15,129 Notes and accounts receivable - trade 47,860 41,063 Electronically recorded obligations - operating 2,717 2,383 Electronically recorded monetary claims - operating 2,795 2,514 Inventories 27,372 30,644 Short-term borrowings 15,501 14,420 Others 4,500 4,865 Income taxes payable 1,258 993

Allowance for doubtful accounts (199) (200) Provision for bonuses 2,900 2,953 Total current assets 98,895 96,117 Others 6,806 6,392 Non-current assets Total current liabilities 50,118 42,272 Property, plant and equipment Buildings and structures 60,787 61,937 Non-current liabilities Accumulated depreciation (42,704) (43,590) Long-term borrowings 10,604 13,514

Buildings and structures, net 18,082 18,347 Deferred tax liabilities 4,364 3,200 Machinery, equipment and vehicles 113,465 114,195 Retirement benefit liability 2,468 2,634 Accumulated depreciation (93,201) (96,140) Provision for environmental measures 724 543 Machinery, equipment and vehicles, net 20,264 18,055 Others 3,014 3,951 Tools, furniture and fixtures 11,579 11,793 Accumulated depreciation (9,802) (9,910) Total non-current liabilities 21,177 23,843 Tools, furniture and fixtures, net 1,776 1,882 Total liabilities 71,295 66,116

Land 15,111 14,909 Net assets Construction in progress 3,247 6,037 Shareholders’ equity Others 210 1,636 Share capital 29,166 29,166 Accumulated depreciation (200) (358) Others, net 9 1,277 Capital surplus 29,359 29,359 Total property, plant and equipment 58,491 60,509 Retained earnings 80,166 85,111

Intangible assets Treasury shares (2,250) (3,184) Goodwill 249 13 Total shareholders’ equity 136,441 140,453 Others 5,527 4,868 Accumulated other comprehensive income Total intangible assets 5,776 4,881 Valuation difference on available-for-sale securities 7,220 4,959 Investments and other assets Investment securities 39,307 35,436 Deferred gains or losses on hedges (163) (163) Retirement benefit assets 8,767 7,816 Foreign currency translation adjustment (2,100) (3,491)

Deferred tax assets 2,700 3,455 Accumulated remeasurements of defined benefit plans 373 (465) Others 2,272 2,338 Total accumulated other comprehensive income 5,328 838 Allowance for doubtful accounts (0) (1) Non-controlling interests 3,146 3,147 Total investments and other assets 53,048 49,046 Total non-current assets 117,316 114,438 Total net assets 144,916 144,440 Total assets 216,212 210,556 Total liabilities and net assets 216,212 210,556

72 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 73 Consolidated Statements of Income Consolidated Statements of Comprehensive Income

(Millions of yen) (Millions of yen) Fiscal year ended Fiscal year ended Fiscal year ended Fiscal year ended March 31, 2019 March 31, 2020 March 31, 2019 March 31, 2020 Net sales 145,663 144,739 Profit 6,066 6,964

Cost of sales 108,651 106,818 Other comprehensive income

Gross profit 37,012 37,920 Valuation difference on available-for-sale securities (1,410) (2,288)

Selling, general and administrative expenses 29,105 29,785 Deferred gains or losses on hedges (154) 60

Operating profit 7,906 8,135 Foreign currency translation adjustment (397) (632)

Non-operating income Remeasurements of defined benefit plans (103) (834)

Interest income 33 21 Share of other comprehensive income of entities (1,991) (951) accounted for using equity method Dividend income 752 679

Share of profit of entities accounted for using equity method — 1,841 Total other comprehensive income (4,058) (4,646)

Others 1,111 710 Comprehensive income 2,007 2,317

Total non-operating income 1,897 3,252 (Breakdown)

Non-operating expenses Comprehensive income attributable to owners of parent 1,790 2,269 Comprehensive income attributable to non-controlling Interest expenses 248 230 216 47 interests Share of loss of entities accounted for using equity method 1 —

Foreign exchange losses — 250

Others 664 593

Total non-operating expenses 915 1,074

Ordinary profit 8,888 10,312

Extraordinary income

Gain on sales of investment securities — 58

Gain on sales of non-current assets 7 49

Total extraordinary income 7 108

Extraordinary losses

Loss on abandonment of non-current assets 179 367

Loss on sales of investment securities 1 158

Impairment loss 68 1,609

Loss on valuation of investments in capital of subsidiaries 85 — and associates

One-hundredth anniversary commemorative expenses — 187

Others 29 70

Total extraordinary losses 364 2,393

Profit before income taxes 8,531 8,027

Income taxes - current 1,863 1,656

Income taxes - deferred 601 (593)

Total income taxes 2,464 1,063

Profit 6,066 6,964

Profit attributable to non-controlling interests 263 204

Profit attributable to owners of parent 5,802 6,759

74 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 75 Consolidated Statements of Changes in Equity Consolidated Statements of Cash Flows

Fiscal year ended March 31, 2019 (Millions of yen) (Millions of yen) Shareholders’ equity Fiscal year ended Fiscal year ended Total shareholders’ Share capital Capital surplus Retained earnings Treasury shares March 31, 2019 March 31, 2020 equity Cash flows from operating activities Balance at beginning of period 29,166 29,359 76,179 (2,235) 132,469 Profit before income taxes 8,531 8,027 Changes during period Depreciation 6,966 7,578 Dividends of surplus (1,815) (1,815) Amortization of goodwill 235 236 Profit attributable to owners of parent 5,802 5,802 Impairment loss 68 1,609 Purchase of treasury shares (17) (17) Share of loss (profit) of entities accounted for using equity method 1 (1,841) Disposal of treasury shares (0) 2 2 Increase (decrease) in provision for bonuses 131 54 Net changes in items other than shareholders’ equity Increase (decrease) in allowance for doubtful accounts (5) 9 Total changes during period — (0) 3,987 (15) 3,972 Decrease (increase) in retirement benefit assets (591) (483) Balance at end of period 29,166 29,359 80,166 (2,250) 136,441 Increase (decrease) in retirement benefit liabilities (67) 48 Increase (decrease) in provision for environmental measures (179) (181) Accumulated other comprehensive income Interest and dividend income (785) (700) Valuation Foreign Accumulated Total accumulated Deferred gains Non-controlling difference on currency remeasurements other Total net assets or losses on interests Interest expenses 248 230 available-for- translation of defined comprehensive hedges sale securities adjustment benefit plans income Loss on abandonment of non-current assets 189 381 Balance at beginning of period 8,614 7 249 470 9,340 2,991 144,801 Loss (gain) on valuation of investment securities 19 22 Changes during period Loss (gain) on sales of investment securities 1 99 Dividends of surplus (1,815) Decrease (increase) in trade receivables (4,430) 6,797 Profit attributable to owners of parent 5,802 Decrease (increase) in inventories 99 (3,383) Purchase of treasury shares (17) Increase (decrease) in trade payables 1,970 (5,941) Disposal of treasury shares 2 Others (417) 545 Net changes in items other than (1,393) (171) (2,350) (96) (4,011) 154 (3,857) Subtotal 11,986 13,108 shareholders’ equity Interest and dividend received 1,588 1,350 Total changes during period (1,393) (171) (2,350) (96) (4,011) 154 114 Interest paid (250) (231) Balance at end of period 7,220 (163) (2,100) 373 5,328 3,146 144,916 Income taxes paid (1,648) (1,778) Cash flows from operating activities 11,677 12,449 Fiscal year ended March 31, 2020 Cash flows from investing activities (Millions of yen) Purchase of property, plant and equipment (8,526) (10,481) Shareholders’ equity Proceeds from sales of property, plant and equipment 166 236 Total shareholders’ Share capital Capital surplus Retained earnings Treasury shares equity Purchase of intangible assets (588) (404) Balance at beginning of period 29,166 29,359 80,166 (2,250) 136,441 Purchase of investment securities (80) (51) Changes during period Proceeds from sales of investment securities 0 498 Dividends of surplus (1,814) (1,814) Purchase of shares of subsidiaries and associates (931) — Profit attributable to owners of parent 6,759 6,759 Revenue from sales of investments in affiliates 112 — Purchase of treasury shares (938) (938) Payment of loans receivable (134) (17) Disposal of treasury shares (0) 5 5 Collection of loans receivable 25 51 Net changes in items other than Payments for retirement of property, plant and equipment (124) (186) shareholders’ equity Payments for acquisition of businesses (5,229) — Total changes during period — (0) 4,944 (933) 4,011 Others 29 (43) Balance at end of period 29,166 29,359 85,111 (3,184) 140,453 Cash flows from investing activities (15,280) (10,399) Accumulated other comprehensive income Cash flows from financing activities Valuation Foreign Accumulated Total accumulated Deferred gains Non-controlling difference on currency remeasurements other Total net assets Net increase (decrease) in short-term borrowings (942) (245) or losses on interests available-for- translation of defined comprehensive hedges Proceeds from long-term borrowings 119 4,673 sale securities adjustment benefit plans income Balance at beginning of period 7,220 (163) (2,100) 373 5,328 3,146 144,916 Repayment of long-term borrowings (4,813) (2,525) Changes during period Dividends paid (1,809) (1,810) Dividends of surplus (1,814) Purchase of treasury shares (18) (940) Profit attributable to owners of parent 6,759 Dividends paid to non-controlling interests (62) (46) Purchase of treasury shares (938) Others (8) (267) Disposal of treasury shares 5 Cash flows from financing activities (7,534) (1,161) Net changes in items other than Effect of exchange rate change on cash and cash equivalents 89 (225) (2,260) 0 (1,390) (838) (4,490) 1 (4,488) shareholders’ equity Net increase (decrease) in cash and cash equivalents (11,049) 664 Total changes during period (2,260) 0 (1,390) (838) (4,490) 1 (476) Cash and cash equivalents at beginning of period 27,585 16,536 Balance at end of period 4,959 (163) (3,491) (465) 838 3,147 144,440 Cash and cash equivalents at end of period 16,536 17,200

76 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 77 Company Information / Shareholder and Investor Information (As of March 31, 2020)

Corporate Profile Share Distribution by Type of Shareholder Share Price and Trading Volume

Share price (Yen) Trading volume (Thousands of shares) Private individuals, etc. Financial institutions & 5,000 20,000 Name: Nippon Soda Co., Ltd. 13.75% securities companies 36.61% 4,500 18,000 2-2-1, Ohtemachi, Chiyoda-ku, Tokyo Other companies Head Office: 100-8165, Japan in Japan 4,000 16,000 +81-3-3245-6054 16.76% 3,500 14,000

Akira Ishii, Representative: 3,000 12,000 Representative Director, President

2,500 10,000 Established: February 1920 Non-Japanese companies, etc. 32.88% 2,000 8,000 Share capital: ¥29,166 million 1,500 6,000

* Figures have been rounded off to the nearest third decimal point Fiscal year end: March * Treasury shares are included in “private individuals, etc.” 1,000 4,000

2,744 (consolidated) 500 2,000 Number of employees: 1,313 (non-consolidated) Major Shareholders 0 0

Number of 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 Stock code: 4041 Shareholding shares held Name of shareholder ratio 2015 2016 2017 2018 2019 2020 (Thousands of (%) shares) Stock listing: First Section, Tokyo Stock Exchange The Master Trust Bank of Japan, Ltd. 1,474 4.93% (Trust Account) Number of shares 2016/3 2017/3 2018/3 2019/3 Japan Trustee Services Bank, Ltd. 2020/3 constituting one trading 100 shares 1,375 4.60% (Trust Account) Profit attributable to owners unit: (Billions of yen) 14.31 8.79 6.38 5.80 6.76 Mitsui & Co., Ltd. 1,015 3.39% of parent

Total number of JP MORGAN CHASE BANK 385632 951 3.18% 96,000,000 shares Total dividends (Billions of yen) 1.87 1.82 1.82 1.82 2.40 authorized shares: Nippon Soda Client Shareholding 906 3.03% Association Dividend payout ratio (%) 12.9 20.9 28.4 31.2 35.7 31,127,307 shares Total number of issued The Norinchukin Bank 884 2.96% (Includes 1,211,717 shares of treasury shares: Purchase of treasury shares (Billions of yen) — 2.0 — — 0.94 stock) JP MORGAN CHASE BANK 380684 818 2.74% Mizuho Bank, Ltd. 816 2.73% Total return ratio (%) 12.9 43.4 28.4 31.2 49.4 13,371 Number of shareholders: INTERACTIVE BROKERS LLC 756 2.53% (265 less than March 31, 2019) Note: The Company carried out a reverse stock split of its common shares on a one for five basis on October 1, 2018. All per share indicators are calculated on the assumption that BNP PARIBAS SECURITIES SERVICES the reverse stock split was executed. LUXEMBOURG/JASDEC/JANUS 652 2.18% Fiscal year: April 1 to March 31 HENDERSON HORIZON FUND

Note 1: The Company holds 1,211,717 shares of treasury stock. They are not included Website Information Annual general meeting in the list of major shareholders above. Treasury shares do not include the June of each year of shareholders: 70,840 shares held by the executive stock ownership plan. Please access the following websites for details about the Company. Note 2: The calculation of shareholding ratio does not include treasury shares.

Year-end dividend: March 31 Dividend record dates: Group Companies Interim dividend: September 30 Consolidated subsidiaries

Mizuho Trust & Banking Co., Ltd. • Chemicals • Overseas Shareholder registrar: 1–2–1, Yaesu, Chuo–ku, Tokyo Nisso Fine Co., Ltd. NISSO AMERICA INC. 103–8670, Japan Shinfuji Kaseiyaku Co., Ltd. NISSO CHEMICAL EUROPE GmbH Nisso Metallochemical Co., Ltd. Nisso Namhae Agro Co., Ltd. Joetsu Nisso Chemical Co., Ltd. Alkaline SAS, and four other companies Stock Transfer Agency Department • Trading of the Head Office of Mizuho Trust & Nisso Shoji Co., Ltd. Banking Co., Ltd. Affiliated companies accounted 1–2–1, Yaesu, Chuo–ku, Tokyo Nisso Green Co., Ltd. for by the equity method Corporate Website CSR Information Investor Relations • Logistics 103–8670, Japan NOVUS INTERNATIONAL, INC. https://www.nippon-soda.co.jp/e/ https://www.nippon-soda.co.jp/e/environment/ https://www.nippon-soda.co.jp/e/financial_fact/ Sanwa Soko Co., Ltd. IHARABRAS S/A. INDÚSTRIAS houkoku.html Sanso Unyu Co., Ltd. Handling office: Contact: QUÍMICAS 2–8–4 Izumi, Suginami–ku, Tokyo, • Engineering Certis Europe B.V. Nisso Engineering Co., Ltd. Japan 168–8507 NISSO BASF Agro Co., Ltd. Stock Transfer Agency Department • Civil engineering and construction Mizuho Trust & Banking Co., Ltd. Nisso Kensetsu Co., Ltd. TEL: 0120-288-324 * The Company carried out an absorption-type merger of Joetsu Nisso Chemical Co., (toll-free within Japan only) Ltd. on April 1, 2020.

78 Nippon Soda Group Integrated Report 2020 Nippon Soda Group Integrated Report 2020 79