Kaneka Integrated ReportKaneka 2018 Kaneka Integrated Report 2 0 18
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This printed matter is using FSCTM certified paper includes sources from responsibly managed forests. The environment-friendly vegetable oil ink is used for printing. KANEKA thinks “Wellness First”. CONTENTS
Kaneka brings the environment to its ideal state, Ⅰ Management Philosophy Ⅳ Business Foundation 1. Management Philosophy Structure 1. List of Directors develops its business in a “wellness-first” direction, energizes people, 2. New Management System 2. Corporate Governance adds vibrancy to business, and helps build a happier society. 3. Business Risks and Uncertainties Ⅱ Social Value Creation 4. Compliance To make the world more wellness-first. 1. KANEKA thinks “Wellness First”. 5. Intellectual Property 2. History of Kaneka’s Reform 6. ESG Promotion System Kaneka takes an innovative approach to science, 7. Environment Ⅲ Management Strategies 8. Safety and seeks to fulfill people’s dreams by offering a wide variety of solutions. 1. Interview with the Chairman 9. Job Satisfaction 2. R&D Strategies 10. Diversity 3. Special Feature “Three Crises” Special Feature 1: Ⅴ Appendices Wellness-first Global Environment 1. Consolidated Financial Statements Special Feature 2: 2. Financial and Nonfinancial Highlights Wellness and Comfortable Life 3. Corporate Profile / Global Network Special Feature 3: Wellness
From the Editorial Team Kaneka Integrated Report 2018, covering both financial and non-financial information, has been issued to enhance the understanding of our stakeholders regarding the Kaneka Group’s value creation in the medium to long term. It is created based on the Medium-term Management Plan as of March 31, 2018.
Organizations Covered in This Report This report covers Kaneka Corporation and its consolidated subsidiaries both in Japan and other countries. The data on Responsible Care activities encompass the parent and all 60 Group production subsidiaries. In this report, “Kaneka” refers specifically to Kaneka Corporation. “Kaneka Group” encompasses Kaneka Corporation and Group companies (its consolidated subsidiaries). References to “Group company/companies” do not include Kaneka Corporation.
Notes Regarding Future Prospects Statements in this report regarding performance forecasts and other future prospects are based on currently available information and certain assumptions that we consider reasonable, and Kaneka Corporation does not guarantee their achievement. Actual results may differ greatly due to various factors.
1 Kaneka Integrated Report 2018 Kaneka Integrated Report 2018 2 Management Philosophy
Management Philosophy Structure Kaneka Group’s “Declaration of Kaneka United” Stakeholders
Expresses our raison d’être and our social mission Customers With people and technology growing Taking into account those 1 together into creative fusion, we will who purchase our prod- break fresh ground for the future and tie ucts as well as potential customers and aiming to Corporate in to explore New Values. We are also create a sound society, we Philosophy committed to challenge the environmen- provide quality products, tal issues of our planet and contribute to Society services and value, ensure The Environment product safety, and disclose upgrading the quality of life. We do business rooted in information. We make efforts to reduce Kaneka local communities and pro- environmental burden in our 2 Describes our key values Group’s ESG mote social contributions and business activities, including community engagement. We raw material procurement, Corporate Toward an Even More Impressive and Activities also contribute to creating a manufacturing and transporta- Productive Future well (sound) community and tion. We also fulfill our social Ideals society, disclosing pertinent responsibilities by develop- Hold in your hands the future you have always Working to resolve information to make local ing cutting-edge materials dreamed of. We are a highly perceptive and social issues to keep residents feel reassured and and unique technologies to collaborative value-creating group or, as we like the world well ensuring the safe operation enhance the wellness of the to say, a “Dreamology Company. (see note)” of plants. Kaneka global environment. ※Note: “Dreamology” is an expression coined from ‘dream’ and ‘ology’ (science). Our “Dreamology Providing Company” is a “highly perceptive and collaborative Valuable Shareholders and Group 3 value-creating group.” Investors Vendors Solutions We offer appropriate returns We conduct fair transactions and disclose timely information with raw material suppli- ESG Charter to those who recognize our ers and contractors with Pursuing corporate stance and the value a focus on compliance. Social of our corporate brand and We also build mutually who own our shares, so we beneficial and well (sound) Responsibility can increase overall trust in the Employees relationships of trust with Group, which aims to ensure a We offer employees a them, offering equal oppor- company culture and a society workplace environment of tunities to do business. characterized by wellness. wellness — job satisfaction, appropriate treatment and remuneration, and safe Putting the Corporate Philosophy Into Practice working environments — and respect their diversity. Our 1. We offer solutions characterized by value to global markets and contribute to the evolution of employees include those who lifestyles and the environment through innovative chemistry. work for the Kaneka Group as well as their family members. ❶ We bring innovation to lifestyles and the environment by harnessing the unlimited potential of chemical materials to help communities achieve sustainability. (Earthology Chemical Solution) ❷ By adopting a unified approach to food and medicine that is defined by a focus on chemistry, we provide innova- tive solutions that empower people to live healthier lives. (Active Human Life Solution) As good citizens, we will conduct out business activities, 2. We fulfill our social responsibility by empowering individual employees to put our corporate while respecting all stakeholders. philosophy into practice through serious, forward-looking effort. ❶ We actively contribute to our communities by cultivating understanding of the cultures and customs of the countries and regions where we do business and by pursuing corporate activities that are deeply rooted in those communities. ❷ We operate our businesses in a fair and impartial manner based on the principles of free competition and legal compliance. ❸ We’re committed to communicating with shareholders and other stakeholders and to making information about our operations available in a timely and appropriate manner. Support for the United Nations Global Compact ❹ We strive to foster an organizational culture that respects the personalities and uniqueness of all employees so In March 2015, the Kaneka Group became a signatory to the United Nations Global that they can enjoy good health, feel motivated, and make the most of their abilities. Compact. The UN Global Compact is a voluntary code of conduct through which ❺ Reflecting a commitment to make safety the top priority in our operations, we work to create safe and healthy the top management of signatory companies commit themselves to take action workplaces, ensure product safety, and protect and preserve the environment. aimed at achieving ten principles in the four areas of Human Rights, Labour, Environment, and Anti-Corruption. As a group with a global network, we actively share information about our commitment to global sustainable growth as a respon- In 2018, Kaneka Group established the ESG Charter, aiming to evolve its ESG management. sible corporate citizen with our stakeholders and the international community.
3 Kaneka Integrated Report 2018 Kaneka Integrated Report 2018 4 Management Philosophy
New Management System
We have created a new management system to deliver solutions that resolve social issues and Under a new management system, contribute to making our stakeholders and the world more wellness-first. Under this system, management hardware comprising four Solutions Units (SUs) and nine Solutions Vehicles we will further accelerate our transfor- (SVs) was built, and a growth strategy was formulated as an intended direction. We have also established a new personnel system for realizing the strategy to accelerate our innovation and mation into a solutions provider growth.
Evolving into New Management System Solutions Unit vison Measures a Solution Provider
We will evolve from a conventional Material SU Material Value Contribute to global environmental supplier of materials into “a solution Earthology Chemical Solution Creator conservation and comfortable living provider” that both delivers solutions ● Provide outstanding materials for evolving social infra- Vinyls and Chlor-Alkali SV structure, mobility (lighter weight, more fuel efficient for social issues and is also committed To support the advance- vehicles), and more to realizing Innovation and growth. ment of life and the envi- ronment by drawing out the ● Provide solutions where materials like biopolymers are Performance Polymers SV of direct help to ecological society richness of the materials
Management Hardware Quality of Life SU Quality of Life Contribute to energy-saving and a rich life ● Deliver energy-efficient housing solutions→Create a Pathfinder high quality, sustainable housing market The 4 SUs SU：Solutions Unit Foam & Residential E & I ● Provide unique materials and services that excel The 9 SVs SV：Solutions Vehicle Techs SV Technology SV To produce the leading edge of the enhancement regarding both energy-saving and smart application needs PV & Energy Performance of the quality of life through management SV Fibers SV the power of materials Management System Transformation Health Care SU Medical Edge Contribute to a society advancing in age and medical sophistication Formulation of Active Human Life Solution Explorer New Personnel Growth Strategy ● Strengthen marketing and product development glob- System ● New Medium-Term Medical Devices SV ally in cutting-edge medical fields including biopharma- Management Plan To create a world in where ceuticals, and regenerative medicine and cell therapy ● SU Vision advanced medical means are available to as many ● Proactively utilize open innovation and U.S. R&D bases ● Provide solutions that deliver value by fusing devices people as possible and medicine Management Software Pharma & Supplemental Nutrition SV Nutrition Contribute to health and a plentiful, Work Culture Innovation Value Chain varied diet Make effective use time, information, ● Provide a broad range of solutions that help diversify and human resource Innovator and enrich people’s diets Foods & Agris SV ● Offer solutions that help prevent disease and promote Maximize the productivity of the organization To re-innovate food health, and enhance the food materials lineup and health ● Deliver solutions that assist production in the fields of Nutrition SU agriculture, livestock, and fishery
→ For details, see the Interview with the → Four SUs are divided into two large domains. Chairman (p.11-18). More details are provided on the following page.
5 Kaneka Integrated Report 2018 Kaneka Integrated Report 2018 6 Social Value Creation
KANEKA thinks “Wellness First”. Continuing to create value We focus on three crises as social issue areas in which we can make contributions through as a solution provider our business. We will continue creating high added value to resolve social issues in these areas through open innovation, ensuring issue resolution and sustainable growth. for issues facing the world
KANEKA thinks “Wellness First”.
Advancement of ESG Management Three Crises Resolution of social issues KANEKA’S By providing valuable solutions globally, we will continue growing and building Environment / Energy Food Wellness a reputation for contributing to Realizing a society where Realizing a society where safe, Realizing a society where ESG the evolution of people’s lives and everyone can enjoy natural secure and highly nutritious everyone has access to ade- Trial & Error experiment blessings and can use clean food is available to everyone quate medical services and driven company the environment throughout the world. and sustainable resources and and where food producers can continue to live a vibrant energy also feel happy and brilliant life Contribute to the advancement of life and the environment of people world wide through chemistry
Ocean pollution Social Energy saving Earthology Chemical Active Human Life control infrastructure Solution Solution Food production Medical Informatization Health promotion Aim to be an innovation leader for the With a central focus on chemistry, support sophistication global environment and lifestyles by treating food and medicine as one, aim drawing out the unlimited possibilities to be an innovative solutions provider of chemical materials and supporting supporting healthy and active lives sustainable societies Create added value
In addition to management system reform, Material SU Health Care SU M&A-based discontinuous growth is also Global M&A To support the advancement of life To create a world in where advanced essential for achieving our long-term vision. System and the environment by drawing out medical means are available to as By breaking away from our self-sufficiency the richness of the materials many people as possible policy and adopting open innovation, we will pursue technological innovation and Quality of Life SU Nutrition SU cluster our business and products based on Open Source-in/ To produce the leading edge of the To re-innovate food and health external technologies. Thus, we will acquire Innovation Source-out enhancement of the quality of life cutting-edge technologies and accelerate new through the power of materials business development to continue creating added value. Combine technologies from different industries
7 Kaneka Integrated Report 2018 Kaneka Integrated Report 2018 8 Social Value Creation
History of Kaneka’s Reform Recognizing the changes of the times to realize continuous innovation and growth Third Foundation Since its foundation in 1949, Kaneka Group has achieved growth by overcoming Becoming a solution provider that contributes to a sustainable society changes in the times and business environment through a creative fusion of people and technology. We will provide value globally to resolve social and global issues by offering various innovative products. 2017 A new management system adopted Second Foundation 2018 ESG Charter established as guiding principles for Change of its company name and the materialization of the Corporate Philosophy management system and successive establishment of new businesses Active promotion of M&A and open innovation
2004 Trade name changed to Kaneka Corporation ● Acquired full ownership of a bio-pharmaceutical company, Foundation 2009 Long-term vision (Declaration of Kaneka Eurogentec S.A. (2016)
Establishment of foundation businesses leading to future growth United / Basic CSR Policy) formulated ● Established Kaneka US Innovation Center (2016)
and promotion of global business expansion ● Introduction of drug-coated balloon technology (2017)
● Acquired an aircraft composite business (Kaneka Aerospace Development of innovative LLC) and invested in a company specializing in lactic acid 1949 Kanegafuchi Chemical Industry Co., Ltd. established technologies and products bacteria (2018)
● Released the functional food material “Kaneka Coenzyme Q10” (2002)
● Industrialized the world’s first telechelic Establishment of foundation businesses polycylate, followed by the development of ● Successively turned foundation businesses based on macromo- nanocomposite technology, a new modifier lecular and fermentation technologies, which covered polyvinyl for epoxy resin, a transparent resin with
chloride, fermentation-based butanol, modacrylic fiber and poly- heat and light resistance, and a high ther- Introduction of drug- Acquisition of an aircraft Investment in a company styrene foam made with the bead method, into commercially mal conductive graphite sheet (2006–) coated balloon technology composite business specializing in lactic acid (Kaneka Aerospace LLC) bacteria (technology import) feasible businesses. Actively strengthened the food business ● Developed a balloon catheter for heart covering margarine and shortening (1949–) disease of the nation’s smallest size ● Created new businesses covering cocoa butter equivalents, MBS among its own products (2007) Provision of value on a global scale resin and polystyrene foam resin (1961–) Takasago Manufacturing Site ● Began the full-fledged development of ● Established Kaneka Taiwan Corporation, Kaneka Korea Corpo- at the time of its founding ● 100% plant-based biodegradable poly- Developed metabolic cardiotonic drug bulk “ubidecarenone (Takasago City, Hyogo Prefecture) ration and Kaneka South America Representative Ltd. (2011–) (CoQ10)” using the fermentation method (1977) mers (2009) ● Established regional headquarters – Kaneka Asia Co., Ltd. ● Developed photovoltaic modules and ultra-heat-resistant polyim- (2012), Kaneka Americas Holding, Inc. (2012) and Kaneka Europe ide film (1984) Holding N.V. (2015) – to strengthen the Group’s functions
Acceleration of global expansion
● Successively established Kaneka Belgium
N.V., Kaneka America Corporation, Kaneka Functional food material Balloon catheter for heart Singapore Co. (Pte.) Ltd., and Kaneka Texas “Kaneka Coenzyme Q10” disease of the nation’s smallest Corporation (now Kaneka North America size among its own products LLC), to accelerate the global expansion of its business (1970–)
● Established Kaneka (Malaysia) Sdn. Bhd. and Kaneka Consulting (Shanghai) Co., Ltd. Distant view of Kaneka (Malaysia) Sdn. Bhd. (now Kaneka Trading (Shanghai) Co., Ltd.) Kaneka Belgium N.V. Overseas holding companies in at the time of founding Asia, the Americas and Europe to expand its business in Asia (1995–) Usage example of 100% plant-based biodegradable polymers
9 Kaneka Integrated Report 2018 Kaneka Integrated Report 2018 10 Management Strategies
Interview with the Chairman The transformation of our management system is our top priority right now.
Awareness of the times and outlook Food as a field where Kaneka can that Chairman Sugawara values as contribute by adding value an executive The second area involves problems of food. Managing a business means remaining aware When we consider the food crisis in light of of the times in which one is living and work- the need to improve lifestyles and quality of ing. My approach to be a man of action means life, we come to see it as an issue that cannot visiting the sites where innovation is being be separated from health. In January 2018, we Kimikazu Sugawara pursued in the countries of Europe, North entered into a technological alliance with Pur Chairman and Representative Director America, and Asia; talking with customers; Natur in Belgium, a company whose organic and updating my awareness of the times dairy products comprise a strong brand in accordingly. In these times of rapid change Europe. We’re working to leverage our part- and unclear direction, I value my outlook and ner’s technology and brand to raise quality worldview. I’m trying to organize my thoughts, while reducing costs. We’re planning to build ascertain what it means to live right now, and a successful business by adding our expertise practice management accordingly by means of and technology to what has long being done the current transformation of our management in the areas of dairy farming and agriculture to system. provide new value to society.
In Hokkaido, we’re already working with Contributing to the health field to dairy farmers to supply milk, high-quality help people live well butter, and functional yogurt. And we’re also working with famers to develop fertilizers that Right now, there are three areas where Kaneka will raise the productivity of crops. can make a contribution to the crises being faced by the world. The first involves problems Turning to the world, there are many chil- of health. It is becoming important for people dren starving to death, which is just an exam- to be able to enjoy healthy lives up to the age ple of food crisis. To solve it, we will work to of 100. Leading a rich and satisfying life means allow production of food even in harsh envi- being able to work no matter one’s age. ronments that are characterized by excessive heat, extreme cold, and desert-like water People and animals alike draw nutrients shortages. We will leverage the life science from what they eat to boost immunity system technologies that Kaneka has accumulated and maintain their bodies. We are working over many years to pursue initiatives that sup- to strengthen our businesses through an port life. approach to management that sees foods as a source of nutrition and uses that awareness to develop supplements, pharmaceuticals, and medical products.
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What we can do in the field of technologies, we want to convert the unlimited environment and energy on behalf of resource of sunlight into energy and supply it the future Earth at stable prices. Being a healthy company and practicing ESG management are The third area involves problems of environ- In addition, attention has been focused on ment and energy. The Earth’s population will the problem of micro-plastic pollution in the linked by the idea of how we can reach 10 billion after a few decades. If the world’s oceans. Kaneka can contribute to solve play a useful role. present state continues, we will exhaust our environmental problems by providing our bio- sources of energy. We are supplying solar degradable polymers. power systems as well as homes and prod- ucts that manage energy. We believe that the Chemistry provides technologies that sup- question of how we can effectively convert port life. We should be aware of it and would unlimited sunlight into energy and then put it like to spur innovation by developing new tech- to use will be critical. By further advancing our nologies.
What Wellness-First Management manage to provide both types of value are Design of the Housing means for Kaneka as a company that healthy companies. Future is committed to making the world a Large Domain Management Hardware Perspective healthier place [Problem] Where we are Another priority is to earn cash through our core businesses and then use that cash In FY2018, we adopted “Wellness-First Man- to conduct research and development for The 4 SUs Ambition agement” as our management policy. For us, Our Ambition new businesses so that we can transform our The 9 SVs Action Strategy Goal that concept entails a healthy way of thinking portfolio. Like living creatures, companies that about things, not just the idea of being healthy can change through metabolism are healthy. Technological Speed & Scale as individuals. We see “Wellness-First Management” as the Large Action Large Goal Innovation & Driving Force What, When, How process of growing into such a company. to complete Management System What to do Of course, employees can only do their jobs SU Vision Transformation 29th Medium-Term well if they enjoy physical and mental health. Management Plan Ⅱ We have created an internal Work Culture What lies at the heart of Change and Committee, and we’re implementing measures the transformation of Kaneka Growth to provide mental and physical care. We’re also our management system? 1-on-1 Triangle using IT to focus on jobs that only people can do, for example thinking about things, develop- The figure to the left illustrates the transfor- ing strategies, and considering the future. mation of our management system. This is Leadership that lights a fire 29th Medium-Term in peoples’ hearts Management Plan Ⅱ Our goal of transforming our portfolio What companies can gain from ■Material ■Quality of Life ■Health Care ■Nutrition Management Software Growth strategy from the viewpoint a ceaseless metabolism Implementation of the new of the Change and Growth Triangle personnel system [Kaneka 1-on-1] Growth of people and work The essence of Kaneka’s approach to ESG management lies in asking whether we’re 203.0 160.9 ( ) 306.0 ( ) 238.9 playing a useful role. It’s important to face up ( ) Work Culture innovation Sales ( ) Sales to social demands and solve them. We pursue ¥596.1 billion Make effective use time, information, and human resource ¥850.0 billion social value by continually asking whether 45.9 112.5 Maximize the productivity of the organization ( ) ( ) we’re playing a useful role as we pursue eco- 149.4 ( ) 227.5 nomic value. I believe that companies that ( )
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Accelerating the growth of ware. That is the approach behind the trans- people and the company formation of the management system that we We are supporting new challenges by through the enthusiasm of leaders introduced in 2018.
incorporating the importance of trying If the change of growth triangle is the hard- new things into our concept of Kaneka as ware, then the software is “Kaneka 1-on-1”, What is the strategy that will drive “Trial & Error experiment driven company”. which relates to people. We will reassess how Kaneka’s growth? we evaluate the work and the nature of our organization. Leaders who inspire employees One key concept in Kaneka’s growth strat- will play the central role in cultivating engage- egy is diversity. Kaneka has broad business ment and spontaneous, voluntary motivation domains, a diverse range of technologies, as we create mechanisms to facilitate personal global corporate activities, and a diverse work- growth through employees’ jobs. force. These assets urge us to create new products and launch new businesses. A sec- Since 2018, we have embraced the concept ond key concept is an approach of providing of Kaneka as “Trial & Error experiment driven solutions rather than materials only. It is not company”. Our aim has been to focus on the enough to simply supply products if we want importance of trying new things, the idea to be a solution provider. A third key concept a major priority that the management of the Continuing to ask how we should that you may find something by failing over is a focus on market needs. We must listen company is currently pursuing. In 2017, we move forward using the change and and over again. My desire to fuel employees’ to customers’ feedback and use our technol- identified four Solutions Units (SUs) as our growth triangle willingness to embrace new challenges lies ogies to propose solutions that go beyond business domains and developed a vision for behind that concept. Failure teaches success. customers’ own expectations. By giving shape each. By adopting these four SUs as a new Last year, we launched a transformation of to an approach that moves from products to framework, our goal is to remove organiza- our management system. This year, we com- In addition to four SUs and nine SVs, the solutions, our interface with customers will tional barriers in the form of SUs and Solutions piled the management transformation system company will realize a metabolism like a living become a lifeline. Finally, a fourth key concept Vehicles (SVs) as well as market barriers so into three packages: four SUs and nine SVs, creature utilizing the “change and growth trian- is the idea of starting small and growing big. that we can see things from a broader per- Kaneka 1-on-1 and the change and growth tri- gle” as hardware and “Kaneka 1-on-1” as soft- We can create numerous unique products spective. Right now, interactions between SUs angle. Our four SUs and nine SVs comprise the and SVs are leading to synergies in technolo- vessels into which our employees pour their Kaneka 1-on-1 gies, manufacturing, and markets. spirit. The perspective we need is the change and growth triangle. The framework of the Leaders who inspire employees We have also broken through barriers in medium-term plan is to identify the problems, the area of biodegradable polymers, which is decide the actions e.g., breakthrough technol- an area that’s attracting significant attention, ogy, and judge the goals, considering scale Styles based on sharing dreams by adopting an unprecedented new approach. and speed. To that end, we should place par- Connecting biochemistry to the chemistry of ticular emphasis on continually asking “Why plastic is something that only Kaneka is in a not yet?” in order to achieve the technological “Hard” style Action Plan “Soft” style unique position to do. innovation. omm n cat on th o h el ance on emplo ee n t ct on an cont ol who o ent them el e , ma e ec on , an ta e Check Do act on a tonomo l Managers Team members
Kaneka 1-on-1
15 Kaneka Integrated Report 2018 Kaneka Integrated Report 2018 16 Management Strategies
Capital investment under consideration M&As under consideration We invest about 5% of Kaneka Group Becoming a company brimming with ■ Material ■ Quality of Life ■ Health Care ■ Nutrition ■ Material ■ Quality of Life ■ Health Care ■ Nutrition sales into research and development, and that capability and energy Market Market investment will continue to grow over time ew ew along with sales. As a result of that invest- My goal is to turn Kaneka into a company e m ll on e m ll on ment, we will increase new product sales as a whose metabolism creates new products and percentage of total sales. During FY2018, that does work that plays a useful role in the world. e phe al e phe al ～ m ll on m ll on figure was around 25%, but we are striving to As teams give voice to competing opinions increase it to more than 30% in the near term. and ideas, the process will bring about flashes ～ m ll on m ll on of inspiration and innovative ideas. The old will t n t n be replaced by the new. The cash generated ～ m ll on ～ m ll on Pursuing both global and glocal as a as a result will give rise to new value, and
Technology Technology big niche company our portfolio will change. A company capa- t n e phe al ew t n e phe al ew ble of achieving this type of metabolism is a Another pair of strengths of Kaneka is the truly healthy company, and I think such health combination of global and glocal. Overseas derives from the process of change. The most sales account for more than 65% of our important thing is to turn this approach into and technologies and then combine them in invested in the Spanish company AB-Biotics, total sales, excluding businesses that serve mechanisms and to ensure that they function response to the needs of the times in order to which is developing unique products using domestic demand. To date, Kaneka has always effectively. foster their growth. I believe that this is a key lactic acid bacterium. In this way, expanding adopted a global perspective as it develops strength of Kaneka. the scale of our operations through M&As is its businesses. This thoroughgoing global per- an extremely important strategy that will serve spective is a strength. We have established a as a driver of our growth in the future. series of regional headquarters since 2012, and Searching for new potential in a today we continue to localize management. world without borders Giving shape to a world Until a little more than a decade ago, Kaneka we imagine through creative, did not emphasize M&As or open innovation. impactful technology However, markets and the flow of technology are no longer constrained by national borders. It goes without saying that pursuing the My goal is to turn Kaneka into a company In order to broaden and strengthen the com- research and development that provides the whose portfolio changes over time with pany’s business domains, we will need to try a core of our own technologies is also an import- variety of new combinations. We are working ant driver of growth. The Three Is — Impactful, the introduction of new value, like the to create solutions to society by combining Innovative, and Implementable — are import- metabolism of a living creature. technologies from outside the company with ant considerations as we invest management what we have. resources in a concentrated manner. This means we need to anticipate technologies Specifically, we have acquired technology whose scale will allow them to make a major from the Swiss company Med Alliance so that contribution to society and then implement we can manufacture balloon catheters that are them. Currently, we are strengthening our coated with a cardiovascular pharmaceutical. efforts in the life sciences and electronics, and We have also purchased a high performance we are particularly focused on regenerative composite materials business so that we can medicine and cell therapy and biopharmaceu- enter the aerospace field. Additionally, we have tical.
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R&D Strategies
Achieving sustainable growth by Key technologies and expanding and evolving a technology key drivers for the future
Regenerative medicine base through the introduction and and cell therapy Technological innovation fusion of advanced technologies Catheters and Next-generation breeding technology sustainable growth We will enhance global sourcing and open inno- iPS cells / Stem cells vation of technology as a solution provider to Drug-coated balloon develop materials with overwhelming competi- technology Drug-coated balloon catheter tiveness. We will also strengthen resource allo-
cation in the fields of life science and electronics Genome edited crop Cell separation and culturing technology to realize unique technologies with great impact, Food production pursuing themes with speed and scale. support Composite materials Microbial biopharmaceutical Biodegradable production technology plastics Fusion of Bioorganic synthesis technology
self-developed technologies with New high-performance fertilizer introduced technologies Precision polymerization technology Aircraft / Space aircraft Biodegradable polymers
Adsorption separation technology Polyimide resin OLED Lighting devices Resin foaming technology
Biotechnology Energy management
Ultra-heat-resistant polyimide film Functional film processing technology Organic EL lighting Powder granulation technology OLED device designing technology Photovoltaic modules integrated Material into roofing tiles Enhancing thermoplastic and thermosetting resin blending and processing technolo- Resin modification / blending technology gy and advancing integrated technological development from macromolecular design to processing, with macromolecular structure design and precise synthesis technolo- gies as the core, to create new materials, including biodegradable resin produced using heat-resistant composites and macromolecular and bio-technologies. Metal microfabrication technology Thermosetting resin Quality of Life Putting into practical use materials that help evolve electronics and a living environ- Compounding / processing technology ment based on the development and introduction of advanced thin-film formation Spinning technology Macromolecular technology technology, functional film processing technology and extrusion molding technology. Thin-film formation technology Health Care Self-developed Fusing newly introduced catheter-related technology with macromolecular technolo- gy, and newly introduced advanced technologies, including microbial biopharmaceuti- technologies cal production technology and regenerative medicine and cell therapy technology, with self-developed technologies to expand the technological field in a spiral manner.
Fermentation technology Nutrition Approaching nutrition from an engineering perspective by acquiring new technologies and developing innovative production technologies, in addition to existing genome editing technology and biotechnology.
19 Kaneka Integrated Report 2018 Kaneka Integrated Report 2018 20 Special Feature “Three Crises”
Earthology Chemical Solution Create a comfortable and sustainable living environment
Special PHBH. Future Prospects Feature Environment / Energy Made from biomass, such as plant oils, PHBH is first accumulated in the bodies of microorganisms Aiming to expand our business by as polymers. These polymers are processed without increasing production capacity through Food Wellness the use of organic solvents and are commercialized. aggressive investment 1 Unlike general plastics, PHBH is decomposed into Amid increasing demand for biodegradable polymers carbon dioxide (CO2) and water in the natural environ- mainly in the environmentally conscious European ment, for example, in soil or water. market, we decided to install larger production equip- ment in the Takasago Manufacturing Site. Investing Lifecycle of biopolymer PHBH 2.5 billion yen, we plan to start operating new equip- Wellness-first Global Environment P t o s ment with an annual production capacity of 5,000 P tons in December 2019. As the next step, we are con- lt at on sidering constructing a large-scale commercialization Contributing to resolving growing plant, aiming to achieve 100,000 ton-scale business in the future. We strive to contribute to a sustainable society by micro-plastic issues in the ocean by offering oce n supplying PHBH products. 100% plant-based biodegradable polymers Production capacity scheme for biodegradable polymers t o e a a le o po a le n n P st c pro ucts
Social Needs and Kaneka’s Plan Application examples of PHBH t What is micro-plastic? ti e The government and companies are t accelerating actions amid increasing concerns Micro-plastic refers to tiny plastic particles over the impact of micro-plastics on the ent ecosystem. with a diameter of under 5 mm that break Plastic products are convenient and essential in our into fine pieces while daily lives. Meanwhile, there are increasing concerns adrift in the ocean. that micro-plastics, which are floating in the oceans Checkout bag Tableware Straw without being properly disposed of, have an adverse impact on the ecosystem and human health. Amount of plastic trash flowing into the ocean These marine plastic pollution issues are accelerat- Obtained the “OK Biodegradable MARINE” ing the global movement to reduce the use of dispos- Over 8 million tons certificate able plastic products. The UK plans to ban their use annually Expanding applications as a marine material in 2019, followed by EU countries. In this situation, In November 2017, we obtained “OK Biodegradable Source: Jambeck et al. 2015 major food and beverage manufacturers and fast food MARINE” certification for PHBH. In March 2018, our chains across the world show considerable interest in biodegradable polymer PHBH was registered as a biodegradable polymers, which are environmentally “Food Contact Substance” by the U.S. Food and Drug friendly plastics. Administration. These achievements enable us to use To hand down a beautiful global environment to Kaneka Group’s Efforts it as marine materials, food packaging materials and future generations, we will contribute to resolving compost bags. We will accelerate the development environmental pollution issues caused by disposable Putting 100% plant-based biopolymers to of new biomass-based products with biodegradable plastics through the development of new materials. practical use for the first time in the world property. Since 2009, we have fully focused on developing biodegradable biopolymer PHBH derived 100% from plants. Our development was realized by fusing our original fermentation technology cultivated through many years of research on yeast and our resin blend- “OK Biodegradable MARINE” certification ing and processing technologies. This was the world’s granted by VINÇOTTE, an international certification body first industrialization of biodegradable biopolymer
21 Kaneka Integrated Report 2018 Kaneka Integrated Report 2018 22 Special Feature “Three Crises”
Earthology Chemical Solution
Solar Circuit (SC) method, combining external heat insulation Special and double ventilation techniques Feature Environment / Energy te c t Su er i ter te c t
ect hot a p o ce ect mo t e that Food Wellness ola heat ca e con en at on 2 to the o t e to the o t e nne c t nne c t
eel e e he eel wa m when open when clo e ampe ampe Wellness and a Comfortable Life
Kaneka Sustainable New Town (Front) A show house that enables the physical experience of Realizing a wellness and living in a Solar Circuit House
a comfortable life by properly Wisely using energy in a “local production for local consumption” manner creating and using energy from nature Energy generated from natural resources should be efficiently used. One of our greatest strengths is that we offer a wide lineup of materials for net zero energy Kaneka “Dreamology” Center with low-reflective solar cells houses (ZEHs).*2 installed on walls and handrails equipped with Specifically, our Solar Circuit House is a highly thin-layer see-through solar cells that transmit light Social Needs and Kaneka’s Plan Kaneka Group’s Efforts airtight, heat-insulating house that provides comfort and energy-saving performance. The entire house is From an era of energy consumption Kaneka’s technologies that expand completely covered with an insulation material called Future Prospects to an era of energy creation solar power generation possibilities Kanelite Foam, and the Solar Circuit (SC) method, To supply energy, it is necessary to ensure stable sup- Solar power generation is gaining attention as an combining external heat insulation and double venti- Proposing multiple business models, using ply, greater economic efficiency, environmental com- important renewable energy source in Japan, which lation techniques, realizes a comfortable life without diverse materials, to help resolve energy issues pliance and safety in a sustainable manner. In Japan, aims to create a low carbon society. excessive dependence on air conditioners. The development of net zero energy management there are various energy-related issues, including low How much more energy can be generated from If equipped with VISOLA, a solar-cell system built systems for houses and buildings designed with energy self-sufficiency, regional dependence in oil and incoming sunlight? To this end, we have advanced the into house tiles, the Solar Circuit House can have a focus on solar cells is reviewed globally. We will gas procurement, and greenhouse gas emissions. We development of crystalline silicon solar cells and have storage batteries and an energy management system, promote projects combining our diverse materials strive to resolve these issues by offering solar cells as achieved the world’s highest*1 cell conversion effi- so that lighting equipment and air conditioners can and multiple business models to enhance solutions to renewable energy sources and net zero energy man- ciency of 26.63% in a practical size (180 m²) cell. be used with the electricity generated during daylight global energy issues. agement system materials for houses and buildings. We are also trying to enable these solar cells to hours on sunny days, and surplus power can be sold. be placed not only on the ground and rooftops, but This can help local production for local consumption A growing number of solar cells installed globally also on other surfaces, including building walls and of energy. openings. This will provide a wider range of choices We are also committed to realizing net zero energy 2020 for creating energy. However, we face many difficul- buildings (ZEBs).*2 To promote ZEBs, it is important to ties in realizing it, as we are strictly required to meet increase the energy self-sufficiency rate by installing 591 GW requirements, including securing durability and glare a photovoltaic system in various locations, including resistance under any environmental conditions and walls, windows and roofs. We are making progress on 2030 creating designs that do not detract from the original ZEB solutions, developing photovoltaic windows and appearance. We will expand energy possibilities by photovoltaic walls (building integrated photovoltaics 1,760 GW resolutely addressing these challenges. [BIPV]).
Source: IRENA REthinking Energy 2017 *1 As of August 21, 2017, for non-concentration type crystalline *2 A net zero energy house (ZEH) or a net zero energy building “Accelerating the global energy transformation” silicon solar cells [Search by Kaneka Corporation] (ZEB) refers to a house or building that basically achieves zero net primary energy consumption (for air conditioning, hot-water supply, lighting and ventilation) annually by increas- ing heat insulating and energy saving properties and creating energy through photovoltaic systems.
23 Kaneka Integrated Report 2018 Kaneka Integrated Report 2018 24 Special Feature “Three Crises”
Active Human Life Solution Earthology Chemical Solution Supporting energetic and healthy living
Wellness-first and Comfortable Life
Special Feature Environment Offering highly functional materials to support the evolution of equipment that / Energy uses IoT and AI technologies fundamental to wellness and comfortable living Food Wellness The arrival of an IoT- and AI-based society has Responding to globally ballooning demands 3 rapidly improved the performance of digital devices and communication systems, and has Investment in production equipment brought significant changes to our work and life styles. These trends are expected to accelerate, Approx. 11 billion yen Wellness leading to a surge in the use of home sensors and the evolution of wearable terminals and devices, such as smart glasses, followed by higher complexity and greater heat generation Ultra-heat-resistant Ultra-high thermal Supporting people’s desire for ongoing and densification in communication design. Polyimide film conductivity To respond to these market changes, we Graphite sheet wellness and fulfilling lives through have focused on heat- and cold-resistant poly- Annual production Annual production capacity capacity imide film and polyimide-based graphite sheet with three times the thermal conductivity of Approx. 30% About three Kaneka’s technologies and businesses increase times increase copper, and have established an integrated production system for these materials. This enables us to quickly develop products tailored to customer needs. We will continue to support equipment that Social Needs and Kaneka’s Plan Kaneka Group’s Efforts serves as infrastructure for more comfortable lives. Supporting wellness by combining food and Promoting sustainable dairy farming to create * Scheduled to operate in the spring of 2019 medicine in the era of 100-year lives high-value-added dairy products The era of 100-year lives is said to come in the near A good diet is one of the means for people to main- ■ Expanding polyimide-related market future. The key to living a productive life depends tain and improve their health. We aim to contribute on wellness, which forms the basis of all activities. to wellness by offering food eaten on a daily basis, ～ While the population is aging in Japan and the world, including dairy products. the use of big data is becoming more common, and However, Japan’s dairy farming faces a difficult u icati e ice Increase in the Next-generation Mobile IoT / Trillion Sensors AI and robot technologies are rapidly evolving. In this environment due to the lack of successors and labor, Se r Number of Devices Communication “5G” situation, the healthcare-related business environment and accelerated retirement from farming. We are pro- is undergoing significant changes, having an enor- moting sustainable dairy farming, considering attrac- High-brightness, Thin, AR/VR r ati tru e t i pla Smart Glass Market mous impact on social needs. There are expectations tive dairy farming together with dairy farmers, as our and Smart Displays for the progress of advanced medical treatment and business development philosophy. extended healthy life expectancies, while it is impera- Based on our food production support activities, ut ile Automotive Panels / Sensors Power Module Output Capability tive to curb medical expenses. we help increase productivity in dairy farming and Under these circumstances, we have contributed improve the farming work environment. to people’s wellness mainly in therapeutic areas, To ensure that dairy products gain a high reputation e Smart Home Appliances / Surge in the Use of Home Sensors offering pharmaceutical bulk and intermediates and in the market, it is essential to develop high-quality pplia ce Robots endovascular therapy catheters. We aim to further products, pursuing good taste. Accordingly, in January crea e ra e applicati contribute to people’s healthy lives by offering inno- 2018, we established a technical tie-up with Pur Natur Full-fledged Countermeasures against er e ice er pace Fiel Sic / GaN Chips vative solutions for medical treatment and disease Invest BVBA (“Pur Natur”), a Belgian company mar- Heat in Aerospace Applications prevention and prognosis through a unified approach keting its organic dairy products in European coun- to food and medicine with a focus on chemistry. tries with high technical capabilities. By integrating
25 Kaneka Integrated Report 2018 Kaneka Integrated Report 2018 26 Special Feature “Three Crises”
Active Human Life Solution
Kaneka’s ideal model for circular dairy farming management ■ to bring benefits to our lives. Future Prospects Dairy farmers in Hokkaido * Probiotics: Live microbial community and foods containing live Aiming to expand food- and wellness-related microbial community, giving beneficial effects to the human businesses ● Support to dairy farmers body by improving the intestinal environment and controlling ● Working together to promote attractive dairy farming For the dairy products business, we plan to bring intestinal function and the immune system Productivity enhancement, work environment improvement, yogurt and other dairy products to the market. In addi- environmentally friendly dairy farming management tion, the construction of a full-fledged dairy products Contributing to QOL improvement manufacturing factory in Hokkaido is under consider- Kaneka Group in patients from the disease prevention ation, aiming to achieve net sales of 20 billion yen in to the prognosis stage five years’ time. (B to B) For business use (B to B to C) For household use While working on disease prevention through wellness Considering that organic dairy farming is ideal for Technical tie-up Fermented butter Milk, yogurt, butter, cheese, etc. promotion, we are expanding the scope of our contri- circular dairy farming management, we will work to bution by offering various solutions to cover patients expand the domestic organic dairy products market Pur Natur Sales and support activities Sales and at the prognosis stage after treatment. in cooperation with a Belgian dairy farmer group and support activities In the case of mastectomy due to breast cancer, domestic related research institutes. Invest BVBA (including sales support efforts) Sweets CVS sales channels most patients undergo breast reconstruction to relieve For the lactic acid business, we aim to accomplish Bakery (High-class supermarkets, etc.) Bakery their emotional distress and inconvenience. sales of 10 billion yen in five years’ time by gradu- In our technology for regenerative medicine and ally launching products combining ABB’s probiotics Communication activities cell therapy, adipose-derived stem cells, which are products with our functional food materials and dairy Consumers separated from fat sucked out of a patient’s abdom- products in developing markets. inal or femoral region, are mixed with the extracted For the entire healthcare business, we aggres- fat again and are injected into the patient by syringe. sively incorporate advanced technologies while This method attains a higher retention rate of fat than strengthening resource allocation in the life science conventional fat transfer. It is also expected to safely field, pursuing themes with speed and scale. In high-quality raw milk from Hokkaido with Pur Natur’s Power of lactic acid bacteria reconstruct breasts closely to their former shapes 2017, to significantly expand our biopharmaceutical unique manufacturing method, we will offer with much potential because it uses the patient’s own stem cells. It can production capacity, we made capital investment of high-quality and delicious milk to meet the growing Lactic acid bacteria have been drawing attention also tremendously reduce the amount of collected approximately 5 billion yen in Kaneka Eurogentec S.A., need for organic products. for their effects on growth and the immune system adipose-derived stem cells by culturing them using our group company, aiming to increase its production as well as new effects to allergic symptoms and our unique technology. capacity four-fold by 2020. infectious diseases. The market size of health food We believe that our technology not only reduces Thus, we will pursue our businesses from multiple using lactic acid bacteria exceeds $2 billion in North the physical burden of treatment, but also enables angles to ensure that people live healthy and fulfilling America. In Japan, market demand is expected to rise patients to resume a normal life after treatment, lives. higher than ever. ensuring a high QOL. In March 2018, we acquired AB-Biotics, S. A. Support from the disease prevention to the prognosis stage (“ABB”), a Spanish company specializing in lactic acid bacteria, concluding a license agreement that Reduction of the risk Early detection through grants us exclusive rights for production and sales of of developing disease advanced examination ABB’s products in North America (U.S. and Canada) techniques and diagnosis For instance, For instance, and Japan. ABB possesses advanced R&D capability, reduced coenzyme Q10 gene detection kits Milk for Bread Fermented butter with more than 550 original probiotics* strains from human healthy intestinal samples. ABB sells a wide Disease prevention Examination range of clinically documented probiotics products, Wellness Diagnosis promotion which improve the intestinal environment and have clear effects to decrease the risk of cardiovascular, periodontal and infectious diseases, to health food and pharmaceutical companies worldwide. Prognosis Treatment Meanwhile, we have been expanding our functional food business globally, including the marketing of For instance, For instance, reduced coenzyme Q10 (Kaneka QH) and other func- regenerative medicine and drug-coated balloon catheters cell therapy (breast reconstruction) Lactic acid bacteria tional food materials fully supported by evidence data regarding their safety and beneficial effects to humans. QOL improvement in Reduction of treatment daily life after treatment burden on patients Capitalizing on the two companies’ strengths, we will further exploit the potential of lactic acid bacteria
27 Kaneka Integrated Report 2018 Kaneka Integrated Report 2018 28 Business Foundation
List of Directors Corporate Governance
Basic Policy
Guided by our Corporate Philosophy, we at Kaneka citizens, we will conduct our business activities while aim to achieve sustainable growth and improve cor- respecting all stakeholders. porate value in the medium to long term. As good
Diagram of Corporate Governance System
Kimikazu Sugawara Mamoru Kadokura Minoru Tanaka Chairman of the Board President Executive Vice President ene al eet n o ha ehol e (Representative Director) (Representative Director) (Representative Director) ppo ntment Chair of Board epo t Independent External of Directors Director’s Meeting ppo ntment
epo t Appointment and Board of Directors Remuneration Advisory Committee
Shinichiro Kametaka Shinobu Ishihara Akira Iwazawa Hidesuke Amachi ppo ntment Member of the Board Member of the Board Member of the Board Member of the Board Senior Managing Executive Senior Managing Executive Managing Executive Officer Managing Executive Officer President Officer Officer t Manegement Board of Committee Auditors
oope at on ESG Committee oope at on
nte nal t, Kazuhiko Fujii Yasuaki Nuri Takeo Inokuchi Mamoru Mohri Divisions including nte nal ont ol Internal Control Member of the Board Member of the Board Independent Member of Independent Member of Operation Production, R&D, al at on cco nt n t Accounting Division, Managing Executive Officer Managing Executive Officer the Board the Board General Administration; Auditor ESG Department and Group Company
Audit & Supervisory Board Members Managing Executive Officers Executive Officers * Since FY 2018 when Kaneka launched the ESG management initiatives, the term “CSR” we conventionally used has been replaced by “ESG.”
Hideyuki Matsui Atsushi Kawakatsu Yoshiki Takeoka Haruhiko Maki Masahiro Ueda Masami Kishine Ikuo Aoi Katsunobu Doro Riichi Nishimura Takuo Ishibashi Hiroshi Fujiwara (Outside) Fuminori Hoya Jun Enoki Kan Okabe Shinji Mizusawa Yasuhiro Uozumi (Outside) Masaaki Kimura Yasuhiro Sumi Toshio Komori Kazuo Ochiai Takamune Yasuda Minetoshi Marufuji Hitoshi Yahara Yasuyoshi Ueda
29 Kaneka Integrated Report 2018 Kaneka Integrated Report 2018 30 Business Foundation
Corporate Governance
Corporate Governance Structure Auditors and the Board of Auditors Standards for Independence of Our Efforts to Strengthen the Governance Capacity External Directors/Audit & Supervisory Auditors and the Board of Auditors, on behalf of the ● Introduced the executive officer system Organizational Design shareholders, seek to ensure healthy and sustainable Board Members ● Changed the number of directors from 21 to 13 We currently have two independent external directors corporate growth and to establish a structure with 2006 ● Formulated the Basic Policy on and two independent external auditors. Since both good corporate governance that can gain social trust We have defined the Standards for Independence Internal Control System the overseeing of business operations by the Board by checking on the performance of directors in regard of External Directors/Audit & Supervisory Board of Directors and auditing by the Board of Auditors are to their duties. The Board of Auditors comprises four Members to guarantee the independence of indepen- 2011 ● Appointed an outside director
functioning well, Kaneka has chosen to be a Company members, two of whom are independent external dent external directors and auditors in practice. The ● Formulated the Criteria for Independence of 2013 with Board of Auditors under the Companies Act. auditors in principle, and performs audits in coor- standards are disclosed in our corporate governance Outside Directors dination with the Accounting Auditor and the ESG report, etc. ● Increased the number of outside directors Directors and the Board of Directors Department Internal Control Division’s. Auditors are from 1 to 2 The Board of Directors, on behalf of the shareholders, given space to periodically exchange views with the ● Formulated the Basic Policy on seeks to ensure efficient and effective corporate gov- president, and monitor the state of business opera- Selection Criteria for Directors Corporate Governance ernance in order to realize the company’s sustainable tions when necessary, by attending key meetings of 2015 ● Established the Appointment and growth and increase corporate value in the medium the Board of Directors and those of the Management At Kaneka, directors are selected by the Board of Remuneration Advisory Committee
to long term. The Board of Directors exercises its Committee, which decides on the implementation of Directors, on the basis of character, judgment, exper- ● Established the Independent oversight functions on overall management to ensure important matters, as well as division head meetings. tise and experience as well as ethics without limita- Outside Officers Meeting fairness and transparency, as well as to appoint man- tions on gender, age, nationality and other attributes, ● Commenced the effectiveness evaluation on the Ad Hoc Committees 2016 agement positions, evaluate and determine remuner- after deliberation by the Appointment and Remuner- Board of Directors ation, evaluate serious risks and determine strategies Independent external directors meetings are held, and ation Advisory Committee, which is comprised of to counter them, and make the best decisions on an appointment and remuneration advisory committee representative directors and independent external important business operations. The Board of Directors will be created as an ad hoc committee. directors. makes resolutions on important matters related to the management of the Kaneka Group after delibera- Implementation of Business Operations tion by the Management Committee, which includes Kaneka has adopted the executive officer system Analysis and Evaluation of Effectiveness the president. There are at most 13 members on the to separate the oversight function of directors from of the Board of Directors Board of Directors. Of these, two are independent the implementation function of business operations, external directors to strengthen the oversight func- which also facilitates decision-making and clearly Kaneka regularly implements an analysis and evalu- tion. Directors serve for a period of one year to clearly defines roles. The Board of Directors decides on key ation of the effectiveness of the Board of Directors, define management responsibilities. management strategies and business operations of and discloses a summary of the evaluation results. the entire Kaneka Group, while executive officers Specifically, the Chair of Board of Directors periodi- handle business operations in their respective areas cally receives reports from the Independent External of responsibility. While division heads, including exec- Director’s Meeting and opinions from the internal utive officers appointed by the Board of Directors, are directors. Based on these reports, the current status given extensive authority over daily business execu- of operations of the Board is evaluated. In this fiscal tion, directors are responsible for specific divisions year’s evaluation process, the Independent External and oversee the business execution in their respec- Director’s Meeting held discussions focusing on the tive divisions. Monthly division head meetings are operation of the Board of Directors (number of meet- held to enable the directors and auditors to directly ings held, frequency, length, contents of information hear progress reports from each division head. The provided beforehand, contents of agendas, delibera- Internal Control Division of the ESG Department tions, etc.), role of external directors, and risk man- evaluates the effectiveness of internal control and agement. Based on the discussion results, the Board conducts an internal audit. of Directors conducted a self-evaluation. As a result, it has been confirmed that the Board of Directors functions effectively in making decisions on important matters for the Group such as risk management and supervising business execution. We will continue to enhance the effectiveness of our Board of Directors through effectiveness evaluations.
31 Kaneka Integrated Report 2018 Kaneka Integrated Report 2018 32 Business Foundation
Business Risks and Uncertainties Compliance
Basic Policy Strengthening of Information Security Basic Policy Internal Audits and Establishment of Consultation Hotlines Our basic risk management policy is that each division Kaneka Group has established a Basic Information Viewing compliance as an important management identifies operational risks and other types of risks Management Policy, and works to disseminate it to issue, we implement various initiatives to ensure all ESG evaluation audits were carried out for all Group that it may face, takes appropriate preventive mea- all employees, thereby ensuring appropriate manage- directors and employees comply with all applicable companies in Japan, the U.S. and Europe. Going sures, and responds appropriately in cooperation with ment of information. laws and regulations. forward, Group companies outside Japan will be other relevant divisions if a risk manifests itself. included as well. Basic Information Management Policy For preventive measures against potential risks We have also set up compliance consultation including those related to ethics and legal compliance, Compliance Awareness Raising hotlines both internally and with outside law firms 1. Observance of laws/regulations and rules the Compliance Subcommittee of the ESG Committee The trust and confidence of society and customers is the most in order to answer inquiries from those within the oversees the development and implementation of the precious asset the Group must protect. Our corporate Intranet provides ready access to Group. We strive to respond quickly to provide a rapid Complying with laws and regulations, social norms, and internal company-wide plans. regulations/procedures is the basic principle that all individuals our Compliance Guidebook, which provides a clear resolution to any concerns that may arise. When a risk occurs or is likely to occur, the Risk engaged in business activities should follow. explanation of our Ethical Code of Conduct as well Management Committee handles the risk in coopera- 2. Protection of confidential information as the laws and regulations to be observed by all of tion with the relevant divisions. Confidential information concerning manufacturing processes, our directors and employees. Additionally, a variety of research, sales, etc. is the source of the Group’s competitiveness. We regularly check whether the above-mentioned All individuals engaged in business activities must be fully aware training sessions and meetings, and activities of the activities are implemented properly to prevent our risk of this, and must not leak such information or use it for illicit Compliance Subcommittee ensure that we strictly purposes. In particular, data requiring strict handling, such as management system from falling into mere formality, personal information and information entrusted as confidential adhere to our compliance policies. and strive to maintain and improve its effectiveness. from other entities, must be identified as such and managed strictly by the person in charge of information management at each company. Self-Check in Training Session 3. Establishment of systems/structures Business-Related Risks In order to sustain and expand the Group’s business, it is essential to make effective use of information and increase the The compliance online course for all employees, efficiency of business operations. Factors that may significantly affect the performance In addition to establishing rules regarding information security launched in 2014, was expanded to include Group com- and the financial position of the Kaneka Group include and continuing to improve information systems to ensure safe, panies in Japan in 2016; a total of 5,042 participants A compliance training session those described below. effective use of information, the persons responsible for infor- from 43 companies have participated since 2014. mation management should be determined to ensure appropri- Please note that the matters described are only ate information management. Training sessions on the Antimonopoly Act are those that we considered risks as of March 31, 2018 4. Implementation of training and awareness-raising programs conducted regularly with all of managerial officers and that this is not an exhaustive list of risks borne by With the strengthening of Group management and increased from the Kaneka and Group companies in Japan who use of external resources, people with diverse values and ethics the Group. are involved in Kaneka’s business operations. are involved in sales, purchasing, and business devel- To ensure smooth cooperation with these members, efforts opment, all of whom are required to submit a pledge. 1. Risks related to the Group’s ability to maintain should be made to raise awareness of information security risks and to enhance and continue training on information security operational advantages and trends in the Japanese including ethical aspects. and overseas economic environments 2. Risks associated with the globalization of our business (fluctuations in foreign exchange rates and To protect its information assets from risks including overseas business development) cyberattacks, Kaneka Group continues striving to enhance security levels, by utilizing the knowledge of 3. Risks of price fluctuations of raw materials and fuels external experts. 4. Risks associated with product liability, To increase employees’ industrial accidents and large scale disasters awareness and sensitivity toward prevention of risks 5. Risks associated with the protection of such as leakage, falsification intellectual property rights and illicit use of information, 6. Impact of environment related regulations we issued the “Information 7. Risks associated with legal action Security Guidebook” in 2006. We work to raise employee 8. Other risks awareness and understanding of information security, through See the Financial Section for more details various measures such as reg- ular hierarchical training, audits, Information Security and e-learning courses. Guidebook
33 Kaneka Integrated Report 2018 Kaneka Integrated Report 2018 34 Business Foundation
Intellectual Property ESG Promotion System
Basic Policy infringing on our trademark rights, and had them con- Basic Policy Diagram of ESG Promotion System fiscated with the cooperation of Chinese and French Kaneka has established the Intellectual Property customs. In June 2018, Kaneka Group established the ESG Char- ESG Committee ana ement (Chairperson: Executive Vice President) Department as an organization directly under the ter to evolve its ESG management. Aiming to provide President to secure rights for our R&D results as a valuable solutions globally with a focus on chemistry, form of intellectual property, such as patents, thereby Number of Patents Held the ESG Charter serves as an action agenda for each protecting our products from being imitated. employee to materialize our Corporate Philosophy. ESG Steering Committee The Intellectual Property Department formulates In reflection of our efforts to increase the patent and implements intellectual property strategies, includ- registration ratio and to strengthen our foreign patent Compliance Subcommittee ing the establishment of a patent application portfolio, portfolio, which have been reinforced since FY 2011, a ESG Promotion System oc e on co po ate eth c an compl ance in cooperation with the business and R&D divisions. large number of patents relating to Organic EL (OEL) We also have various in-house patent incentive lighting panels, solar cells, medical devices, expand- The ESG Committee and the ESG Steering Committee Safety & Human Health Subcommittee programs, including an incentive program for patent able plastics, etc. were registered in Japan. Mean- promote Group-wide ESG activities in line with the oc e on occ pat onal a et , p oce a et an a te applications, a patent master incentive program for while, many patents relating to modified silicone liquid ESG Charter. p e ent on a oc ate w th p o ct on an technolo cal act t e the acquisition of a certain number of registered polymers, solar cells, graphite sheets, biodegradable The ESG Committee leads the Group’s efforts in patents, and an incentive program for overseas patent polymers, etc. were registered overseas. addressing environmental, social and governance Earth Environment Subcommittee registration. We actively create intellectual property by Consequently, the number of patents held by the issues. The Committee also inspects and evaluates ont te to eal n a ta na le oc et ett n an p n a c pol c e an oal elate to the lo al en onment increasing application incentives for employees. Group increased both in Japan and overseas, with the implementation status of the activities of each Moreover, we respect the intellectual property domestic and foreign patents totaling 3,491 and Subcommittee, shares information about key issues, rights of other companies and, to avoid disputes, are 3,386, respectively as of the end of fiscal 2017. and determines the direction of the necessary man- Product Safety Subcommittee e ee p o ct a et an al t a ance sure to conduct patent searches and secure patent agement measures. Number of National Patents Held clearance at each phase of business development In fiscal 2017, the ESG Committee met once, and including theme proposal, commercialization and m e ） the four Subcommittees (Safety and Human Health, specification changes. , Earth Environment, Product Safety, and Compliance ESG Inspections , Subcommittees) met once each. The ESG Steering Committee discusses important To inspect the legal and regulatory compliance status Establishment of Patent Portfolio and , matters related to ESG management from a compa- of the Kaneka Group and to improve its occupational Execution of Patent Rights , ny-wide perspective to promote the ESG Committee’s safety and health performance, ESG inspections are activities effectively. carried out, comprising ESG safety and quality inspec- In fiscal 2017, we acquired patent rights for a manufac- , tions and ESG evaluation audits. turing method of flame-retardant expandable styrene; , In fiscal 2017, we conducted ESG safety and qual- thermal storage materials capable of maintaining a ity inspections at all parent Manufacturing Sites, 14 , predetermined temperature above 0°C, for storage sites of 13 Group companies in Japan, and four sites and transportation applications; roll-in margarine that of four Group companies outside Japan, focusing on provides a low-trans-fatty-acid content but has supe- their material risk management status and change cal ea rior formability and texture; and new lactic acid bac- management status (multifaceted evaluation and teria that have the functions of resisting fatigue and Number of Foreign Patents Held effectiveness evaluation). We also conducted ESG improving blood circulation. evaluation audits relating to competition laws, includ- m e ） Biodegradable polymer has superior biodegrad- ing the Antimonopoly Act, for all business operations , ability in the marine environment, and patents for divisions, 26 Group companies in Japan, and five resin compositions with superior moldability were , outside Japan. registered in Japan, the United States, and Europe. From fiscal 2018, we conduct ESG safety and , In the United States, a patent was registered for a quality inspections and ESG evaluation audits on a protein medicine that is effective for kidney disease , continuous basis.
that frequently affects cats kept as pets. In Japan, a , patent was registered for simple formation of cellu- lar aggregates that will contribute to the large-scale ,
suspension culturing of iPS cells. , In Europe, based on the patent right for reduced form coenzyme Q10, we issued warnings to infringing
products and had them excluded from the market. For cal ea artificial hair-related products, we detected products
35 Kaneka Integrated Report 2018 Kaneka Integrated Report 2018 36 Business Foundation
Environment
Basic Policy Initiatives to Reduce CO2 Emissions Pollution Control
In keeping with our ESG Charter, we at the Kaneka Committee. Meanwhile, issues on global environment We are undertaking efforts to address climate change, Kaneka engages in production activities in compliance Group will contribute to realizing sustainable devel- protection are shared and further discussed at the with the Earth Environment Subcommittee estab- with the standards specified in the Air Pollution Con- opment and the enrichment of society by conserving management meeting, the plant management meet- lished under the ESG Committee. We are working to trol Act and the Water Pollution Control Act as well as resources and reducing environmental impacts at ing, and other meetings. The medium-term manage- promote energy-efficient use to reduce CO2 emissions the criteria included in agreements made with local each stage of the entire product lifecycle. ment plan also focuses on strengthening initiatives on through various measures, for example by utilizing our governments. We will continue to thoroughly comply Important matters pertaining to the protection important matters to further improve our ESG man- own environmental capital investment program. with these standards and criteria. of the global environment are decided by the ESG agement. ● Our carbon intensity*1 was 91.5, which reached the company’s goal. Biodiversity Conservation Eco-Friendly Products ● Our energy intensity*2 decreased by 0.2% year- on-year. Although this did not reach our goal (a Considering the impacts of our businesses on ecosys- Kaneka Groups is engaged in various environmental friendly products*. decrease of 1.0% year-on-year), we achieved our tems, we at Kaneka strive to develop technologies, initiatives. * Products that can contribute to reducing global environmental impacts at the goal of a decrease of 2.1% in a five-year average materials and products that have less environmental stages of customer use, disposal and recycling, compared to conventional Focusing on eco-friendly management from fiscal products rate of change. Since the start of the Business impacts, as well as to mitigate environmental impacts 2017, we will define, enhance, and expand our eco- Operator Classification Assessment System under of our production. the Energy Saving Act, we have maintained the As part of our corporate S-Class position (a business operator excellent social responsibility efforts, Energy Creation Energy Storage Energy Saving Energy Saving Waste Reduction Clearing Agents for in saving energy) for four consecutive years. We we also collaborate with Chemical Pollutants will work to streamline our production processes stakeholders outside the through innovation to reduce CO2 emissions. company in biodiversity con-
*1 A ratio of energy-origin CO2 emissions per unit of output of a product servation activities. *2 A general indicator of energy consumption which assesses production efficiency based on the energy requirements to produce a unit of output An adult firefly observed in the biotope at the Osaka Manufacturing Site Product name Product name Product name Product name Product name Product name VISOLA Residential electricity Kanepearl Eperan PHBH KANEKA Surfactin Promotion of 3R Initiatives SoltileX storage systems Intended use Intended use Intended use Intended use GRANSOLA (Reduce, Reuse and Recycle) Intended use Residential/ Automotive parts Biodegradable Biosurfactant, Intended use Residential stationary automotive foams Package cushioning polymers Cleaning agents Solar power batteries materials (Packaging materials, We at the Kaneka Group promote the 3Rs to pro- Reason for Reason for generation systems garbage bags, foams) tect the global environment through efforts to save Reason for environmental Reason for environmental Reason for environmental contribution environmental Reason for contribution resources and reduce CO2 emissions, and other environmental contribution Saving energy as insu- contribution environmental A naturally derived and means. Regarding waste produced by the Kaneka contribution lation and lightweight contribution biodegradable material Storing energy by houses Saving energy as light- Group, we conduct 3R activities mainly at the stage of Creating energy with equipped with this residential/automotive weight automotive parts A naturally derived and friendly to the environ- houses equipped with product materials biodegradable polymers ment production. We also facilitate continuous improvement this product that has little environ- activities through process analysis with the Material mental impact when discarded Flow Cost Accounting (MFCA) approach.
37 Kaneka Integrated Report 2018 Kaneka Integrated Report 2018 38 Business Foundation
Safety
Occupational Safety, Process Safety and Disaster Prevention Product Responsibility
Placing the top priority for management on safety, The Product Safety Subcommittee under the ESG Chemical Substance Management we have established the Basic Policy on Safety, under Basic Safety Policies Committee and its implementation bodies, namely the which all employees as well as all persons working at Product Safety Review Conference and Quality Man- Internationally, regulatory systems are becoming ● Safety forms our management foundation, the Kaneka Group and our partner companies aim for and is the basis of all corporate activities. agement Conference, are responsible for all matters more stringent in order to achieve appropriate man- no accidents and no disasters. We take action with priority given to ensuring safety in relating to product safety and quality assurance within agement of chemical substances related to consumer To share the importance of safety, members of top all activities in the company. the Kaneka Group. products. We strictly follow Japanese and interna- management inspect plants to check the on-site situa- tional laws and regulations, and also actively offer tion and create an opportunity to talk with employees. ● Safety is the foundation of local and world- information for the proper handling of our products, Through our safety-related efforts, the actual safety wide communities’ confidence in Kaneka. Quality Management through displaying the Globally Harmonized System of situation is checked by the Safety and Human Health We do our best to develop their trust. Classification and Labelling of Chemicals (GHS) labels Subcommittee to clarify important matters related to We at the Kaneka Group strive to benefit society and and providing a safety data sheet for products. ● Safety is based on our belief that safety that should be addressed in the following fiscal satisfy our customers, through providing a stable “All accidents can be prevented.” year, which are finally decided by the ESG Committee. supply of safe and reliable products. To that end, we In 2017, we worked on (1) boosting personal safety We always move forward without being satisfied with undertake quality management activities to ensure lukewarm results. awareness, (2) enhancing employees’ professional the safety and quality of our products at all stages of
skills and (3) building systems needed to ensure ● Safety is the responsibility of every design, development, manufacturing and sales. safety as important matters. employee in accordance with his/her duties. We will work to achieve no-accident and no-disaster We fulfill our responsibilities by mutually clarifying the In fiscal 2017, related activities included the following: operations by determining the real causes of individual duties we have assumed. ● We examined the certification status of inspectors accidents and disasters, making employees thoroughly and confirmed that there were no problems. aware of basic actions, implementing risk assessment, ● Safety must be maintained continuously. ● We reorganized the existing Quality Assurance Pro- instructing employees to make preoperative risk We ensure safety through steady efforts on a daily moters Conference to comprise persons in charge predictions, and sharing information on accidents basis. of quality management in each business division, and disasters. and operated the Quality Management conference under the new structure. ● We undertook a range of activities to build the Mental Health Care capacity of our employees, including through out- side seminars and in-house lectures by external Mental health care activity is necessary to maintain experts. employees’ mental health. In addition to provid- ● We continued to provide employees in the business ing care to those with high stress levels, identified and research divisions with e-learning regarding through stress checks (which were introduced in quality control as part of strengthening the founda- 2016), we launched efforts to improve the workplace tion of quality management. environment based on the stress check results. Such efforts involve conducting stress check group analysis for each workplace, identifying problems based on the analysis results, and working to solve the identified problems.
39 Kaneka Integrated Report 2018 Kaneka Integrated Report 2018 40 Business Foundation
Job Satisfaction Development of Leaders As part of our efforts to develop leaders who will drive Hitotsubu-no Tane Momi Juku and Kaneka Creative reform and growth, we enhanced our training pro- Corner for next-generation leaders, and the Leader- Human Resource Development through Kaneka 1-on-1 —Promoting Growth through Dialogue— grams that focus on early development of leaders and ship Challenge Workshop for current leaders. We also management personnel. In fiscal 2017, with the aim continued to implement job rotation by enhancing Amid the arrival of the age of change, our corporate Specifically, the system requires managers and of developing leadership skills and awareness among cooperation between the human resource department mission is to overcome all of our issues and grow team members to dialogue (communicate) with each personnel both in and outside Japan, we held and other divisions. flexibly. other twice a month, with the aim of strengthening Kaneka is naturally a human-driven company. Con- the relationship between them through dialogue sidering that the results and value of work are gen- (communication) and to encourage subordinates to erated on-site, we focus on developing employees’ behave autonomously and voluntarily by stimulating abilities under the idea that it is people who identify their spontaneous motivation. issues and resolve them. Believing that the age of It also aims to accelerate the employees’ ability Diversity change offers a great opportunity for people to show development and human resource development in outstanding performance, we have started a new and general by shortening the PDCA cycle through regular extremely unique personnel system that grew out of dialogue and to promote efficient and effective opera- Active Promotion of Female Employees Hiring and Support of Employees with the old one. tions by flexibly modifying the subsequent strategies Various Nationalities The core concept of the new personnel system for achieving goals. On April 1, 2018, under the “Stand Close Together” is to promote employees’ goal attainment and ability To operate “Kaneka 1-on-1” in accordance with its strategy, we set up a project that spanned the entire Of approximately 10,000 employees of the Kaneka development by making them face their issues head-on aims, we hold workshops to help employees under- company solely consisting of female members. Its Group, there are over 2,500 employees with foreign through frequent dialogue between managers and stand its purposes as well as training sessions that activities have been initiated to expand Kaneka’s nationalities engaged in operations worldwide. In team members and to shift to a new way of working enable them to acquire coaching skills on a continu- business and increase its corporate value and brand overseas group companies, some of them are working that grows people and their work for a lifetime. ous basis. power. in top management. As in the last fiscal year, in fiscal 2018 we have In the Kaneka Corporation, there are more than 40 focused on the themes contained in the Action Plan, employees with foreign nationalities. In order for them which was developed based on the Act on Promotion to quickly become accustomed to the workplace and Managers Team members of Women’s Participation and Advancement in the play an active role, we offer them continuous support, Workplace. The Career Consultation Desk is held at including Japanese language training. Action Plan three sites for women to brush up their career image. To promote the appointment of female managers, Check Do we create personalized training plans for candidates Employment of Persons with Disabilities and provide support for them on a continuing basis. Regarding recruitment, the employment rate of female The employment rate for persons with disabilities students who graduated from technical colleges and in fiscal 2017 reached 2.19%, achieving the legally Purpose Think and act for ourselves and take on challenges from a higher and broader perspective universities in fiscal 2018 was approximately 32%. mandated employment rate (2.0%). We will continue While creating a women-friendly company envi- to actively employ persons with disabilities and sup- Consciousness Dialogue ronment, we will continue our active efforts to hire port employment efforts by our group companies by
● Fostering an understanding of Kaneka’s corporate policies and mission ● Sharing the progress toward growing and achieving goals women and build their capacity. expanding the range of occupational opportunities and ● Flexibly reviewing initiatives according to environmental changes ● Sharing the good results produced by members and their plus points creating a welcoming workplace. ● Promoting challenging actions for achieving goals ● Sharing worries and issues faced by members to grow and achieve goals ● Accelerating human resource development ● Sharing the direction and specific actions toward members’ growth ● Promoting ability development and goal achievement Employment of Senior Citizens
In light of the Amended Act on Stabilization of Employment of Elderly Persons, which took effect in Work Culture Innovation April 2013, we revised our system for senior contract employees to accommodate those who wish to con- To maximize the productivity of the organization Committee. The Committee reviews how regular large tinue their employment up to age 65. through effective use of time, information and meetings should be conducted, to make meetings a In fiscal 2017, we conducted career design training human resources, which are precious management place of proposals and decisions. for 50- and 55-year-old employees, to encourage them resources, we have established the Work Culture to see their retirement from the company at age 60 as a turning point where they can take up new work with enthusiasm.
41 Kaneka Integrated Report 2018 Kaneka Integrated Report 2018 42 Appendices
Consolidated Financial Statements Consolidated Balance Sheets KANEKA CORPORATION AND CONSOLIDATED SUBSIDIARIES March 31, 2018 and 2017 Thousands of Thousands of Millions of yen U.S. dollars Millions of yen U.S. dollars Assets 2018 2017 2018 Liabilities and net assets 2018 2017 2018 Current assets: Current liabilities: Cash and cash equivalents ¥ 47,414 ¥ 41,018 $ 446,291 Short-term loans payable ¥ 50,356 ¥ 42,889 $ 473,983 Notes and accounts receivable - trade Current portion of long-term loans payable 9,298 9,405 87,519 Unconsolidated subsidiaries and affiliates 795 760 7,483 Notes and accounts payable: Other 141,400 124,722 1,330,949 Trade 84,914 73,058 799,266 Inventories 104,215 96,749 980,939 Construction 8,373 7,418 78,812 Short-term loans receivable from unconsolidated subsidiaries and affiliates 1,735 1,672 16,331 Other 18,971 15,016 178,567 Deferred tax assets 5,639 5,871 53,078 Income taxes payable 4,481 3,391 42,178 Other current assets 11,684 10,001 109,978 Accrued expenses 13,514 13,475 127,203 Allowance for doubtful accounts (973) (354) (9,159) Other current liabilities 4,975 4,350 46,828 Total current assets 311,909 280,439 2,935,890 Total current liabilities 194,882 169,002 1,834,356
Noncurrent liabilities: Bonds payable 10,000 10,000 94,127 Property, plant and equipment: Long-term loans payable 45,848 50,336 431,551 Land 32,545 31,072 306,335 Net defined benefit liability 37,325 37,310 351,327 Buildings and structures 194,565 183,089 1,831,372 Provision for directors’ retirement benefits 297 319 2,796 Machinery, equipment and vehicles 564,428 546,146 5,312,764 Deferred tax liabilities 2,670 2,099 25,132 Construction in progress 12,712 13,431 119,654 Other noncurrent liabilities 3,389 2,283 31,899 Other 3,728 3,620 35,090 Total noncurrent liabilities 99,529 102,347 936,832 807,978 777,358 7,605,215 Less accumulated depreciation 570,503 551,814 5,369,946 Property, plant and equipment, net 237,475 225,544 2,235,269 Contingent liabilities
Net assets Shareholders’ equity: Intangible assets: 9,892 10,252 93,110 Capital stock Authorized—750,000,000 shares Issued —350,000,000 shares 33,047 33,047 311,060 Investments and other assets: Capital surplus 32,799 32,813 308,726 Investment securities: Retained earnings 264,964 248,524 2,494,013 Unconsolidated subsidiaries and affiliates 5,514 4,035 51,901 Less treasury stock, at cost—22,284,691 shares in 2018 Other 63,857 59,031 601,064 19,834,211 shares in 2017 (18,684) (16,753) (175,866) Long-term loans receivable 1,229 1,301 11,568 Total shareholders’ equity 312,126 297,631 2,937,933 Deferred tax assets 1,259 2,611 11,851 Other 10,145 9,916 95,491 Accumulated other comprehensive income: Allowance for doubtful accounts (270) (229) (2,541) Valuation difference on available-for-sale securities 24,731 22,338 232,784 Total investments and other assets 81,734 76,665 769,334 Deferred gains or losses on hedges (109) (61) (1,026) ¥ 641,010 ¥ 592,900 $ 6,033,603 Foreign currency translation adjustments (3,035) (5,105) (28,567) The translation of the Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside Japan, Remeasurements of defined benefit plans (7,527) (9,653) (70,849) using the prevailing exchange rate on March 31, 2018, which was ¥106.24 to U.S. $1.00. Total accumulated other comprehensive income 14,060 7,519 132,342
Subscription rights to shares 301 271 2,833
Non-controlling interests 20,112 16,130 189,307 Total net assets 346,599 321,551 3,262,415 ¥ 641,010 ¥ 592,900 $ 6,033,603
The translation of the Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside Japan, using the prevailing exchange rate on March 31, 2018, which was ¥106.24 to U.S. $1.00.
43 Kaneka Integrated Report 2018 Kaneka Integrated Report 2018 44 Appendices
Consolidated Statements of Income Consolidated Statements of Changes in Net Assets KANEKA CORPORATION AND CONSOLIDATED SUBSIDIARIES KANEKA CORPORATION AND CONSOLIDATED SUBSIDIARIES Years ended March 31, 2018, 2017 and 2016 Years ended March 31, 2018, 2017 and 2016 Thousands of Thousands of Millions of yen U.S. dollars Millions of yen U.S. dollars 2018 2017 2016 2018 2018 2017 2016 2018 Net sales ¥ 596,143 ¥ 548,222 ¥ 555,227 $ 5,611,286 Shareholders’ equity Cost of sales 426,960 385,362 394,021 4,018,826 Capital stock Gross profit 169,183 162,860 161,206 1,592,460 Balance at beginning of year ¥ 33,047 ¥ 33,047 ¥ 33,047 $ 311,060 Selling, general and administrative expenses 132,294 129,695 122,986 1,245,237 Operating income 36,889 33,165 38,220 347,223 Changes of items during the period Total changes of items during the period － － － － Balance at the end of current period 33,047 33,047 33,047 311,060 Other income (expenses): Capital surplus Interest and dividend income 1,602 1,783 1,483 15,079 Interest expenses (1,692) (1,428) (1,199) (15,926) Balance at beginning of year 32,813 34,936 34,837 308,857 Gain on sales of investment securities － 1,602 121 － Changes of items during the period Gain on sales of property, plant and equipment － 626 － － Disposal of treasury stock － － (6) － Loss on disposal of property, plant and equipment (1,745) (2,534) (3,485) (16,425) Change in treasury shares of parent arising from transactions Foreign exchange gains (losses), net 455 (2,270) (302) 4,283 with non-controlling interests (14) (2,123) 105 (131) Equity in earnings of affiliates, net 147 118 281 1,384 Total changes of items during the period (14) (2,123) 99 (131) Gain on negative goodwill 954 － 1,313 8,980 Balance at the end of current period 32,799 32,813 34,936 308,726 Compensation expenses － － (668) － Retained earnings Litigation expenses (1,088) (963) (1,177) (10,241) Balance at beginning of year 248,524 234,378 218,746 2,339,270 Restructuring charges (1,782) － － (16,773) Gain on step acquisitions 1,430 － 230 13,460 Changes of items during the period Impairment loss － － (1,536) － Dividends from surplus - ¥18.00 per share (5,934) (6,329) (5,345) (55,855) Environmental expenses (567) － (598) (5,337) Change of scope of consolidation 823 － － 7,747 Provision of allowance for doubtful accounts (638) － － (6,005) Net income attributable to owners of parent 21,572 20,485 20,986 203,050 Other, net (2,880) (1,407) (2,081) (27,110) Disposal of treasury stock (21) (10) (9) (199) Income before income taxes and non-controlling interests 31,085 28,692 30,602 292,592 Total changes of items during the period 16,440 14,146 15,632 154,743 Income taxes: Balance at the end of current period 264,964 248,524 234,378 2,494,013 Current 8,372 7,089 6,599 78,803 Deferred (83) 88 2,992 (782) Treasury stock Net income 22,796 21,515 21,011 214,571 Balance at beginning of year (16,753) (15,559) (12,072) (157,690) Net income attributable to non-controlling interests 1,224 1,030 25 11,521 Changes of items during the period Net income attributable to owners of parent ¥ 21,572 ¥ 20,485 ¥ 20,986 $ 203,050 Purchase of treasury stock (2,619) (1,812) (3,585) (24,652) Disposal of treasury stock 688 618 98 6,476 The translation of the Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside Japan, using the prevailing exchange rate on March 31, 2018, which was ¥106.24 to U.S. $1.00. Total changes of items during the period (1,931) (1,194) (3,487) (18,176) Balance at the end of current period (18,684) (16,753) (15,559) (175,866) Accumulated other comprehensive income Valuation difference on available-for-sale securities Consolidated Statements of Comprehensive Income Balance at beginning of year 22,338 17,451 19,660 210,260 KANEKA CORPORATION AND CONSOLIDATED SUBSIDIARIES Years ended March 31, 2018, 2017 and 2016 Changes of items during the period Thousands of Millions of yen U.S. dollars Net changes of items other than shareholders’ equity 2,393 4,887 (2,209) 22,524 2018 2017 2016 2018 Total changes of items during the period 2,393 4,887 (2,209) 22,524 Net income ¥ 22,796 ¥ 21,515 ¥ 21,011 $ 214,571 Balance at the end of current period 24,731 22,338 17,451 232,784 Other comprehensive income: Deferred gains or losses on hedges Valuation difference on available-for-sale securities 2,440 5,047 (2,239) 22,967 Balance at beginning of year (61) (52) (105) (574) Deferred gains or losses on hedges (47) (9) 53 (442) Changes of items during the period Foreign currency translation adjustments 2,116 (4,268) (4,049) 19,917 Net changes of items other than shareholders’ equity (48) (9) 53 (452) Remeasurements of defined benefit plans 2,154 1,248 (12,098) 20,275 Share of other comprehensive income of associates accounted Total changes of items during the period (48) (9) 53 (452) for using equity method 3 (2) (18) 28 Balance at the end of current period (109) (61) (52) (1,026) Total other comprehensive income 6,666 2,016 (18,351) 62,745 Comprehensive income ¥ 29,462 ¥ 23,531 ¥ 2,660 $ 277,316 Continued on the following page. Comprehensive income attributable to: Comprehensive income attributable to owners of parent ¥ 27,959 ¥ 22,597 ¥ 2,690 $ 263,169 Comprehensive income attributable to non-controlling interests 1,503 934 (30) 14,147
The translation of the Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside Japan, using the prevailing exchange rate on March 31, 2018, which was ¥106.24 to U.S. $1.00.
45 Kaneka Integrated Report 2018 Kaneka Integrated Report 2018 46 Appendices
Consolidated Statements of Cash Flows KANEKA CORPORATION AND CONSOLIDATED SUBSIDIARIES Years ended March 31, 2018, 2017 and 2016 Thousands of Thousands of Millions of yen U.S. dollars Millions of yen U.S. dollars 2018 2017 2016 2018 2018 2017 2016 2018 Foreign currency translation adjustments Cash flows from operating activities Income before income taxes and non-controlling interests ¥ 31,085 ¥ 28,692 ¥ 30,602 $ 292,592 Balance at beginning of year (5,105) (1,082) 2,975 (48,052) Depreciation and amortization 30,323 27,808 26,438 285,420 Changes of items during the period Impairment loss － － 1,536 － Net changes of items other than shareholders’ equity 2,070 (4,023) (4,057) 19,485 Gain on step acquisitions (1,430) － (230) (13,460) Total changes of items during the period 2,070 (4,023) (4,057) 19,485 Gain on negative goodwill (954) － (1,313) (8,980) Restructuring charges 1,782 16,773 Balance at the end of current period (3,035) (5,105) (1,082) (28,567) － － Increase (decrease) in net defined benefit liability 3,026 2,516 429 28,483 Remeasurements of defined benefit plans Decrease (increase) in net defined benefit asset － － 425 － Balance at beginning of year (9,653) (10,910) 1,172 (90,860) Increase (decrease) in allowance for doubtful accounts 639 34 14 6,015 Changes of items during the period Interest and dividend income (1,602) (1,783) (1,483) (15,079) Net changes of items other than shareholders’ equity 2,126 1,257 (12,082) 20,011 Interest expenses 1,692 1,428 1,199 15,926 Loss (gain) on disposal of property, plant and equipment 531 102 824 4,998 Total changes of items during the period 2,126 1,257 (12,082) 20,011 Gain on sales of investment securities － (1,602) － － Balance at the end of current period (7,527) (9,653) (10,910) (70,849) Equity in earnings of affiliates, net (147) (118) (281) (1,384) Subscription rights to shares Decrease (increase) in notes and accounts receivable-trade (12,054) (4,609) 6,933 (113,460) Balance at beginning of year 271 228 137 2,551 Decrease (increase) in inventories (6,176) (4,057) (1,596) (58,133) Changes of items during the period Increase (decrease) in notes and accounts payable-trade 8,568 7,304 (4,566) 80,648 Others 1,706 19 5,733 16,059 Net changes of items other than shareholders’ equity 30 43 91 282 Subtotal 56,989 55,734 64,664 536,418 Total changes of items during the period 30 43 91 282 Interest and dividend income received 1,753 1,904 1,600 16,500 Balance at the end of current period 301 271 228 2,833 Interest expenses paid (1,681) (1,405) (1,172) (15,823) Non-controlling interests Income taxes paid (7,310) (8,113) (5,387) (68,806) Net cash provided by operating activities 49,751 48,120 59,705 468,289 Balance at beginning of year 16,130 16,285 10,830 151,826 Cash flows from investing activities Changes of items during the period Purchase of property, plant and equipment (34,113) (36,726) (38,552) (321,094) Net changes of items other than shareholders’ equity 3,982 (155) 5,455 37,481 Proceeds from sales of property, plant and equipment 62 1,093 466 584 Total changes of items during the period 3,982 (155) 5,455 37,481 Purchase of intangible assets (1,406) (1,474) (2,880) (13,234) Balance at the end of current period 20,112 16,130 16,285 189,307 Purchase of investment securities (1,385) (76) (70) (13,037) Proceeds from sales and distributions of investment securities 157 1,586 386 1,478 Total net assets Purchase of shares of subsidiaries resulting in change in scope Balance at beginning of year 321,551 308,722 309,227 3,026,648 of consolidation (1,464) (102) － (13,780) Changes of items during the period Proceeds from purchase of shares of subsidiaries resulting in Dividends from surplus- ¥18.00 per share (5,934) (6,329) (5,345) (55,855) change in scope of consolidation 780 － 1,538 7,342 Payments for transfer of business (332) － － (3,125) Change of scope of consolidation 823 － － 7,747 Payments of loans receivable (934) (315) (1,462) (8,791) Net income attributable to owners of parent 21,572 20,485 20,986 203,050 Collection of loans receivable 896 213 930 8,434 Purchase of treasury stock (2,619) (1,812) (3,585) (24,652) Others (1,057) (569) (1,108) (9,950) Disposal of treasury stock 667 608 83 6,277 Net cash used in investing activities (38,796) (36,370) (40,752) (365,173) Change in treasury shares of parent arising from transactions Cash flows from financing activities Net increase (decrease) in short-term loans payable 6,702 (2,859) 1,359 63,084 with non-controlling interests (14) (2,123) 105 (131) Proceeds from long-term loans payable 5,628 6,251 13,326 52,974 Net changes of items other than shareholders’ equity 10,553 2,000 (12,749) 99,331 Repayment of long-term loans payable (9,169) (5,986) (9,301) (86,305) Total changes of items during the period 25,048 12,829 (505) 235,767 Proceeds from sales and leasebacks 232 － 280 2,184 Balance at the end of current period ¥ 346,599 ¥ 321,551 ¥ 308,722 $ 3,262,415 Repayments of lease obligations (266) (171) (101) (2,504) Proceeds from share issuance to non-controlling shareholders － 54 － － The translation of the Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside Japan, Cash dividends paid (5,934) (6,329) (5,345) (55,855) using the prevailing exchange rate on March 31, 2018, which was ¥106.24 to U.S. $1.00. Cash dividends paid to non-controlling interests (359) (400) (243) (3,379) Purchase of treasury stock (2,618) (1,812) (3,585) (24,642) Proceeds from sales of treasury stock 475 411 74 4,471 Payments from changes in ownership interests in subsidiaries that do not result in change in scope of consolidation (82) (2,772) (16) (772) Net cash used in financing activities (5,391) (13,613) (3,552) (50,744) Effect of exchange rate change on cash and cash equivalents 232 (281) (259) 2,183 Net increase (decrease) in cash and cash equivalents 5,796 (2,144) 15,142 54,555 Cash and cash equivalents at beginning of period 41,018 43,162 28,020 386,088 Increase in cash and cash equivalents resulting from change of scope of consolidation 600 － － 5,648 Cash and cash equivalents at end of period ¥ 47,414 ¥ 41,018 ¥ 43,162 $ 446,291
The translation of the Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside Japan, using the prevailing exchange rate on March 31, 2018, which was ¥106.24 to U.S. $1.00.
47 Kaneka Integrated Report 2018 Kaneka Integrated Report 2018 48 Appendices
Financial Highlights Nonfinancial Highlights
Net Sales / Operating Income Net Income Attributable to Owners of Parent / ROE CO2 Emissions from Energy Consumption and Carbon Intensity Waste Generated and Recycled
■■Net sales Operating income ■■Net income attributable to owners of parent ROE (Return on equity) ■Non-consolidated ■Other greenhouse gases on a non-consolidated basis ■Amount of waste generated by Kaneka ■Amount recycled by Kaneka ■Group companies in Japan ■Group companies outside Japan ■Amount of waste generated by group companies in Japan Carbon intensity for all parent manufacturing sites (right scale) ■Amount recycled by group companies in Japan ( ll on o en) ( ll on o en) ll on o en m on , t a on nten t ho an o ton
( cal ea ) ( cal ea ) ( cal ea ) ( cal ea ) （ a e ea ）
Overseas Sales / Overseas Sales Ratio Net Assets / Shareholders’ Equity Ratio VOC Discharge: Voluntary Plan and Performance Water Consumption
■Asia ■North America ■Europe ■Other Overseas sales ratio ■■Net assets Shareholders’ equity ratio ■Kaneka ■Group companies in Japan ■Group companies outside Japan on
ll on o en ll on o en , ll on m , , , , ,
( cal ea ) ( cal ea ) cal ea cal ea （ a e ea ） （ a et）
R&D Expenses / R&D Expenses Ratio New Product Sales / New Product Sales Ratio
■■R&D expenses R&D expenses ratio ■■New product sales New product sales ratio
ll on o en ll on o en
( cal ea ) ( cal ea )
49 Kaneka Integrated Report 2018 Kaneka Integrated Report 2018 50 Appendices
Corporate Profile Global Network
EUROPE / AFRICA Corporate Profile
● Kaneka Europe Holding N.V. ● Eurogentec Ltd. Name KANEKA CORPORATION Facilities in Sales Office ● Kaneka Belgium N.V. ● Eurogentec France S.A.S.U. Japan Nagoya (Aichi Prefecture) Offices Tokyo Head Office ● Kaneka Pharma Europe N.V. ● Eurogentec Nederland B.V. Manufacturing Site 1-12-32, Akasaka, Minato-ku, Tokyo 107-6028, ● Kaneka Eurogentec S.A. ● AB-Biotics, S.A. Takasago (Hyogo Prefecture) Japan ● Kaneka Modifiers Deutschland GmbH ● Kaneka Africa Liaison Office Tel: +81-3-5574-8000 Fax: +81-3-5574-8121 Osaka (Osaka Prefecture) Shiga (Shiga Prefecture) ● Eurogentec Deutschland GmbH ■ Kaneka’s European Photovoltaics Osaka Head Office Kashima (Ibaraki Prefecture) ● Eurogentec Proteomics GmbH Research Laboratory 2-3-18, Nakanoshima, Kita-ku, Osaka 530-8288, Japan Research Material Solutions New Research Engine Institutes Tel: +81-6-6226-5050 Fax: +81-6-6226-5037 BDP Technology Laboratories Biotechnology Research Laboratories Date of September 1, 1949 Regenerative Medicine and Cell Therapy Labo- Establishment ratories Paid-in Capital 33,046 million yen (As of March 31, 2018) Photovoltaic & Thin Film Device Research Labo- ratories Net Sales 596.142 billion yen Process Development Research Laboratories (Fiscal years ended March 2018) Process Technology Laboratories Number of 10,234 employees Affiliated 110 Subsidiaries (Including 43 (in Japan) and 41 (As of March 31, 2018) Companies (Including consoli- (outside Japan) consolidated subsidiaries) dated subsidiaries)
Investor Information (As of March 31, 2018)
Common Tokyo, Nagoya Shareholder Composition Stock Traded ％ ● Overseas Subsidiaries Transfer Agent Mitsubishi UFJ Trust and Banking Corporation, Financial institutions ■ Overseas R&D Facilities Osaka Branch ％ , , ha e ha ehol e 3-6-3, Fushimimachi, Chuo-ku, Osaka 541-8502, Foreign companies Japan ％ ASIA / OCEANIA AMERICA , , ha e ha ehol e er o Accounting KPMG AZSA LLC hareholder Individuals and others ● Kaneka Asia Co., Ltd. ● Showa Global (Thailand) Co., Ltd. ● Kaneka Americas Holding, Inc. Auditor Ginsen Bingomachi Bldg., 3-6-5, Kawaramachi, ％ , , ha e , ha ehol e ● Kaneka Trading (Shanghai) Co., Ltd. ● Cemedine (Thailand) Co., Ltd. ● Kaneka North America LLC Chuo-ku, Osaka 541-0048, Japan Other companies ％ ● Kaneka Eperan (Suzhou) Co., Ltd. ● Kaneka India Pvt. Ltd. ● Kaneka Pharma America LLC Authorized 750,000,000 shares , , ha e ha ehol e Capital ● HiHua Fiber Co., Ltd. ● PT. Kaneka Foods Indonesia ● Kaneka Aerospace LLC Financial instruments firms ● Kaneka (Foshan) High Performance ● Kaneka Taiwan Corporation ● Anaspec Inc. Issued Shares 350,000,000 shares , , ha e ha ehol e Materials Co., Ltd. ● Taiwan Cemedine Co., Ltd. ● Cemedine America Co., Ltd. Number of 15,015 Share numbers are rounded down to the ● Cemedine Shanghai Co., Ltd. ● Kaneka Korea Corporation ● Cemedine North America LLC Shareholders nearest thousand. Percentages are rounded to the nearest ● Dalian Showa Plastic Co., Ltd. ● Cemedine Philiippines Corporation ● Eurogentec North America Inc. decimal point. ● Kaneka (Malaysia) Sdn. Bhd. ● Showa Global Ltd. ● Kaneka South America Represen- Common Stock Price Range (Tokyo Stock Exchange; Yen) ● Kaneka Eperan Sdn. Bhd. ● TGA Pastry Company Pty. Ltd. tative Ltd. ● Kaneka Paste Polymers Sdn. Bhd. ■ Kaneka US Material Research Years ended 2014 2015 2016 2017 2018 ● Kaneka Innovative Fibers Sdn. Bhd. Center March 31 ● Kaneka Apical Malaysia Sdn. Bhd. ■ Kaneka US Innovation Center High 710 898 1,278 1,061 1,114 ● Kaneka MS Malaysia Sdn. Bhd. Low 495 558 810 643 815 ● Kaneka Singapore Co. (Pte) Ltd. ● Kaneka Pharma Vietnam Co., Ltd. ● Vina Showa Co., Ltd. ● Kaneka (Thailand) Co., Ltd. ● Asia Cemedine Co., Ltd.
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