Introduction to NSG
July 2019
Nippon Sheet Glass Co Ltd TSE Code: 5202
Copyright © 2019, Nippon Sheet Glass Co., Ltd. All rights reserved Contents
I. NSG Group Today 3
II. Long-term Strategic Vision & Medium-term Plan (MTP) Phase 2 8
III. FY2020 Policy - Shift to ‘VA + Growth’ 16
IV. ESG for Creating Value 33
V. Capital Allocation 41
VI. Appendices 46 1. Manufacturing Process 47 2. Operational Footprint 53 3. Medium-term Plan (MTP) 57 4. BIC Focus Area 64 5. Financial Data 69 6. Class A Shares Detail 75
Updated July 2019 Introduction to NSG 2 I. NSG Group Today
3 NSG Group Today
One of the world’s largest manufacturers of glass and glazing products • Supplying Architectural and Automotive glass globally and promoting shift to higher added value • Leading supplier of Technical Glass products including thin glass for display etc., lenses for printers and scanners, specialty glass fiber products*1
Principal operations in approximately 30 countries around the world, with sales in over 100 countries
29 float lines worldwide*2 *3
Approximately 27,000 employees globally (as of March 2019) Reference: Consolidated Revenue : JPY612.8bn (FY2019) *1: Refer to slide 28 for Technical Glass products *2: Refer to slide 48 for the float process *3: Refer to slide 54 for the location of float lines Updated July 2019 Introduction to NSG 4 History
1918 - 1940s • 1918: America Japan Sheet Glass Co Ltd established in Osaka • 1931: Company name changed to Nippon Sheet Glass Co Ltd Foundation & Expansion • 1935: Yokkaichi site opened
1950s - 1960s • 1950: Listing on stock exchanges in Japan • 1951: Maizuru site opened Capacity Expansion and • 1963: Chiba site opened Start of Automotive Glass • 1965: First float glass production in Asia at Maizuru site
1970s - 1990s • 1971: First overseas investment made in Malaysia • 1978: Ultra Fine FloatTM production started Overseas Expansion & • 1979: Glass fiber business launched Diversification • 1995: Overseas investment expanded including China and Vietnam
2000s • 2004: Headquarters moved from Osaka to Tokyo • 2006: Acquisition of Pilkington, becoming global leader in flat glass Acquisition of Pilkington • 2007: “Company with committees” governance adopted & Globalization • 2011: IFRS adoption
• May 2014: Announcement of Long-term Strategic Vision and Medium-term Plan For Growth • Apr 2017: Medium-term Plan (MTP) Phase 2 started • Nov 2018: Announcement of “Our Vision”
Updated July 2019 Introduction to NSG 5 Management Principles ― “Our Vision” Announced in November 2018 • From a glass company to ‘glass and more’ company to create more value • A team consisting of motivated individuals, leveraging its diversity, to achieve the shared goals
Updated July 2019 Introduction to NSG 6 Businesses
Architectural: 41% Automotive: 51% Technical Glass: 8%
16% 8% 23% 15% 11% 10% 17%
Europe Asia Americas Europe Asia Americas
Products: Products: Products: - Building glass & glazing - Glazing for new vehicles - Thin glass for display etc. - Glass for solar panels - Glazing for replacement markets - Lenses for printers and light guide Business: Business: - Special glass fiber products such as - 29 float lines operated globally - Key operations in 14 countries battery separators, glass code for - Leading market position in each - Supplying the world’s leading car engine timing belt, etc. region vehicle manufacturers Business: - Leading supplier for thin film solar - Key player globally in automotive - Key operations in Asia and Europe panels aftermarket (AGR) glazing - Unique ‘Number One’ and ‘Only One’ distribution and wholesale niche products
Granroof at Tokyo Station Photo: Toyota Motor Corporation Super Glass PaperTM Updated July 2019 Introduction to NSG 7 II. Long-term Strategic Vision & Medium-term Plan (MTP) Phase 2
8 Long-term Strategic Vision
Long-term Strategic Vision:
Transform into ‘VA Glass Company’ Value-added
Strategic Intent • Transform the whole Group structure into “VA-ready” while increasing the VA ratio in the Group’s sales
Objectives • Consolidate our trusted reputation as a glass specialist • Work closely with customers worldwide to offer unique value through our products and services • Transform business structure from a traditional model to a value-added model * VA: Value-added
Updated July 2019 Introduction to NSG 9 Positioning of MTP Phase 2 Long-term Strategic Vision MTP Achieve financial sustainability Sustainable Transform into VA Glass Company growth Four Key Measures • Operational • Drive VA No.1 efficiency Strategy improvement • Establish growth After MTP Restructuring to • Driving VA shift drivers restore profitability Top-line growth • Business culture based on financial innovation sustainability Restored • Enhance global profitability management Financial Stability • Issuance of Class A Shares (2017/3/31)
Phase 2 FY2012-FY2014 FY2015-FY2017 FY2021- FY2018-FY2020
Updated July 2019 Introduction to NSG 10 Medium-term Plan (MTP) Phase 2 (FY2018-FY2020)
Phase 2 Measures MTP Targets Growth Measures Financial sustainability Transform into VA Glass Company Drive VA No.1 Strategy Establish growth drivers Financial Targets Business culture innovation Net debt / EBITDA: 3x Enhance global management ROS > 8%
Financial Measures [Expectation after achieving MTP Targets] (After redemption of Class A Shares)
Enhance equity Equity Ratio: 20% ROE: 10% Reduce net debt VA Sales Ratio: > 50% Issue Class A Shares Trading Profit: JPY50-60 bn
VA: Value-added ROS (Return on Sales): based on trading profit (profit before amortization of non-tangible assets) Updated July 2019 Introduction to NSG 11 MTP Phase 2: Four Key Measures for Growth Drive VA No.1 Strategy Establish Growth Drivers • Win leading position in the areas with “high • Launch multiple, promising growth drivers growth potential” and “core strength” • Target areas: • How： －Architectural Glass (energy-save/generation, －Focus resources on VA shift in the areas where health, design) NSG technology and brand have the biggest －Automotive Glass (ADAS, connected, UV/IR advantage shield, light-weight) －Enhance customer relationship, build strategic －Technical Glass (new products/applications alliance Vacuum with proprietary technology) glazing ADAS Energy Online High- saving & coating precision generation Information press VA Glass Communication Customer- Company Rapid oriented R&D decision- & marketing Lean structure, making Cost manufacturing reduction Business Culture Innovation Enhance Global Management • Build leaner business structure • Advance global management to achieve the Group’s • How： optimization • How: －Optimize all work processes －Drive talent development, promote diversity － Enhance manufacturing excellence in each －Enhance faster decision-making with flexible region organization management －Optimize global R&D with customer viewpoints －Continue to reduce cost across the Group －Strengthen customer-oriented marketing
Updated July 2019 Introduction to NSG 12 MTP Phase 2: KPI Update
While key performance indicators have improved during Phase 2, the financial targets of MTP are unlikely to be achieved [Targets] MTP Phase 2 Financial FY2017 FY2018 FY2019 FY2020 MTP KPI (Forecast)
ROS 5.7% 6.2% 6.3% 6.0% > 8%
Net Debt/ 5.0x 4.8x 4.9x > 5x 3x EBITDA
[Reference] (Expectation)
Equity Ratio 15.7% 17.1% 16.2% - 20%
ROE 4.9% 4.7% 10.3% - 10%
VA Sales 41% 44% 46% - > 50% Ratio Updated July 2019 Introduction to NSG 13 MTP Phase 2: Trading Profit & ROS Six-year continuous trading profit improvement has been achieved, while a temporary slowdown is expected in FY2020. (JPY bn) 80.0 Trading profit ROS 9.0%
70.0 8.0% Global Financial 60.0 7.0% Crisis 6.0% 50.0 European Financial 5.0% 40.0 Crisis 4.0% 30.0 3.0% 20.0 2.0% 10.0 1.0% 0.0 0.0% FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 MTP ROS (Return on Sales) : based on trading profit (profit before amortization of non-tangible assets) MTP P2 Updated July 2019 Introduction to NSG 14 MTP Phase 2: Steady Improvement in VA Sales Ratio Aiming at the 50 percent target ratio, After MTP responding to different needs of businesses and regions > 50％
FY2019
46%
Constantly evolving VA products ・Energy-saving/generation, glass for electrochromic Before MTP Architectural products ・ Online-coated glass, glass ・Online-coated low-e glass for 1/3 with high light transmission automobiles Automotive ・Hybrid cords, super glass ・ Glass for HUD, ADAS, Super UV Cut paper (SGP) Technical ・i-NAFLECSTM ・ Lenses, battery separators, glass cords ・PicoGeneTM
Updated July 2019 Introduction to NSG 15 III. FY2020 Policy - Shift to ‘VA + Growth’
16 Shift to ‘VA + Growth’ With a view to returning to profitability growth from FY2021, the Group will stay focused on what needs to be done to reform its businesses Actions based on different growth phases Profitability Enhancement Core ➢Further accelerate VA shift to achieve 50% target Business ➢Cost structure review in addition to productivity improvement ➢Continuous efficiency improvement of underperforming businesses
Development of Future Growth Opportunities ➢Sound execution of strategic investment projects Growth Business ➢Enhancing marketing capability for growth ➢Increase and re-focus R&D ➢Acceleration of new product launches
New Business Development New Business ➢Additional resources to Business Innovation Center (BIC), moving to execution phase
Updated July 2019 Introduction to NSG 17 “VA＋Growth” – Seeds for Next Growth - Strategic investment projects decided for growth; BIC launched for expediting new business development - Focused actions in the areas of strengths or high growth potential
New solar float line New product 2nd solar float line in North America growth in in Vietnam (H2 of FY2021) BIC areas (H2 of FY2020)
2nd float line in New BIC Business launched Argentina (H1 of FY2021) Growth 3 new APBL* Business lines Core Business MTP Next management plan FY2018 FY2019 FY2020 FY2021 - * APBL： Advanced Press Bending for Laminated
Updated July 2019 Introduction to NSG 18 Architectural Glass Value creation based on energy saving & generation, health & safety, design & visibility
↑ SpaciaTM ↑ OptiwhiteTM ↑ Conventional glass （Vacuum glazing） (High transmission glass) Courtesy of First Solar Inc. ↑ Glass for thin film Solar panels
↑ MirroViewTM (High reflection glass) ↑ Glass for electrochromic ↑ Low-e coated glass ↑ OptiwhiteTM used for applications Midtown Hibiya in Tokyo （Photo: View Dynamic Glass） Updated July 2019 Introduction to NSG 19 Capacity Expansion in Emerging Architectural Market (South America) Investing in new float line in Argentina, leveraging 80 years of business experience and solid market position in South America
Summary Venezuela • Investment: USD200 m Colombia • Facility: 2nd float line for VASA * (capacity: 900 ton/day) • Site: Cardales (near Buenos Aires) • Start-up: planned in H1 of FY2021 Brazil • Market: Argentina and neighboring countries Bolivia Paraguay 3,000 Growing South American Glass Demand
2,500 （ Our estimate ） 2,000 Argentina 1,500 Uruguay 1,000 VASA 500 Chile * Vidrieria Argentina SA 0 NSG: 51%; Saint-Gobain: 49% （kt） JVGroup Float inclTanks JVs CompetitorsOthers Float Tanks Updated July 2019 Introduction to NSG 20 Thin-film Solar Glass Architectural Capacity Expansion Expanding production facilities of thin-film solar glass with mid- to long-term growth potential Investment JPY38 bn (total) Facilities 2nd solar float line in Vietnam New solar float line in the (conversion of suspended float line) US (greenfield) Site Ba Ria Vung Tau (near Ho Chi Minh) Luckey, Ohio Start-up (planned) H2 of FY2020 H2 of FY2021
* Thin-film solar glass :
Refer to slide 52 Ohio
Ho Chi Minh
↑ Equipment installation in Vietnam ↑ Ground breaking in the US
Updated July 2019 Introduction to NSG 21 Growth of Architectural Online-coated Products Function Use Conductivity Heating glass Transparent conductive film for touch panels Transparent conductive film for thin film solar panels Automotive application (Low e glass） Infrared Heat insulation glass reflection Heat blocking glass Super thin NSG TEC™ Low e glass
NSG Online Coaters
UK Japan Existing: 1 Existing: 1
US Germany Vietnam Existing : 3 Existing: 1 New: 1 (FY21) Existing ：1 New: 1 (FY20)
Updated July 2019 Introduction to NSG 22 Energy-saving Regulations Architectural – Growth Opportunity ➢ In response to heightening calls for CO2 emission reduction, governments across the globe have been tightening building energy-saving regulations and introducing zero- emission building targets. ➢ Behind in energy saving, the private sector including offices and houses are now adopting more functional windows such as triple grazing with low e coating instead of double glazing or single pane windows. Windows equipped with photovoltaics (BIPV) may pave its way into buildings soon.
Updated July 2019 Introduction to NSG 23 Automotive Glass Value creation along with advanced automotive • Lightweight • Augmented reality • Fuel efficiency technologies (OE/AGR) head up display • Heat insulation (AR HUD) & blocking Environment Connectivity • Internet of Things • Electric vehicle (IoT)
Comfort & Safety & Convenience Security • Heat insulation & blocking • Autonomous driving • Ambient lighting • Visibility • Acoustic • High rigidity • UV/IR cut
Style • Streamline design • Exterior Photo : Licensed by Matzda Updated July 2019 Introduction to NSG WS: Windshield; ISS: Idling stop & start; SL: Side light 24 ADAS: Advanced driving assistance system Automotive Respond to Automotive Innovation Global footprint of press bending equipment for high-precision windshields
➢ With the advancement of automotive technology such as ADAS and HUD, highly accurate front glass molding that needs increase ➢ New lines of APBL (Advanced Press Bending for Laminated) glass started in Japan, Europe and the US in FY2018. ➢ Developed in house, and started production in Germany in 1995, ahead of competitors
Installation of APBL
Poland 2013 Japan 2005 & 2017 Germany 1995
Italy United States 2017 2015 & 2017
Updated July 2019 Introduction to NSG 25 High-precision Glass Required Automotive for ADAS & HUD Accelerating glass demand for ADAS (Advanced Driver Assistance System) • Many of ADAS features rely on cameras mounted to windshields • High precision windshields required for proper sensing (OE and AGR)
High precision windshields also required for HUD (Head Up Display) • Adopted for LEXUS LS windshield with a largest HUD and a pickup truck of GM (GMC Sierra)
百万枚Mil pcs Global HUD WS Growth 4 CAGR30% 3 (NSG estimate)
2
1
0 FY2018 FY2019 FY2020 FY2021 NSG Market
Courtesy of TOYOTA Global Newsroom Updated July 2019 Introduction to NSG 26 Automotive Value Provided for AGR
Working from wholesale to retail business, providing value to our customers
・ Availability & product range ・ Well-established wholesale network ・ Customer focused services
ADAS calibration - Impact of ADAS enabled us to offer new services
● Opportunity ADAS systems often require calibration of the cameras after windshield replacement ● Our Business ・ Opti-AimTM developed to support our customers in the US ・ Training services for ADAS calibration are offered in South America
Updated July 2019 Introduction to NSG 27 Technical Glass Unique products and new business opportunities
↑Super Glass Paper
↑ MetashineTM
↑Thin glass; glanovaTM
↑ Glass cord
↑ Glassflake ← Battery separators ↑ SELFOC TM Lens Array （Left：PE separator） （Right：AGM separator） Updated July 2019 Introduction to NSG 28 Technical Battery Separator Business Development with Strategic Alliance
ISS car ratio CAGR15% Approx. 40%
ISS車比率 約4割
Announced on 13 July 2017 Approx. 30%
Expand supply for catering to growing lead-acid batteries, including ISS batteries Aim for a world leading supplier, leveraging on technological, commercial and manufacturing strengths.
Production at new site started in FY2019Q4 ISS: idling stop & start Updated July 2019 Introduction to NSG 29 BIC New Business Development and Creation of Customer Value
Business Innovation Center (BIC) Established in July 2018 ➢ An organization tasked to lead the Group’s growth strategy, in developing new businesses customized for needs of different regions and markets ➢ External talent, Satoshi Ishino, Chief Development Officer, brought in to lead the organization, with the relevant new business experience ➢ Change corporate culture of NSG to be innovative
Business R&D Innovation Life Science Center Architectural IoT, Cloud Automotive Cross New OE business business AGR projects projects Energy Management Technical Glass Industry 4.0
Updated July 2019 Introduction to NSG 30 BIC BIC Target
Augmenting the new organization and aiming for an early shift to the execution phase 10 years later (around 2027) Revenue: JPY100billion
Life Industry 5 years later (around 2023) Science 4.0 Revenue: JPY20billion 20% 30%
Industry 4.0 IoT, Cloud 15% Life Energy Science 20% Manageme 35% Energy nt Management 20% IoT, Cloud 30% 30%
Updated July 2019 Introduction to NSG 31 BIC Life Science Applications - PicoGeneTM for global markets
Sales launch announced in April 2019
Environmental Global health and Conventional PCR Issues Study environmental issues Though highly precise and useful… ・ Secure safe drinking water ・ Only usable in specialized labs Food ・ Rising risks of infectious disease ・ Long time required for testing Sanitation ・ Changing ecosystem Bacteria, virus
Water Analysis Mobile and rapid DNA testing Research and system is needed Compact Education Light-weight
Quick Enabling quick, high-precision DNA testing with handheld Energy saving equipment High-precision
website：https://pcr-nsg.jp/
Updated July 2019 Introduction to NSG 32 IV. ESG* for Creating Value Materiality for NSG Group
* ESG: Environment, Social, Governance 33 Sustainability Targets & Progress Quantitative targets and KPIs set based on identified materiality FY2017/2018 Progress FY2020 Targets Safety • 6% yoy improvement in FY2018 • Reduce Significant Injury Rate by 10% with no fatalities with no fatalities Waste • Exceeded target in FY2018 with • Reduce waste to landfill by 12kt (40% 10kt (33%) reduction reduction vs FY2014) Energy & CO2 • Achieved 1% reduction • 1% yoy reduction in Co2 intensity reduction across glass manufacturing operation Sustainable • 44% in FY2018 • Increase VA sales ratio to >50% VA products • Demonstrate environmental and social benefit of products Responsible • 65% of key suppliers have agreed • 10% yoy increase in Supplier Code of sourcing & to SCoC etc. Conduct acceptance by key suppliers transportation etc. Employees • Overall engagement score • Improve NSG engagement score by increased by 4% 5pts etc. • 279 action plans created and 84% • Increase inclusion & diversity are on track awareness by training managers Ethics & • The online code training was • Review, develop and enhance Ethics compliance completed and Compliance educational modules, • Completed hotline communication resources and overall culture, etc. NSG Group Integrated Report: http://www.nsg.com/en/investors/ir-library/annual-reports
Updated July 2019 Introduction to NSG 34 Corporate Governance – Framework to bolster sustainable growth Diversity & independence of Board of Directors – material decision making and supervision of executives, representing shareholders ➢ Clear separation of roles between Board chairman and CEO ➢ Robust succession plan based on nomination process Key developments 2008: “Company with Committees”; 4 Independent External Directors 2012: All 3 Committees chaired by Independent External Director 2013: The Board chaired by Independent External Director 2014: Share purchase element in LTIP; shareholding targets for EOs 2015: Publication of NSG Group Corporate Governance Guidelines 2016: 1st Effectiveness Evaluation; compliance with all the principles of CGC Board Effectiveness Evaluation Led by Independent External Directors; the following action plans have been set and followed up 1) Deeper discussion on strategic direction including ESG 2) More robust risk management
Updated July 2019 Introduction to NSG 35 Corporate Governance – The Board & Committees all chaired by Independent External Director
General Meeting of Shareholders
Election / Dismissal Director Nomination
Board of Directors Executive Officer Nomination Committee Nomination Chaired by Masatoshi Matsuzaki
(Former CEO, Konica Minolta)
Chaired by Günter Zorn (Former Executive Vice President North Pacific, DHL) Audit Committee Appointment Chaired by Toshikuni Yamazaki Supervision Audit / Dismissal (Former Executive Vice President Finance, JFE Holdings) Executive Officers
Compensation Committee Chaired by Yasuyuki Kimoto
Compensation (Former Chairman, Olympus ) Led by Shigeki Mori Determination President & CEO
Updated July 2019 Introduction to NSG 36 Board of Directors – Robust corporate governance with a majority of the Board of Directors being independent
Günter Zorn Toshikuni Yamazaki Yasuyuki Kimoto Masatoshi Matsuzaki Yuji Takei Jörg Raupach Sumiya Independent External Independent External Independent External Independent External External Director Independent External Director Director Director Director Director Chairman of the Board
Shigeki Mori Clemens Miller Kenichi Morooka Director Director Director President Executive Vice President Executive Vice President Chief Executive Officer Chief Operating Officer Chief Financial Officer
Nomination Committee Audit Committee Compensation Committee
Masatoshi Matsuzaki (Chairperson) Toshikuni Yamazaki (Chairperson) Yasuyuki Kimoto (Chairperson) Günter Zorn; Toshikuni Yamazaki; Günter Zorn; Yasuyuki Kimoto; and Günter Zorn; Toshikuni Yamazaki; Yasuyuki Kimoto; and Shigeki Mori Masatoshi Matsuzaki Masatoshi Matsuzaki; Jörg Raupach Sumiya; and Shigeki Mori
Updated July 2019 Introduction to NSG 37 Executive Officers – International management team
Representative Executive Officers
Shigeki Mori Clemens Miller Kenichi Morooka Director Director Director President Executive Vice President Executive Vice President Chief Executive Officer Chief Operating Officer Chief Financial Officer
Senior Executive Officers
Tony Fradgley Koichi Hiyoshi Satoshi Ishino Hiroshi Nishikawa Jochen Settelmayer Phil Wilkinson Head of Automotive AGR Chief Legal Officer and Chief Development Officer Head of Technical Glass Head of Architectural Glass Chief Information Officer and and Head of Automotive OE Company Secretary Head of Business Innovation Global Head of Automotive AGR Centre
Executive Officers
- Tim Bolas (Finance Director – Operations) - John Mercer (Chief Procurement Officer) - Mike Greenall (Chief Technology Officer) - Yutaka Nakashima (Chief Human Resources Officer) - Hiroshi Kishimoto (Chief Risk Officer) - Iain Smith (Finance Director – Global Finance) - Shiro Kobayashi (Head of Group Sustainability) - Milena Stanisci (Head of Manufacturing Excellence and Head of Manufacturing, Automotive OE SBU)
Updated July 2019 Introduction to NSG 38 Environment: Reducing CO2 Emission For reducing CO2 emission ➢ One percent year on year reductions in CO2 across glass manufacturing operations ➢ Supplying low e and other energy saving products, contributing to the reduction of greenhouse gas emissions and mitigation of the effects of climate change FY2018/2019 Actions ➢ Science based targets (SBT) for greenhouse gas reduction: Committed in August 2018; targets being developed ➢ Shift to renewable energy Green Energy Solar Energy In Europe, contract in place to switch 50 PV panels installed or planned at Lathom percent of electricity to green energy (UK), Northwood IUS and other Group sites
*ESG: Environment, Social and Governance Architectural DS site in Kyushu, Japan Copyright © 2014, First Solar, Inc. All rights reserved. Updated July 2019 Introduction to NSG 39 Social
Employees • Global and regional talent development programs and succession planning • Leadership development programs to identify and develop talent pool • Competency model to define expectations for Group employees • Promotion of inclusion & diversity
Supply Chain • Based on “Supplier Code of Conduct” issued in 2009, more than 350 suppliers audited by FY2018 for its compliance, with coverage increasing 20 percent p.a.
Ethics and Compliance • Rolling out “Code of Ethics” and maintaining 100% annual training completion • Communications on Ethics & Compliance Hotline and encouraging reporting
NSG Foundation • NSG Foundation was established to commemorate the 60th anniversary of NSG with the aim to contributing to the promotion of R&D activities on inorganic materials through research grants, which amounts to JPY1,610 million for 1,237 projects cumulatively.
Updated July 2019 Introduction to NSG 40 V. Capital Allocation
41 Redemption of Class A Shares (Acquisition & Cancellation) Considering the continued improvement in net profitability, the Group started to redeem a portion of its Class A shares
31 Mar 2017: Issuance (40,000 shares; JPY40 bn) *Refer to slide 75 for detail 7 Dec 2018: First acquisition & cancellation (5,000 shares; JPY 5bn) 6 Jun 2019: Second acquisition & cancellation as below Number of shares acquired 5,000 and cancelled Amount JPY5,800m including JPY750m premium and JPY50m dividends Date of acquisition 6 June 2019 Number of outstanding 30,000 (Issued value: JPY30,000m) shares after redemption
Redemption Policy: • To redeem Class A Shares at the earliest possible timing, considering attributable profit and preferred and ordinary dividends, while maintaining financial stability • By reducing the outstanding shares, the amount of preferred dividends and redemption premium will be reduced.
Updated July 2019 Introduction to NSG 42 Dividend Policy
Forecast for FY2020 year-end: JPY20 per share
FY2019 FY2020 Forecast
Interim Year end Total Interim Year end Total Ordinary (JPY/share) - 20 20 - 20 20 Commemoration (JPY/share) 10 - 10 - - - Total Ordinary Dividend 10 20 30 - 20 20 Dividend Amount (JPY bn) 20 28 48 - 35 35 (Ordinary Dividends) (9) (18) (27) ( - ) (18) (18) (Preferred Dividends) (11) (10) (21) ( - ) (17) (17) Consolidated Payout Ratio 26% 21% (Ordinary)
* Resumption of ordinary dividend payment at the end of FY2018 (JPY20 per share); Including the commemoration (interim) dividend of 10 yen for FY2019
Dividend Policy: • To secure dividend payments based on sustainable business results, and to aim to pay dividends continuously • Once Class A Shares are fully redeemed, aiming to a consolidated pay-out ratio of 30 percent
Updated July 2019 Introduction to NSG 43 “VA+Growth” – Financial Sustainability Mid- to long-term policy to improve financial sustainability remains unchanged; allocation of increased profit to be balanced among financial improvement, growth and return to shareholders Redeem Class A share Operating Profit (Pref dividend & premium reduction) Reduce Debt （Finance expense reduction) Net Profit Shareholders’ Equity Free Cash Flow Invest in Growth Shareholders’ Opportunities Value
Credit Ratings Make Return to Shareholders
Toward Further Growth Updated July 2019 Introduction to NSG 44 Notice
The projections contained in this document are based on information currently available to us and certain assumptions that we consider to be reasonable. Hence the actual results may differ. The major factors that may affect the results are the economic and competitive environment in major markets, product supply and demand shifts, currency exchange and interest rate fluctuations, changes in supply of raw materials and fuel and changes and laws and regulations, but not limited. Nippon Sheet Glass Company, Limited
Updated July 2019 Introduction to NSG 45 VI. Appendices
46 1. Manufacturing Process
47 Float Process
Float glass: Molten glass is poured continuously from a furnace onto a shallow bath of molten tin. It Raw material floats on the tin, spreads out and forms a level surface. This method was introduced to the world as the float process in 1959. Others Sand Recycled glass
Regenerator Soda ash
Cooling lehr Raw material feed
Float bath
Updated July 2019 Introduction to NSG 48 Online Coating
Raw material feed Coating
Cutting Cooling lehr Melting furnace Float bath (tin) Various TCO coating with different functionalities
➢ Thin, uniform metallic oxide film deposited over glass while being formed inside the float bath ➢ Cost competitive, available in large size ➢ Durable: suitable for further processing & for use as an external glass pane ➢ Versatile: architectural, solar & automotive applications ➢ Technical applications include thin or curved displays, OLED lighting and thin-film sensors
Updated July 2019 Introduction to NSG 49 Automotive Glazing – Toughening
Toughened Glass: Flat glass is placed in a tempering oven, and heated to between 650 and 700°C, which is near the glass softening temperature. Then the glass is quenched by blowing air evenly on both sides, causing the surface to harden first, with the inside cooling and shrinking later. The result is the formation of a stable compressive stress layer at the surface, and the glass is 3 to 5 times more resistant to impact than ordinary glass. This glass is mainly used for the side and rear windows of automobiles.
Updated July 2019 Introduction to NSG 50 Automotive Glazing – Laminating
Laminated Glass: Laminated glass consists of two pieces of glass with a sandwich of transparent plastic interlayer. This is then placed into an air-pressure autoclave, and treated at high temperature and pressure. Some special products are made with 3 or more sheets of glass. This glass is mainly used for the front windows of automobiles.
Updated July 2019 Introduction to NSG 51 Solar Panels & Glass: Crystalline vs Thin Film Crystalline Silicon Solar Panels Thin film solar panels High efficiency, Chinese Total cost competitiveness, strength manufacturers in large size and high temperature applications
Low iron rolled glass TCO coated flat glass, forming +AR (Anti Reflection)coating, part of solar cell mainly for cover glass
Updated July 2019 Introduction to NSG 52 2. Operational Footprint
53 Global Float Operations
UK 1 1 St Helens Poland 1 1 Sandomierz Japan 4 2 Chiba 2 Maizuru Germany 4 2 Gladbeck 2 Weiherhammer Italy 3
USA 6 2 San Salvo 1 Venice 2 Rossford 1 Ottawa Vietnam 3 2 Laurinburg 1 Bac Ninh 1 Luckey (to be constructed) 2 Ba Ria Vung Tau (1: to be constructed) Brazil 2 1 Caçapava 1 Barra Velha Malaysia 2 2 Johore Bahru Chile 1 1 Concepcion
Argentina 2 1 Llavallol 1 Cardales Operated by NSG Group: 29 (to be constructed)
Updated July 2019 Introduction to NSG 54 Global Automotive Operations
Finland Tampere Laitila
Poland Canada Sandomierz Germany Collingwood Chmielow Witten Japan USA Aken Maizuru Shelbyville Italy Kyoto Versailles Tochigi Spain San Salvo Sangunto Mexico China Mexicali Tianjin India Guilin Vizaq
Brazil Malaysia Caçapava Sungai Buloh
Argentina Munro
Updated July 2019 Introduction to NSG 55 Global Technical Glass Operations
Poland Skierniewice (GC) Canada Guelph (GC)
China Japan UK St Helens (GC) Tianjin (BS) Maizuru (DP) Suzhous (GC) Sagamihara (ID) Tsu (FM, GC) Tarui (BS) Yokkaichi (ID) Ryugasaki (Kagami)
Updated July 2019 Introduction to NSG 56 3. Medium-term Plan (MTP)
57 MTP Phase 2 - Update on Key Measures 1. Four Key Measures Drive VA No.1 • Enhanced competitiveness of online-coated architectural Strategy glass • Increased order awards of value-added automotive glass Establish • Expedited new business development process by Growth Drivers managing promising R&D projects as ‘Star Projects’ Business • Productivity improvement of automotive glass with Culture ‘Manufacturing Excellence’ Innovation • Establishing common mindset of ‘Customer First’ not only in sales teams but across the Group with marketing focused approach Enhance • Setting up shared service centers at four locations in the Global world to streamline administrative work Management • Improving diversity and inclusion with the ‘Inclusion & Diversity” declaration 2. Financial Measure Issuance of Class A Shares to improve equity ratio, resulting in reduced financial expenses one year ahead of plan Updated July 2019 Introduction to NSG 58 Improvements since MTP Started Actions taken in line with Long-term Strategic Vision, ‘Transformation into VA Glass Company’ MTP Phase 2 ～FY2014 FY2015-FY2017 FY2018-FY2020 Global financial crisis & VA sales increase Trading profits European Efficiency & cost improvement increase sovereign debt crisis Additionally Stable attributable profit ’18/3 YE: Ordinary dividend ↓ payment resumed FY2016: Pending issues dealt with: ’ ・ Exited crystalline solar glass 18/12: Partial redemption of Restructuring in China Class A shares started phase to cope ・ Suspended thin glass furnace FY2019: Start preparations for with drastic in Vietnam next growth phase market decline - Strategic investment decisions: thin-film solar glass and FY2017: Issuance of Class A Shares South America → Financial stability - Launch of BIC → Financial expense reduction
Updated July 2019 Introduction to NSG 59 Improved Trading Profits and Stable Attributable Profits Six-year continuous trading profit improvement resulting in stable attributable profits, though temporary slowdown forecasted in FY2020 MTP Phase 2 ～FY2014 FY2015-FY2017 FY2018-FY2020 (JPY bn) Trading profit Six-year 40 profit growth Profit Attributable
20
0 Stable attributable profits
Pending issues taken care of
(50)(20) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 (Forecast) Updated July 2019 Introduction to NSG 60 Improvement with VA Shift & Cost Savings MTP actions improved trading profits, more than offsetting translational effect of strengthening yen FY2014 FY2019 40 Restructuring & VA Shift cost savings, esp. contribution in Europe 30
20 Significant benefit up to FY2017, 10 while affected by cost push in last two financial years 0 Total FX Sales Selling Input Cost Total JPY bn Vol/Mix Prices Costs Savings & Other 22.4 (6.1) 7.0 6.3 1.3 7.9 38.8
Updated July 2019 Introduction to NSG 61 Attributable Profit Boosted by Financial Expense Reduction Target reduction achieved in FY2019, helping attributable profit improvement MTP Phase 2 ～FY2014 FY2015-FY2017 FY2018-FY2020
Net Financial Expenses (JPY bn) Reduction one year ahead
19.1 Target 16.9 17.9 18.2 14.3 14.1 14.6 13.3 13.0
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 MTP P2 Issuance of Class A shares • FY2019 financial expenses would have been JPY11.8 bn without JPY1.5 bn hyperinflation opportunity costs in Argentina Updated July 2019 Introduction to NSG 62 Gap to Targets - Contributing Factors
Gap mainly due to new product sales delay and cost push, Net debt to be affected by strategic investment decisions
ROS Net Debt/EBITDA FY2014 4.0% 6.5x Gap to MTP = Contributing (After restructuring, Factors pre-MTP) Improved ROS% & EBITDA New product revenue growth FY2020 6.0% > 5x Forecast behind expectation Slower VA shift in some ギャップGap businesses Higher input Efficiency gains MTP cost inflation not driving cost Financial 8.0% 3x than plan reductions Targets quickly enough
Based on contributing Net Debt factors identified, Net debt higher than MTP due to actions to be taken in lower profitability and strategic FY2020 investment decisions
Updated July 2019 Introduction to NSG 63 4. BIC Focus Areas
64 BIC Focus Area: (1) Life Science Business Focus on food/water safety, environment, academia
Mobile DNA detector Disposable kit Fine glass processing
Chip with flow channel Inorganic fine particle material
Updated July 2019 Introduction to NSG 65 BIC Focus Area: (2) IoT, Cloud Business Focus on high-speed data transmission, sensors, filters Enhance Image Camera Data Center High-speed transmission IR-cut filter 50・100G/ch Micro lens array Low-reflective nano Optical Network material Cloud
Sensing Distance 5G Optical waveguide Nano material measuring
Low Special glass Light diffusion High-frequency Micro VIA board dielectric elements technology board
Updated July 2019 Introduction to NSG 66 BIC Focus Area: (3) Energy Management Business Improve conversion efficiency with functional material
New battery solution High-efficiency motor solution
Ionic material Super glass paper for i-NAFLECS porous ® separator fine glass particle
Updated July 2019 Introduction to NSG 67 BIC Focus Area: (4) ‘Industry 4.0’ Improve sensor capability with fine glass applications
Hologram Nano glass composite Drones Super glass paper
Smart House Optical glass AR・VR IoT 3D printer material 素材
Cloud 3D Printer Optical transmitter
Security High-performance Big Data optical filter High density material System Simulation
Updated July 2019 Introduction to NSG 68 5. Financial Data
69 Financial Data (1)
FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 Assets ¥ billion 926.2 920.1 812.1 790.2 788.6 761.9 Interest-bearing debt 455.3 442.7 437.0 399.4 372.7 371.5 Shareholders' equity 184.0 175.7 103.1 124.1 135.2 123.8 Called up share capital 116.4 116.4 116.4 116.5 116.5 116.5 Net debt 379.1 374.1 381.0 313.3 306.5 317.7 EBITDA 54.4 57.8 60.3 62.1 66.2 66.2 Net debt/EBITDA 7.0x 6.5x 6.3x 5.0x 4.8x 4.9x Net debt/Equity ratio 2.0x 2.0x 3.4x 2.3x 2.1x 2.4x Shareholders' equity ratio % 19.9% 19.1% 12.7% 15.7% 17.1% 16.2% Trading profit ratio % 3.7% 4.0% 4.3% 5.7% 6.3% 6.3% Net cash flows from operating activities ¥ billion 17.9 24.6 21.8 30.4 34.7 29.0 Net cash flows from investing activities -17.1 -23.2 -26.4 -10.2 -17.9 -28.1 Cash flow before financing activities 0.8 1.4 -4.6 20.3 16.8 0.9 Capital expenditures 31.6 36.6 28.2 28.0 35.5 32.2 R&D costs 7.9 8.2 9.8 8.5 9.1 9.4 Depreciation and amortization 40.4 41.7 40.9 32.2 29.4 27.9
Numbers of shares outstanding (common stock*1) K 903,551 903,551 903,551 90,366 90,487 90,594 Earnings per share*1 ¥ -18.4 1.9 -55.2 62.0 48.3 115.2 Book value per share*1 ¥ 203.78 194.6 114.14 941.76 1042.72 978.5 Cash dividends Yen*1 ¥ 0 0 0 0 20 30 Stock price (High) ¥ 154 149 142 951 1080 1315 Stock price (Low) ¥ 90 94 64 600 743 767 *1: Effective as from 1 October 2016, the Company conducted a share consolidation in which every ten common shares Note: Early IFRS adaption since FY2011
Updated July 2019 Introduction to NSG 70 Financial Data (2)
FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 Revenue ¥ billion 606.1 626.7 629.2 580.8 598.9 612.8 Architectural 240.6 252.9 262.6 237.7 238.0 247.3 Automotive 305.1 314.0 316.3 296.6 311.4 314.6 Technical Glass 59.4 58.7 49.5 46.1 48.4 49.1 Others 1.0 1.1 0.8 0.4 1.1 1.7 Operating profit ¥ billion 14.6 16.8 19.4 29.9 35.6 36.9 Architectural 11.0 17.0 24.6 27.0 26.2 25.8 Automotive 11.2 9.4 9.8 12.7 14.2 15.1 Technical Glass 5.9 4.9 0.3 1.8 5.4 8.1 Others -13.4 -14.5 -15.3 -11.6 -10.2 -12.1 Operating profit ratio to revenue % 2.4% 2.7% 3.1% 5.1% 5.9% 6.0% Architectural 4.6% 6.7% 9.4% 11.4% 11.0% 10.4% Automotive 3.7% 3.0% 3.1% 4.3% 4.6% 4.8% Technical Glass 9.9% 8.4% 0.5% 3.8% 11.2% 16.4% Exceptional items ¥ billion -13.8 5.5 -35.1 2.9 -1.3 -7.1 Finance expenses (net) -16.9 -17.9 -18.2 -19.2 -14.6 -13.3 Share of JVs and associates 1.0 0.4 -3.4 1.1 -2.4 -6.2 Income before income taxes/Profit before taxation -15.1 4.8 -37.4 14.8 22.1 22.7 Net income/Profit attributable to owners of the parent -16.6 1.7 -49.8 5.6 6.2 13.3
Note: Early IFRS adaption since FY2011
Updated July 2019 Introduction to NSG 71 Financial Data (3) - Exchange rate trend - Average rates used FY2020 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 Forecast GBP 159 177 181 142 147 146 145 EUR 134 139 132 119 130 129 130 USD 100 110 120 108 111 111 111 BRR 44.4 44.5 33.5 32.8 34.4 29.4 28.0 ARS 16.27 13.10 11.35 7.22 6.30 - - Closing rates used FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 GBP 171 178 161 139 150 144 EUR 141 130 127 119 132 124 USD 103 120 113 111 106 111 BRR 45.5 37.3 31.3 35.5 32.1 28.3 ARS 12.84 13.66 7.69 7.24 5.30 2.53 FX Sensitivity Increase (decrease) if the value of the yen increases by 1% Oil prices (Brent) (all other things being equal): (JPY bn) FY2017 FY2018 FY2019 FY2020 Forecast Assumption USD 67 per barrel Equity (3.5) (3.5) (3.3) Profit for the period (0.2) (0.1) (0.2)
Updated July 2019 Introduction to NSG 72 Revenue & Trading Profit Quarterly trend Architectural 65.0 61.1 62.1 61.4 56.4 58.4 60.3 60.6 Europe 7.4 23.1 7.5 7.2 25.0 6.6 6.4 22.3 5.9 23.5 24.6 23.3 Asia 24.3 23.7 5.8 5.3 Americas 26.3 19.5 21.7 23.7 21.3 21.1 22.4 23.1 Trading profit 14.6 15.1 14.7 13.6 15.3 13.3 15.6 14.2
FY18 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY19 Q1 FY19 Q2 FY19 Q3 FY19 Q4 Automotive 83.1 84.3 79.7 76.9 75.1 76.3 6.6 76.5 74.2 6.0 40.3 Europe 39.5 34.2 32.8 33.5 4.9 33.7 30.7 35.5 Asia 4.0 Americas 16.7 2.5 18.3 16.1 16.2 1.9 17.4 1.7 18.1 16.7 18.9 1.7 Trading profit 26.6 26.1 25.4 25.5 27.3 26.1 24.6 25.9
FY18 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY19 Q1 FY19 Q2 FY19 Q3 FY19 Q4 Technical Glass 12.6 12.4 12.6 12.4 11.8 12.3 11.7 11.7 2.6 2.1 1.8 2.1 Revenue 1.1 1.8 1.6 Trading profit 0.4
FY18 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY19 Q1 FY19 Q2 FY19 Q3 FY19 Q4 Updated July 2019 Introduction to NSG 73 6. Class A Shares Detail
74 Class A Shares Detail
Amount JPY40 billion (40,000 shares) (No of Shares) Planned Allottees Japan Industrial Solutions Fund II JPY20 billion (20,000 shares) (Amount & UDS III Corporate Mezzanine Limited Partnership JPY10 billion ( 9,000 shares) No of shares) UDS IV Corporate Mezzanine Limited Partnership JPY10 billion (11,000 shares) Voting Rights None
Preferred dividend 31 March 2017 ~ 31 March 2018 4.5% rate 1 April 2018 ~ 31 March 2020 5.5% (Cumulative) 1 April 2020 ~ 6.5% Consi- Consi- Cash Ordinary Shares deration deration Redemp Redemp- 1 July 2020 or later, unless conversion 1 April 2018 or later -tion tion restriction removal reason exists
Paying-in amount per share + cumulative (Paying-in amount per share X ordinary accrued dividend amount + daily prorated share redemption premium) / acquisition Call Put accrued preferred dividend amount + price option redemption premium option No. of (Comp-
In principle, the Planned Allottees may not exercise their put option before 1 July 2020. Design The Planned Allottees may exercise their put option for 4,000 or less Class A Shares, when the Company notifies the exercise of its call option for the entire outstanding Class A Shares. Updated July 2019 Introduction to NSG 75