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The environment-friendly vegitable oil is used for printing. R E P O R T
2019
INTEGRATED REPORT
6-14, Imabashi 2-chome,Chuo-ku, Osaka 541-8523, Japan Tel: 81-6-6203-5531 Fax: 81-6-6203-5018
Japanese: https:// www.kansai.co.jp/ English: https://www.kansai.com/ INTEGRATED REPORT 2019
KANSAI PAINT GROUP CORPORATE PHILOSOPHY
“Continuing to be a company required by society”
In recent years, we at the Kansai Paint Group have been accelerating the pace of our
globalization in an effort to diversify our portfolio of business regions and fields.
We are striving to achieve sustainable growth with the goal of becoming a true
global player. Our Corporate Philosophy forms the foundation upon which we will achieve these goals.
By sharing this vision throughout our group and ensuring that all employees understand and
put into practice the content, we aim to continue being a company needed by society.
On this basis, the Kansai Paint Group has put forth its Mission Statement—that is,
its aim for existence and roles to fulfil in the world—as follows.
We leverage superior technology to contribute to our Customers and Society, in a sustainable manner, with innovative Products and Services, through a competent workforce, built on a culture of Customer Focus, Integrity and Respect to our Stakeholders.
In addition, we have also drawn up the following six Core Values as
important criteria to realize our Mission Statement.
We refer to these six Core Values collectively using the “icare!” logo.
CONTENTS
3 TOP MESSAGE 31 PRTR Substances: Emission/Movement Volumes 5 Material Issues of the Kansai Paint Group 32 Management of Chemical Substances 6 Corporate Data 33 Quality Assurance Consumer Protection 7 Kansai Paint 3 Strengths Customer Relations 11 Financial/Non-Financial Highlights 34 Relations with Business Partners We build strong trust with all We respect diversity and embrace cultural and individual 13 Value Creation Process stakeholders, by doing the right characteristics of organization members, customers and 35 Treatment of Employees thing, and by taking decisions communities by showing empathy and understanding the 15 The 16th Medium-term Business Plan that enhance the reputation of viewpoints of distinct beliefs, philosophies and cultures. 38 Occupational Safety and Health the organization in Society. We encourage and foster an environment of learning, 17 Business Review teamwork and cooperation, that enables the development of 40 Communication all organization members. 20 TOPICS 41 Corporate Governance 23 Policies and System on Environmental Conservation 47 Risk Management We continuously strive to We facilitate the emergence of entrepreneurial ideas that have Responsible Care Organizational Structure understand and exceed a long-term perspective, originality in thinking, and practicality Management of Chemical Substances 48 Other Initiatives Customer expectations. of execution, taking responsibility to see these ideas through, IR activities with ownership at all times. 25 ALES ECO PLAN 2018 We shall continue contributing to People and Society by Other ESG data providing sustainable value to all stakeholders. 26 Formulation of ALES ECO PLAN 2021 49 10-Year Summary of Consolidated Financial Indicators 27 Materials Balance 51 Consolidated Balance Sheets 28 Environmental Accounting We encourage organization We pioneer Innovation by engaging our collective wisdom and 52 Consolidated Statements of Income members to take responsibility knowledge to create new value propositions, and continuously 29 Consolidated Statements of Comprehensive Income for their own actions and strive to generate original and novel solutions for products, Prevention of Global Warming Air Pollution Control decisions, show commitment to services, and work processes. 53 Consolidated Statements of Changes in Net Assets all stakeholders, and accomplish We experiment in different and groundbreaking ways to deal 30 Water Resource Reduction and Water Pollution Prevention work in an appropriate and with value-creation opportunities or challenges, through a 54 Consolidated Statements of Cash Flows efficient manner. deep understanding of the issue at hand. Waste Reduction
1 2 INTEGRATED REPORT 2019
A Message from the President
To all our stakeholders: The Kansai Paint Groupʼs Mission Statement is to “leverage superior technology to contribute to our customers and society, in a sustainable manner, with innovative products and services, through a competent workforce, built on a culture of customer focus, integrity, and respect to our stakeholders.”
Representative Director, President Kunishi Mori
employment and income environment along with the We also drew up our three-year mid-term The Surrounding Environment and with ongoing recoveries in emerging countries in Asia. effects of various policies. However, there are management plan, which began in FY2019. This plan Things We Are Setting Out to Achieve The Japanese economy, which had been temporarily concerns about the impacts of raw material costs and sets out the following key principles for our business weak due to the impacts of natural disasters such as currency fluctuations on corporate profits. activities, based on which we will muster our The coatings business, which is the core business of heavy rains, continued to experience mild recovery Amid the above conditions, we are mustering our capabilities as a Group to achieve the goals we have capabilities as a Group and carrying out business our Group, is applied to various items in our daily supported by a gradual pickup in the global economy set out. lives. It protects materials, making them last longer, as well as improvements in capital expenditures and activities aimed at further improving our performance adds value through beautiful colours and designs, and employment and income environments. with the aim of achieving the following core policies imparts special functions. There is a universal The Groupʼs net sales for the period under review we set out in our three-year mid-term management Profit expansion followed by capital productivity and plan, which commenced in FY2019: Profit expansion demand for features such as these that offer were ¥427,425 million, up 6.3% year on year, while profitability improvement convenience, comfort, safety and security. As such, operating income declined to ¥32,306 million, down followed by capital productivity and profitability Improved business competitiveness the paint industry is expected to further expand as a 9.8% year on year, due to a rise of raw material improvement, Improved business competitiveness growing industry, due to a global increase in new prices and an increase in selling, general and and Improved comprehensive strength of the Group. Improved comprehensive strength of the Group middle class populations and accompanying administrative expenses. Ordinary income was For the fiscal year ending March 31, 2020 (fiscal developments in housing and infrastructure ¥34,838 million, up 4.8% year on year, due to an 2019), we have set targets of net sales of ¥440,000 equipment, progress in industrialization, and increase in equity in earnings of affiliates in Asia, and million, up 2.9% year on year, operating income of You will find more specific details of these further on ¥36,500 million, up 13.0% year on year, ordinary motorization. a decrease in provision of allowance for doubtful in this report. On the other hand, the surrounding environment has receivables. Net income attributable to owners of the income of ¥41,500 million, up 19.1% year on year, entered into a revolution era, a time of drastic and parent declined to ¥17,405 million, down 1.7% year and net income of ¥22,500 million, up 29.3% year on extremely rapid change. With these changes, we on year, reflecting provision for loss on guarantees year, all on a consolidated basis. We plan to pay expect to see needs and ideas emerge that go beyond and other factors. Annual dividends were ¥30 per annual dividends of ¥30 per share for FY2019. Closing Thoughts conventional wisdom, and we must be well placed to share. respond to these issues. Based on this recognition, Key Principles to Tackle as a Matter of Last year, Kansai Paint celebrated its 100th we will strive to achieve sustainable growth by Outlook for the Fiscal Year Ending Priority and Our Management anniversary, and we have now embarked on the next century of our journey. Our wish for people to live in maintaining a mindset that considers the short, March 31, 2020 Strategy medium and long-term, providing values that support a society that is blessed with safety, abundance and the development of people and society while convenience is a universal wish that will continue to In terms of the outlook on the global economy, In order to achieve our Mission Statement, we have satisfying contributions made through our despite risk factors such as an increasing tendency for identified the following six items as key items hold true over the coming 100 years. I hope that by conventional coatings-centered business, not to trade issues, future prospects for the Chinese (materiality) to tackle as a matter of priority, and are turning this wish into reality, we will play a part in mention new business areas. economy, uncertainty surrounding policy, and taking active steps in these areas through our solving all kinds of pressing social issues, such as fluctuations in the financial and capital markets, business operations: SDGs. Overview of the Fiscal Year Ended overall we can expect gradual recovery to continue. I believe that the realization of this wish will become March 31, 2019 Amid this, while on the one hand the Chinese -Contribution to a comfortable and secure life a source of joy for all in our Group, and hope that we economy is predicted to gradually slow down for the will be able to contribute even more to society by -Contribution to local community and industrial During the period under review, the global economy present, the US economy continues to gradually making ongoing efforts to this end. continued to face heightened geopolitical risks and recover. Also, although some European economies development We hope that you find this integrated report a useful uncertainties concerning political, policy, and trade show signs of weakness and there is the risk of a source of information about the business activities of developments in different countries. Under such downturn, they are beginning to show tendencies -Toward new business opportunities circumstances, in spite of signs of a moderate toward a gradual recovery, and ASEAN economies and -Measures for diversity the Kansai Paint Group. slowdown in economic growth in China and Europe, the Indian economy are also expected to gradually -Coexistence with the global environment the global economy as a whole continued to enjoy a recover. While certain weaknesses remain for the turnaround with robust corporate revenue and present in the Japanese economy, it is expected to -Fair governance improved employment in the United States together gradually recover due to improvements in the 3 4 About Kansai Paint INTEGRATED REPORT 2019
Material Issues of the Kansai Paint Group Corporate Data
Based on its Mission Statement, part of the Group Corporate Philosophy, the Kansai Paint Group has identified the Company Profile following key items (materiality) to tackle as a matter of priority so as to provide sustainable value and contribute to Established in 1918, Kansai Paint Co., Ltd. has grown into the development of people and society. Name Kansai Paint Co., Ltd. Japan’s most progressive manufacturer in various fields related to coatings. Head office 6-14, Imabashi 2-chome, Chuo-ku, Osaka 541-8523, Japan Today, the company enjoys a well-established position as Pro ess for spe ifying aterial issues one of the world’s leading paint manufacturers. Date established May 17, 1918 The various products provided by the Kansai Paint Group Capitalization 25,658 millions of yen are highly valued and trusted in a broad variety of fields, STEP 1 Narrow down items STEP 2 Prioritize → select STEP 3 Review/approve → specify due to the important role our coatings play, such as Number of employees 16,287 (consolidated) protection, beautification, special functionality, and environmental sensitivity. End of term March 31 Consider so ial issues and E aluate and sort the ite s e tra ted during Gain appro al through Moreover, with Kansai Paint’s proprietary research and Manufacturing and sale of paints re uests based on our own Step 1 fro two angles: degree of i pa t on deliberation at a anage ent development capabilities at its core, the Company is Principal Design, manufacturing, and sale of coating equipment providing its clients around the world with unparalleled anage ent poli ies, plans, sta eholders and degree of i pa t on our Group. eeting and a resolution business lines Control and undertaking of painting work customer service by expanding its manufacturing, Design of colour schemes strengths, and issues; SDGs Narrow down the list to ite s with the passed down by the Board of distribution, and sales activities worldwide. Corporate website https://www.kansai.co.jp/ and their targets; and sur ey highest i pa t, group these in ter s of si ilarity Dire tors, and spe ify as ite s fro ESG e aluating of ontent and sele t 6 ite s as aterial issues. Material Issues of the Kansai Corporate Mission (Established January 1967) Major Offices Paint Group. bodies, and e tra t issues 1. To further build company credibility with the public and to Registry Office 33-1 Kanzaki-cho, Amagasaki, Hyogo Degree of i pa t on that we need to ta le fro High Things that contribute to the development of people and society contribute to society by providing products and services that the following four perspe ti es: achieve customer satisfaction. Head Office 6-14, Imabashi 2-chome, Chuo-ku, Osaka
sta eholders Contribution to o fortable and se ure life Contribution to lo al o unity 2. To build on our knowledge and strive for technological and industrial de elop ent Plants Amagasaki, Ono, Nagoya, Hiratsuka, Kanuma, Tokyo, Kitakyushu ⑴ Things that ontribute to the ● Helping i pro e ontent ent in life innovations in order to improve the company’s performance. ● ● Contribution to lo al o unity 3. To harness the collective efforts of all individuals in order to de elop ent of people and I pro ing the alue of produ ts R&D Center Hiratsuka and industrial de elop ent maximize company returns. and ser i es ● so iety High Pro oting the spread of paints ● Safety of produ ts and ser i es ⑵ Things that lead to a sense Degree of i pa t on ● Pro oting supply hain Toward new business opportunities of oti ation or a hie e ent the Kansai Paint Group anage ent ● Toward new business opportunities Things that lead to a sense of motivation or achievement among employees a ong e ployees through Overseas the realization/pra ti e of 1) Measures for di ersity ● ● China Indonesia ⑶ Things that we should Creating a sense of oti ation or Ensuring health and safety a hie e ent a ong e ployees ● Respe t for hu an rights and K NS I P INT SHEN NG) C ., LTD. PT K NS I P INT IND NESI obey or o ply with as a ● Pro oting di ersity har ony with the o unity TI NJIN WINFIELD K NS I P INT & CHEMIC LS C ., LTD. PT K NS I PR K RS C TINGS e ber of so iety, su h as G NG H K NS I P INT C ., LTD. Things that we should obey or comply with as a member of society Korea S H K NS I P INT C ., LTD. laws and ordinan es Coe isten e with the global en iron ent Fair go ernan e CH NG ING K NS I P INT C ., LTD. KNK C TINGS C ., LTD. ⑷ Things based on long ter ● Responding to global war ing ● Corporate go ernan e CH NG ING LESC K NS I P INT C ., LTD. ● ● United Arab Emirates aspirations tilizing natural resour es dhering to labor standards H N N I NGJI NG K NS I P INT C ., LTD. ● ● Water usage Thorough o plian e C SC K NS I P INT & CHEMIC LS TI NJIN) C ., LTD. K NS I P INT MIDDLE E ST F C ● Ta ing steps to a hie e a ● Pre enting orruption C SC K NS I P INT & CHEMIC LS SH NGH I) C ., LTD. U.K. re y ling oriented so iety C SC K NS I P INT SH NGH I) C ., LTD. ● Pro oting waste anage ent K NS I P INT E R PE LTD. C SC K NS I P INT & CHEMIC LS H H I) C ., LTD. PPG K NS I T M TIVE FINISHES K, LLP K NS I P INT CHIN ) INVESTMENT C ., LTD. H ING K NS I SHENGLI N P WDER C TING & TECHN L G C ., LTD. France Relationship between the alues of aterial issues and the Group Mission State ent and ESG/SDGs India PPG K NS I T M TIVE FINISHES FR NCE, S S K NS I NER L C P INTS LTD. Austria Material issues Contents of material issues Core Values ESG Relevant SDGs Myanmar K NS I HELI S C TINGS GMBH ● GOOD HEALTH SUSTAINABLE Helping i pro e ontent ent in life AND CITIES AND Contribution to WELL-BEING COMMUNITIES ● Custo er K NS I P INT M NM R C ., LTD. Russia a o fortable I pro ing the alue of produ ts and ser i es ES ● and se ure life Safety of produ ts and ser i es fo us Thailand K NS I P INT R S LLC ● Pro oting supply hain anage ent
INDUSTRY, SUSTAINABLE TH I K NS I P INT C ., LTD. Turkey ● INNOVATION AND CITIES AND Contribution to lo al Contribution to lo al o unity and industrial Entrepreneurial INFRASTRUCTURE COMMUNITIES K NS I RESIN TH IL ND) C ., LTD. o unity and de elop ent ES K NS I LT N B S N I VE TIC RET .S. indset industrial de elop ent ● Pro oting the spread of paints Malaysia P LIS N K NS I B S N I VE TIC RET .S.
AFFORDABLE INDUSTRY, CLIMATE AND CLEAN INNOVATION AND ACTION SIME K NS I P INTS SDN. BHD. U.S.A. Toward new business ENERGY INFRASTRUCTURE ● Toward new business opportunities K NS I P INT SI P CIFIC SDN. BHD. opportunities Inno ation ES K NS I P INT MERIC ), INC. Vietnam .S. P INT C RP R TI N ● PPG K NS I T M TIVE FINISHES .S., LLC Creating a sense of oti ation or a hie e ent a ong e ployees GENDER DECENT WORK REDUCED EQUALITY AND ECONOMIC INEQUALITIES K NS I LPH N M P INT C ., LTD. ● Pro oting di ersity GROWTH Respe t S Mexico Measures for di ersity ● Ensuring health and safety Singapore ● PPG LESC T M TIVE FINISHES ME IC , S.DE R.L. DE C.V. Respe t for hu an rights and har ony with the o unity K NS I P INT SING P RE) PTE. LTD. ● Responding to global war ing DNT K NS I ME IC N S. . DE CV. ● CLEAN WATER AFFORDABLE SUSTAINABLE RESPONSIBLE CLIMATE Coe isten e with tilizing natural resour es AND AND CLEAN CITIES AND CONSUMPTION ACTION Taiwan SANITATION ENERGY COMMUNITIES AND PRODUCTION South Africa the global ● Water usage ountability E T IW N K NS I P INT C ., LTD. en iron ent ● Ta ing steps to a hie e a re y ling oriented so iety K NS I PL SC N FRIC LTD. ● Pro oting waste anage ent Hong Kong Kenya ● PEACE, JUSTICE Corporate go ernan e AND STRONG H NG K NG K NS I P INT C ., LTD. ● INSTITUTIONS K NS I PL SC N E ST FRIC LTD. Fair go ernan e dhering to labor standards Integrity G ● Thorough o plian e Philippines ● Pre enting orruption K NS I P INT PHILIPPINES, INC.
5 6 About Kansai Paint INTEGRATED REPORT 2019
Strength Global Capabilities ont ibut to t o nt o o an so i ti s a oun t o t ou o i in o u ts an s i s Kansai Paint n nt a s ou ou as b n a atin t a o oba i ation an an in its busin ss a ti iti s t ou out t o u oba i ation is b in i n in a ti u a b t obust o t in Strengths an o aints st in o ono i o t in o in nations i ontinu o i in o u ts an s i s t ou out t ob bas on t s busin ss oun ations n into t n t sta o ono i o nt su tin o in ust ia i ation u st n t s a o us to at a u t at is onstant in an
i a t is st n t to a i i ou ● A worldwide network covering most of the globe. POINT ● Well-balanced and robust regional portfolios. o o at a u i tin t n s ● Wide coverage of developing nations with high growth prospects. o sta o s an so i t
Ratio of overseas Ratio of overseas Ratio of overseas sales employees sales percentage point increase
81.9％ 66.1％ +1.2％
7 8
About Kansai Paint INTEGRATED REPORT 2019
Strength Technical Capabilities Aim to achieve product-market fit by bringing together the outstan in t ni a a abi iti s o a ou o ani s
u ou o s i a a u o u ts uti i in o t no o i s a u u at in t ou s o ou ist n su as o ou o si n an is sion t no o i s sou o t is i s in ou abi it to ou ou i t ni a sou s an t n t o s nu tu o an a s o oba i ation at o binin t a ious as ts o ist to o i o ti a o u ts t at t a i s an of global market needs (product-market fit).
● Possession of specialist research units in such areas as colour technologies, synthetic resins and dispersion technologies. ● Technological development systems that maximize collaboration between various coatings business fields, knowledge inherited through our past activities, and information POINT from global sources. ● Technical service systems enabling us to accurately meet the needs of customers in the shortest possible time. ● Investment in technically skilled human resources and the latest R&D facilities to support product development and technical services. Strength 3 Diversity ¥ Group personnel R&D expenses Patents held n as i sit t ou t o otion engaged in R&D activities o t b st a ti s in i o s recognize each otherʼs good points, learn from 923 6,547Millions of yen 832 456 Japan: Overseas: on anot an o nt a ot
Examples of R&D Our group stands out for having business operations in many different regions. 【Basic Technology】 Po s nt sis n oss in in a tions i nt is sion su a ont o o o ont o Coatings business needs differ by region. In order to cope with these diverse needs, we possess a whole host of n i on nta i o nt t no o i s different business models and outstanding assets from various origins. 【Colour Technology & Colour Design】 Attitu su s on as ionab o ou s o ou si n o osa s n si n o nts o ou atin a o o at i at t at s a s an uti i s t s ua iti s ta a ti st s to i o ou si ns uti i in 【Paint and Application Technology】 o titi n ss Waterborne 3-wet coating system, low temperature curing/thin film system, development of at s i in anti ba t ia anti os uito u ti o ou aints ● A comprehensive paint manufacturer covering all business fields. Award History ● Possession of a whole host of different business models and outstanding POINT o nt o P oat A u inu in to it nt assets from various origins. o i i it an aina ● Sharing and utilization of these within the group to improve competitiveness. (Development Award of Japan Aluminum Association) o nt o in o ab Anti ou in Paints (Kanto District Transport Bureau Chief's Award) un tiona iti s o i P ast Paint a in an a an oatin no o Asso iation A a o utstan in s a P ot ti t s t s 8％ Auto oti 1％ Presentation) oatin s oatin s u o a an A u ous st o ai in sin o ut o ou i in ％ no o i s 5 26％ 18％ 18％ a an o i t o o ou at ia no o A a o ati s a on at sistan in u ti a oat oatin s Auto Refinish Region-oriented A i a n ia t Pan s oatin s atio o management a an oatin no o Asso iation st Pa 26％ a s b ％ 16％ o s b 21％ Award) busin ss 6 Verification of the Antiviral Properties of Lime n ust ia ion -polar P ast Paint oatin s Asia management a an o i t o o ou at ia nt 8 Lecture Award) 29％ 26％
9 10 About Kansai Paint INTEGRATED REPORT 2019
Financial Highlights
t a s onso i at atio o s as t a s P Dividend per Share Dividend Payout Ratio (consolidated)
i i n 3 yen i i n 5.1% 427,425 Millions of yen 6.3% increase 66.1% 1.2% increase 67.68 yen 1.12 yen decrease a 30 yen increase Pa out atio 44.3% increase i ions o n n n i i n Pa out atio （％）
Our consolidated net sales for FY2018 were adversely affected by currency i o sti n t sa s in as o s as n t sa s n i u In addition to consolidated operating income falling below the previous year, Under our basic policy of stable and sustainable payouts, we paid out a on sions st in o u n iation in o in nations su to in asin an an n onso i ations in u o A i a an ot in u as t ao ina oss s su t in s as a un an i i n a ount in t ious t t is n is a as n ia an u o nu ontinu to in as u to su ions atio o o s as n t sa s a so in as u t payments in our Africa business operations, in which we have been commemorative dividend celebrating our 100th anniversary. a to s as in asin an o s as n onso i ations in u o A i a un ta in asti a inist ati i o nts an o ision o oss on With consolidated current net income falling below the previous year, this an anot ion an an i o o u t in u an in as a t guarantees in our Middle East business operations. As such, consolidated increased dividend payout resulted in a large, but temporary, rise in the share in Japan. As a result, we posted our best ever results in this regard. u nt n t in o s i t s o t o t ious a an P a so onso i at i i n a out atio o s i t
Composition Ratio of Sales by Region/Business EBITDA (consolidated) o o in A ust nt a ita n st nt osts
2％ 8％ 54,000 Millions of yen 1.8% decrease 8.2％ 1.3％ decrease 23,018 Millions of yen 37. 2 % increase 17％ 5％ 26％ i ions o n (％) i ions o n 34％ 9％ Sales by Sales by 26％ ion business 6％ 17％ 21％ 29％ ■ a an ■ A i a ■ Auto oti oatin s ■ o ati oatin s ■ n ia ■ u o ■ Auto Refinish Coatings ■ a in an P ot ti oatin s ■ Asia ■ t s ■ n ust ia oatin s ■ t s
In terms of the composition ratio of sales by region, the ratio in Europe, We took a number of measures to cope with soaring raw material prices, such Despite continuing to make dividend payouts in a stable and sustainable In our overseas business operations, investment increased due to such where new consolidations took place, increased further. As a result, global as making efforts to increase our market share, passing on rising costs and manner, consolidated current net income fell below the previous year, and a to s as n a to onst u tion in n ia an is u nt o t o ios i o n o improving our product portfolio, but were unable to recover profits on the t us a so o s i t robust, the relocation of a factory in Asia, the introduction of the latest In terms of the composition ratio of sales by business, the ratio increased in basis of a single fiscal year. We were also adversely affected by currency *ROE following adjustment = (consolidated current net income + amortization of goodwill)/ ui nt an n onso i ations n a an too in st nts in as u u o a ion os st n t i s in in ust ia a i ations u t o on sions stockholder's equity (average at the beginning of term and end of term) to su a to s as t aint nan an u a in o istin a i iti s ou our three core business areas of automotive, auto refinish and decorative As a result, consolidated operating income decreased, and EBITDA also fell it t int o u tion o anu a tu in a i iti s o un tiona oatin s coatings became even more robust. s i t s o t on t ious a a ita in st nt t o sa a u in as o t ious a on a *Consolidated EBITDA = consolidated operating income + depreciation costs + amortization consolidated basis. of goodwill + equity in net income of affiliates Non-Financial Highlights u an a ita s as o s nt tua a ita Pat nts o ia a ita Countries Where We Have Submitted Applications for Our Corporate Brand P o u tion a ita Manufacturing Bases
13,341 people 4.0% increase 1,288 patents 148 countries 93 manufacturing bases o at nts a an a an
o s as o s as
The number of overseas employees in our group continues to rise year by We constantly strive to bring about technological innovations, and take an In November last year, our group formulated and introduced a unified To cope with increasing globalization and a robust demand for our products year with the increasing globalization of our groupʼs business operations. In a ti stan in o in n o u ts an t no o i s As a su t corporate brand and logo for use in all sections of our group. an s i s s ia in o in nations a an in ou o s as the most recent fiscal year, the composition ratio of overseas employees in occupy a superior position within the industry in terms of the number of We are currently seeking to expand this corporate brand around the world manufacturing bases each year as a means of carrying out business activities our group exceeded 80%. The number of overseas employees is expected to patents held. In the case of technologies related to automobiles in particular, o a iu to on t s ti an a in t o ss o o in oot in ions it o a o u tion o o a onsu tion keep rising with the expansion of our global business operations. such as automotive coatings, we are the industryʼs top holder of patents. We a i ations o ist ation o ou o o as a ans o i o in ou ou We currently have 93 bases in 34 countries, and have put in place systems for file applications for new patents and make regular revisions, constantly i a promptly providing products and services to global markets and customers of o ti i in ou at nts i ontinu o in to i o ou t ni a a in s capabilities through such measures as promoting the use of patented t no o i s it in t ou
11 12 About Kansai Paint INTEGRATED REPORT 2019
Value Creation Process
Surrounding environment History stretching back over a century Progression of globalization o a an a o o ution
Business area Coatings business Coatings business, a growth industry + challenges in new business fields utilizing existing knowledge and experience
Vision o ont ibut to t o nt o so i t t ou its busin ss a ti iti s to ontinu to b n b so i t to ontinu to b a na i o o at ou
o o at P i oso n ut usin ss o s ut o
2％ Mission Statement u oba busin ss Economic values t iu t usin ss P an a su io t no o to expansion 17％ ont ibut to ou usto s an ■ a an （FY2021 Target） o i t in a sustainab ann it s as 34％ ■ n ia onso i at n t sa s ■ Asia inno ati P o u ts an i s 9％ a s b ion ■ through a competent workforce, built 66％ A i a Millions of yen on a u tu o usto o us ■ u o 490,000 nt it an s t to ou a an 17％ ■ t s （CAGR+4.7％） Stakeholders. 21％ ％ onso i at A a in Core Values 34 Active expansion overseas, including Higher than ％ emerging markets 15.5 Promotion of local （Higher than 2.9% points compared with FY2018） usin ss o Fair governance production for local consumption A ust suit to a u o t s ion （US etc.） ina a an i Higher than 10.0％ ast n ia A A （Higher than 1.8% points compared with FY2018） A i a Promotion and -Polar management Polar business Generate total cash flow from operating activities in 3 years 8 achievement of management management plans Millions of yen Diversity Globalization 140,000 +40,000 millions of yen compared with total cash flow o o atin a ti iti s u in t io o i s u an t t iu t ana nt P an sou s
Promotion of Utilization of u b o o s Technical capabilities Social values onso i at best practice regional strengths ont ibutin to ot tin t a t 16,287
Sharing and Meeting the needs utilization of of clients ni a group assets Application of thoroughly core technologies background and the development of cutting-edge ont ibutin to ot tin i R&D expenses technologies 6,547 Millions of yen
（％） 50 Contributing to enriching peopleʼs minds Sound finances 40 46.7％ 46.0％ 46.2％ 30 uit atio 20 46.2％ 10 0 2016 2017 2018 （FY） Improve business competitiveness
13 14 About Kansai Paint INTEGRATED REPORT 2019
The 16th Medium-term Business Plan
Kansai Paint Group initiated its 3-year 16th Medium-term Target & trend image of sales & margin Key principles Business Plan from FY2019. i ions o n t an t an t an on t （％） The positioning of the 16th Medium-term Business Plan is 1. Profit expansion followed by capital productivity as a transformation period to become a company that t sa s A a in and profitability improvement continuously grows over the long term. The management will exert leadership to bring about We will steadily implement various measures in an Specific measures reforms. In addition to resolving issues experienced optimum manner by concentrating our Group-wide best during the 15th Medium-term Business Plan, they will practices. Share increase create the robust foundations needed for major growth Enhance profitability by improving the product mix in the future. Financial goals Performance indicator Cost reduction Net sales ROIC Earnings Develop high value-added technologies and growth products through group-wide activities Target EBITDA margin Optimize sales, general, and administrative Adjusted ROE FY2021 Target expenses Reduce logistics expenses, etc. 【 Operating results 】 ʼ13 ʼ14 ʼ15 ʼ16 ʼ17 ʼ18 ʼ19 ʼ20 ʼ21 ʼ22 ʼ23 ʼ24 ʼ25 Until now, our group’s management stance has Improve low profit assets Consolidated net sales: 490,000 millions of yen (CAGR: prioritized flow indexes in the form of net sales and profit. Going forward, in addition to improving flow +4.7%) BS optimization Optimize working capital Solve remaining issues of the 15th Medium-term Business Plan indexes, we will also work to optimize BS. Consolidated EBITDA margin: Higher than 15.5% Optimize fixed asset turnover ratio, etc. (Higher than 2.9% points compared with FY2018) Leaping forward after the 16th Medium-term Business Plan Adjusted ROE: Higher than 10% (Higher than 1.8% points compared with FY2018) Generated total cash flow from operating activities in 3 2. Improve business competitiveness 3. Improve comprehensive strength of the group years: 140,000 millions of yen Continuously grow corporate value based on a long-term perspective Analyze external environment and internal factors to With the spirit of “One Kansai” we will implement (+40,000 millions of yen compared with total cash flow optimize portfolio and strength competitiveness promotion and cultivation of intensive customer focused from operating activities during the period of the 15th global talent. Medium-term Management Plan) ● Leverage business that needs fundamental actions 【 Shareholder return 】 ● Optimize the distribution of assets and management 1） Promotion of diversity Payment of dividends in a stable and sustainable manner resources ● Abolish boundaries: Nationalities / Gender / Age / ● Promote utilization of know-how and business models Company background / others within the group ● Create and explore business opportunities including 2） Management of human resources Management cycle inter-business ● Business planning based on KPI tree, coupled with highly transparent evaluation ● Promote global talent Using the Group’s Resources ● Optimum deployment of human resources
Short-term 3） Change our consciousness business recovery o ati oatin s in n ia Auto oti oatin s in a an ● Improve ability to earn Assign the highest priority to provide services and Analyze Realign low profit assets ・Topline growth products that enrich customers ・Profit expansion o ati Auto oti Management resource ・Improve efficiency oatin s in oatin s in reorganization A i a Asia Our policies will focus on nurturing and appointing Focus on profitable areas thoroughly customer-oriented global human resources. We will seek to break down barriers, such as nationality, n ust ia oatin s in u o n ust ia oatin s in a an and reposition our human resource management to be in Reinvestment in growing segments line with globalization. Expansion of scale Maximize cash ･Business ･M&A ･Alliance n ust ia n ust ia oatin s in oatin s in a an u o
We will conduct analysis of our group resources and The strategy contained in our group’s 14th and 15th realign low profit assets. We will then reinvest the Medium-term Business Plans was to expand our regional Based on this policy, we will realign low-potential obtained business resources in promising fields with a and business portfolios, which is why we carried out M&A businesses, including the possibility of withdrawing clear purpose. to this end. However, as we achieved results above a completely, and will reinvest in promising businesses. In By doing so, we will aim to improve our group’s overall certain level, in the current Medium-term Business Plan, addition, we will actively seek to utilize our group’s earning power, expanding and maximizing our cash we have decided on a policy of M&A to promote business resources. inflow. strategies, and will continue to aim at resolute growth. We will then aim to achieve an expansion in scale by Also, part of the cash generated through this cycle will be using this increased cash amount to reinvest in growth returned to shareholders. fields.
15 16 About Kansai Paint INTEGRATED REPORT 2019
Business review
Auto oti oatin s n ust ia oatin s t a s t a s
t a s Market Trends and Operating Results for This Fiscal Year t a s Market Trends and Operating Results for This Fiscal Year i ions o n o sti s as n a an i o u tion in as to i ion i ions o n o sti s as o sti a t o onst u tion a in i s u a on a A i t is ou n t ontinu to o a o ab a in t in as in sa s in as o at as a su t o asu s a o sti sa s i asu s to in as sa s an in u in at a t s a an assin t ou o raise prices in other market fields increased too. soa in a at ia osts s as s it si ns o a s o o n u to ono i s as auto obi o u tion ontinu to in as sta nation in u o t os o tions o nu o in in n ia an a o in auto obi o u tion in t o n onso i ations in u o an ast A i a A A ion in as nu at in as nu at
Market Forecast and Outlook for the Next Fiscal Year Market Forecast and Outlook for the Next Fiscal Year it o asts su stin t at auto obi o u tion in n a an i ontinu o in to an sa s in a Japan will largely level off, we will continue working to market fields with the aim of increasing revenue. Also, in as ou a t s a an ais i s s it i un ta a o i onta ansion o ●A i nt o i o a ● n t is a su in a ● i s an soun t ni a ● n t is a su in a a u t ou i ua it o u ts at ia i s ass t ou s s o t is t out oo is on o s in in o ts u to t a abi iti s su tin o a o n at ia i s ass t ou s s o s i un tion o u ts t oss ss b o s as ● o i s i an su o t and there is a lag in profitability o a i ation o o u tion o o s as an an n t t a o in su in to a b oa and there is a lag in profitability subsi ia i s as a ans o atin n i nts a abi iti s o usto in s i o nt range of business fields i o nt ● t on s n a on ● a not o t a i o a sa s a o ast to o s i t ● t on ations i s o t ust t ou ●Broad range of business fields and s as s it a oo out oo o a a o in as in Japanese-affiliated automobile o u tion o o a onsu tion in a on t o n t a o in i nts anin an in asin n anu a tu s oba busin ss s s as sa s i t o u tion o u o su in to a o i nts to o i s i s on an in i i ua an ai to a i a o at in as in ●Cost competitiveness differs by auto obi s in t in s a t as o ●Poss ssion o o i ina t no o i s in basis nu i a so ta st s ai at ta in into ion business fields in which demand is ● a i a t no o i a inno ation S W o u tion ains obust in ot a ts anin t to o S W o s not o u so asi an a on a an s us s o s as an t a s i t to a o a in as s ● an i o u tion in O T ● u tion in aint o u s u to ● o t in an st in o O T ● n o o tition it an in a ts at ia an s in auto obi s a at in ust ia i ation u to overwhelming presence in specific ● an su to ● n o a t nati at ia s ono i o t in in business fields non-Japanese-affiliated automobile to paint, such as film a ts t ●Intensification of the competitive anu a tu s ● u tion in o sti auto obi ● o t in sa s su tin o t n i on nt it oba a s in ● n as s a su tin o sa s o u s u to a s a in in as o s as ansion o a ion a to s in u in auto obi o b o in o ainst a t a an s i nts ● n o n o tition as a an s ● o a nin s an in as su t o oun b a in busin ss o o tuniti s t an s to t t no o i a inno ation o i onta ansion o t no o i s it in t ou
Auto Refinish Coatings o ati oatin s t a s t a s
t a s Market Trends and Operating Results for This Fiscal Year t a s Market Trends and Operating Results for This Fiscal Year i ions o n o sti s as n a an auto obi o n s i is asin it an i ions o n o sti s as n a an a i s u is o a an too in asin s i t o a o n s i to us A i t is asu s su as an in o u t in u an ou n t sa s in as s i t as a su t o an in asin sa s o un tiona o u ts it n t sa s sa s o i o titi at bas oatin s t o in s i t s as nu in as a t u to t os s as oub i it o t ontinu in n ia i o tions o nu o in o n onso i ations in a on it t os o tions o nu o in o n u o onso i ations in ast A i a in as nu at a so a st a a i nts in Market Forecast and Outlook for the Next Fiscal Year an in sa s o i an o u ts in out i t a on ns o i inis in ui ib iu in A i a t a an s a t i o to an sa s o o i n oatin s an i ta st s to a at Market Forecast and Outlook for the Next Fiscal Year a t s a n a an s it a oo out oo o an in as in ● t on a t s n t ou t ● a s in an in a ts in t ●P s n in in a ts an ● a s in an in a ts in t at st at bas oatin s ina t n a ition i a so o atin n busin ss ions it i tations o ina t o t i ontinu to ai at in asin ou ● i sa o u t in u ● o o o nition o opportunities by combining our groupʼs all-water-based o t su as n ia an A i a ● o ub i i a o aint o a nu b an in sa s o un tiona o u ts an o in it n i on nt at non-Japanese-affiliated car ● i s in u o oba o u ts to a a in t a an s int io a s an u ations anu a tu s oatin s an o ou at in s st s a on it ●Poss ssion o i s busin ss a t o i in o u ts s i s an su o t t at at ●Advanced and efficient colour ●Newcomers have difficulty capturing o s ●Newcomers have difficulty capturing at in a abi iti s bas on an an an in s a s i s an su o t an an in a t s a t n s o i nts o in oo o o ou at s as in a ition to i o in istin busin ss s s as t ono i s o in a ts into in o ation S W i n a o to ntu into n busin ss s S W i ou ou as a o a s ontinu to o an s ia in in a ts o asts su st t at an i ontinu to ●Pot ntia o n busin ss an s O T ● ont a tion in t auto obi ai ● n as in an u to O T ●A a an o o titi o u ts to t an in n s u to t busin ss its u to t i o ansion o i ass an s i s ot t an aint u to in as s i t o a s a in b o in sa t o an o a s o u ation s ia in in ono i o t o ainst a ● a i an s to ui nts o a ts ●Price pass-through is difficult in ● ansion o a ts u to an o u ts an s i s u to ti t ● at o us on un tiona o u ts so ions n t is a su in as in auto obi o n s i in n i on nta u ations t ● an in sa s ann s su as in a at ia i s in a ts ●Pot ntia o an s to t natu o ●Pot ntia o an s to t natu ● i t ai s i s t b o in o o tition u to t a i a o o o tition u to t a i a o o ainst a oba anu a tu s t ou A oba anu a tu s t ou A
17 18 About Kansai Paint INTEGRATED REPORT 2019
TOPICS
Efforts to Promote the Marine and Protective Coatings Net Sales Uptake of Insect Repellent Paint
Overview Net Sales Market Trends and Operating Results for This Fiscal Year (Millions of yen) Domestic Overseas In Japan, amid sluggish demand in the field of Kansai Anti-Mosquito Paint, one of our groupʼs functional protective coatings (iron structures), we took steps to products, is a type of paint which also acts as a mosquito expand sales, such as placing functional products on repellent. We introduced this product into markets in Zambia and Uganda. the market, resulting in net sales largely on par with the previous year. This paint, an alternative vector control, is a In addition, in the field of marine coatings, stagnation in groundbreaking product that functions to “knock down” mosquitos, an effective way to prevent the spread of the shipping market continues, with net sales slumping and the total net sales for both fields falling below the malaria. At the same time, it is safe for people and the previous year. environment. Overseas, revenue increased due to the addition of new Similar products have already been on sale in South consolidations in Europe. Africa, Southeast Asia, Japan and other places, but the (FY) productʼs launch was particularly welcomed in the two What kinds of content/processes are utilized for this product? Market Forecast and Outlook for the Next Fiscal Year countries where malaria is a serious social issue and the ●Ability to propose ●Delay in lineup of products meeting extremely high hopes that this paint would help both process-reducing/energy-saving global specifications In the domestic market, despite a poor outlook for a Anti-mosquito paint developed into a global venture as a ● countries achieve their goal of eliminating malaria were products etc. to users Delay in developing the next recovery in demand in the field of marine coatings, we result of information shared within the group on a ●Long-selling products (protective generation of antifouling paint realized. products, products reducing fuel ●Yet to establish a unified brand as a aim to increase revenue by acquiring business projects product developed at Kansai Plascon Africa, our South costs for ships) global network In the run-up to launching this product on the market, in ● connected with large-scale sports event to be held in African subsidiary. Global alliance with JOTUN Zambia we conducted a series of monitoring tests over a Japan and expanding sales of products in the field of It is as our groupʼs business operations have become period of around two years to demonstrate the paintʼs S W protective coatings that meet the needs of clients and more and more globalized, and we have been promoting society, such as process-reducing, energy-saving and efficacy. These were conducted in cooperation with the ● O T ● the sharing of each regionʼs and each companyʼs best Increased demand for maintenance Maintenance cost constraints due to Zambian Ministry of Health, other agencies and work stemming from aging a worsening of client businesses fire-resistant products. practices, that moves toward application began, with infrastructures in the oil and gas ●Pressure on profitability due to stakeholders as part of a Japan International Corporation industries, etc. soaring market prices for raw Overseas, meanwhile, in addition to existing hints we gained from Southeast Asia, where the focus ● Agency (JICA) Collaboration Program with the Private Expectation for special demand materials, such as zinc and cuprous businesses, we aim to tap into the demand for had been on measures to tackle dengue fever, an illness connected with large-scale sports o i Sector for Disseminating Japanese Technology. The event to be held in Japan, etc. ●Market incursion on the infrastructures and acquire new clients utilizing our bearing similarities to malaria. ● product officially went on sale following approval from the Increased demand for products specifications of global global alliance with JOTUN, etc. In the actual undertaking of such work, development which help reduce fuel costs in line manufacturers (clients and Zambia Environmental Management Agency. with environmental regulations suppliers) needs to conform to the laws and regulations of the Sales also commenced in Uganda following approval from countries concerned, something which is made possible the Ministry of Health of Uganda and other related by making improvements to the formulation design. organizations. This serves as a fine example of how our globalization The fact that this paint is the result of a public-private enables ideas and business models from different sources partnership helps increase its credibility as a product, to be utilized directly in projects. something which, together with the productʼs functions and expected effects, we hope will help encourage its uptake among as many people as possible. By doing so, our goal is to play a part in protecting the safety of people and communities, and help foster sound economic What kinds of values can this product growth. provide to society over the mid to long term? Kansai Anti-Mosquito Paint is a product which can make peopleʼs lives safer and help maintain health, especially when used inside houses. In addition, the product has also been designed to enable use in public and commercial facilities, providing the potential for protection at a range of places we use in daily life. Therefore, the more locations it is used at, the more people benefit from safety and security in their daily life spaces. In this way, we believe our contributions to creating healthy and safe daily life spaces will in turn help provide people with comfortable and safe lives, as well as encourage regional and industrial growth.
19 20 About Kansai Paint INTEGRATED REPORT 2019
TOPICS TOPICS
o nt o at ia s Kansai Paint oba o it iu ion att i s o ou o ast
Overview Overview it iu ion batt i s a sto a i s i a a u ou o s o ou s b a i i in its oba b it iu ions o in b t n ositi t o s an n t o to o i in o ation atin to o ou n ati t o s Positi t o b an s onsist at ia s an o ou s s an s a t it in t o a ti at ia a ti s t at ta ions in an out ou a un as t o aint As a t o ou o t i a on u ti a bon a ti s t at o a at ub is t Kansai Paint o ou o ast on a a in t ons an bin a ti s t at bin t s is i o os as ionab o ou s a on it membrane is formed by first dispersing particles in an su stions o oo inat int io si ns ai o ani so nt an oatin t obtain s u on ta i i a i at t onst u tion a t oi t is sion o a ti s is not o o t as on t n o ou s i t usin a an o at t is sta it is not ossib to obtain a o ab oatin stat an o n o in t is into a busin ss as a in o ation o a oun t o in u in ata on on itions o batt o an o a in t is o ia o u t ono i s an so ia on itions o os ou t n s u as o a a o a n o t batt in ust The levels of priority of a batteryʼs required performance sto i s onsistin o i t a ts a t us nab in an i t oatin in ust as an a s o o a out ut u abi it an sa t n on t o osa s i suit in i i ua tast s n a ition i n an in s u an as bui t an t nsi oo batt anu a tu o t int n n us As su t a s t a sin o ou o a tota o o ou s of technical knowledge in this field. This is why we decided t i a on u ti a bon us in batt i s a so ta s to b ut a o t a t n ut a o ou to a ti i at in t t o s u busin ss o t various forms, and we are currently systematizing different o n ost o t at a ou t n sto i s perspective of technological affinity. The dispersion state of o u as a o in to t a ious n s i ontinu o a A i ta s its ins i ation o t i a on u ti a bon in ositi t o s n s ont ibutin to t o nt o t batt in ust s in to a a s oot in tou an ita it a i on batt o an n i t o t is b an i a u u atin n t no o i s A t on su an atu in ain b si nin a a bon ast it t o t is sion n ut a an o n ast s a i tion o autu n t at st i s a ba an b t n o o t an refinement; and “URBAN,” finished with an edgy winter What kinds of content/processes are What kinds of values can this product tou a in o t t n sto as utilized for this product? provide to society over the mid to long term? chosen as 2019ʼs Neutral of the Year. An inviting blend Paint is oun on an a u u ation o a ious t i i s an a u u ation i s a a i o an b i o ou s i n o out o a o t no o i s a on i i nt is sion o u i s ainin in o u a it o t s ti o this colour scheme imparts a rich sense of refinement to an i o tant o t no o n o to is s n i on nta ons ation ti is tu nin i in s a s i nts an aintain t stab it is n ssa to asti a s ia in ina an n ia s t t ni u s o a uatin t su a st i tions a b n a on aso in auto obi s a a t isti s o i nts t ni u s to si n o auto obi anu a tu s a in oa s o suitab is sants an t in a o iat o u in t i i s n t ot an t is o o tions o a o on nt an o t is sion sti u oo t o s a on i o in t Among our strengths, what kinds of t o s to a i t si is sion s o an o batt i s an a a to a bon ast ai o ust aintain ust t ont ibut in an a s in t s o t o s u o content/processes are utilized for this product? i t oos in stat to o t i a on u ti t i a on u ti a bon ast i is a a t o o ou s a s an a t s o o ani s at s as on t a o ntion t no o i s at ou t is it in ou ou a in o in atin t Kansai is osa a o an t i a on u ti We will continue to explore totally new fields beyond the Paint oba o ou o ast a ti i atin b s a bon ast t at oss ss s t o t in stat onti s o ou t a itiona busin ss a as su as it all bring in their own countryʼs cultural preferences and i t o t on u ti it i usin is sion lithium-ion batteries. Having clarified our core o ou t n n i s i t is uss an s t t n t o s t at o not b o o a nt technologies, we will make efforts to uncover solutions o ou s t at i b a t oba u isin ou at t ia an o a is o a o utu t no o i s i s in to o bin it o u tion is Kansai P as on A i a ou subsi ia in is sant t at o s not in ibit t o an o many suppliers, users, different industries and out A i a t at as ontinu to at an ub is batt i s so t in i as nab us to o a a a ia t n o ou s in its o n ount o t o a s sin ast t at an b sto stab as a i so i as on no o an insi ts bui t u o t ou s o an a s t o t b in s to t an s o a ious ount i s su tin oba P o ss s b i ou is sion t ni u s a a i t u tu o a it iu ion batt onstitu nts o ositi t o at ia t n o ou s a us as a bas o o osa s a o in to t o a u tu s o a o an is sion nts o sto a an b t A ti t i a ー ー t i a on u ti at ia on u ti a bon in a bon Both high solidification and coating a suitabi it an b t t i is a ー ー ＋ is sant i What kinds of values can this product ー ui in an b t as a provide to society over the mid to long term? o nt to a result of high solidification. ー a o ou s a u o t an ust a ans o is sion oatin in uttin Ass b i＋ ous o s to at i in s a s a o in to t i o n n s at t a a s o o i a
in o nts to is a effect in the sense of providing people with emotional batt o an a in an in asin t i o s o on nt ation A ti at ia an b t as ＋ a su t o t i and are used to this effect in a variety of settings, o nt o ation o a o iat including medical facilities and offices. We hope to t i a on u ti ati t o s Positi t o s ontinu in o at o o tab at s n i on nts t ou t o o aint
21 22 ESG activities INTEGRATED REPORT 2019
Policies and System on Environmental Conservation
Corporate policies on environmental conservation Responsible care audit by top management Kansai Paint has formulated Corporate Policies on In February 2019, committee reports on the ALES ECO Environmental Conservation as the framework for its Basic Policies PLAN for progress under the 2018 plan, and trends in Responsible Care activities. Those policies reflect our 1. To supply products after full consideration of their potential environmental regulations in Japan and overseas were commitments in a number of areas, including protection impacts on people and the environment. 2. To undertake proactive countermeasures to cope with the submitted to top management, including the President, of the safety and health of the customers who use our potential effects of products on people and the environment. who also chairs the Responsible Care Committee. products and the employees who use the chemical 3. To contribute to society while raising awareness about the Management discussed initiatives to enhance the substances from which our products are made, as well as environment, safety and health. effectiveness and efficiency of future initiatives. the reduction of environmental loads caused by the use 4. To disclose and provide information related to the environment, safety and health. Top management gave a number of instructions, such as of our products and our business operations. to come up with frameworks to disseminate and respond to information on environmental regulations more effectively, as well as to put in place systems to manage and direct chemical substance management and safety/ Responsible Care Organizational Structure hygiene measures, including at related companies. In addition, we also discussed the objectives set out in Kansai Paint sets goals and formulates plans, and monitors progress on efforts to reduce product-related environmental the ALES ECO PLAN, commencing from April 2019, loads, ensure product safety, disclose information to customers, ensure employee safety and health, and minimize which were granted approval. environmental loads generated by our business operations. This work is carried out by the Environmental & Product We will further expand our RC activities in line with these Safety Committee, the User- and Customer-Related Environmental Safety Committee, and the Environmental Safety & directives from management and objectives of the ALES Health Committee. The activity goals and plans of these three committees are approved and reviewed and progress ECO PLAN. monitored by the RC Committee and the RC Top Management Review Panel, which are the top-level organizations for responsible care. Kansai Paint implements its responsible care activities, including the ALES ECO PLAN, through the activities of these three committees Management of Chemical Substances Management of chemical substances in product design Kansai Paint has considered the hazards and harmful substances and restricted-use substances are contained effects of chemical substances and designated as in raw materials blended into products, based on a a e e t evie Environmental & Product ISO14001 “prohibited substances” those whose use in products is information in SDS and raw materials samples and Company President, Directors, Audit & Supervisory Board Members Safety Committee Activities ittee prohibited and as “restricted-use substances” those instructions submitted by raw materials manufacturers. a i e whose use in new designs and applications are When handling new raw materials or when the method ti restricted. We strive to secure the health and safety of of handling an existing raw material is changed, technical ittee se a st e e ate ● Head Office Environmental Safety Committee a it product users and Kansai Paint technical and production and production personnel conduct risk assessments Committee Chairman: President t a ● E vi e ta e te personnel and conserve the environment by confirming required under the Industrial Safety and Health Act and Protection before the materials registration and product formulation devise measures for safer handling of these raw Secretariat Environmental Safety & ● a asa i a t preparation stages whether or not these prohibited materials. E vi e t ivisi Health Committee ● a t Environmental Safety & Health Audit Team ● a a a t evie Plan Do Environmental & Health Subcommittee ● i ats a a t
Company-wide Safety & Environment Promotion Team ● a a a t ALES ECO PLAN Search for raw materials Registration of raw materials Product design ● Tokyo Technical e t a E e se vati E vi e ta eas es ea & Business Office Ge e a a Act Check Overseas & Affiliated Company Environmental Safety Promotion Team ● G a ies ate ia s es
c isiti tai s i ati evie ta t i e e tati ite s ivisi a e as s tai s a e s a e s New raw a ate ia s e ist ati e ect i ite t ic s sta ces t ic a materials ・SDS a Company-wide Production Division s sta ces it se ate ia s ・Samples of es ate ia s es a ate ia s est icti s 1. Health, safety, and pollution prevention 5. Maintenance of SDS (raw materials, products) 1. Energy conservation i st cti s etc eas es 6. Publication of the CSR Report eas es ct 2. Public liability activities eve e t a is a a e e t s ste a 2. Reduction of environmental ati 3. Quality assurance activities that take into preparation of the Action Manual impacts in manufacturing es consideration health, safety, and the 8. Implementation of green procurement 3. Reduction of waste a e vi e t evie ate ia s 4. Establishment of related regulations ct it se Raw est icti s se cce t materials est icte se Technology Division Sales and Distribution Division already s sta ces 1. Development of eco-friendly products and systems that reduce 1. Popularization of eco-friendly products registered environmental impacts (VOC reduction, elimination of hazardous 2. Provision of product safety information to logistics substances, etc.) companies and customers es 2. Development of energy-efficient, process-efficient products and coating 3. Product safety information labeling and SDS compliance s ste s under GHS 3. Development of production technologies that contribute to environmental impact reduction
23 24 ESG activities INTEGRATED REPORT 2019
ALES ECO PLAN 2018（Evaluation of FY2018 results and targets） Formulation of ALES ECO PLAN 2021
Activities and Targeted Areas FY2018 Targets FY2018 Results Evaluation Activities and Targeted Areas FY2021 Targets
Ended production/sales as of Use prohibited except for special applications 1. Amount of lead in products sold*1） the end of March 2019, with the Elimination by 2020, including special application exception of special Target 1. Amount of lead in products sold*1） Complete elimination applications, in accordance with achieved the JPMA declaration relating to 2） Reduction of Product Reduction of 2. Amount of hexavalent chromium in products sold* 88% reduction from the FY2003 level Product the elimination of lead Hazardous Hazardous Safety Safety Substances in Substances Activities 2. Amount of hexavalent chromium in 78% reduction from the 85% reduction from the Target Activities 3) 4） Products in Products 3. Amount of T, X, EB* in products sold* Maintenance of the FY2015 results products sold*2） FY2003 level FY2003 level achieved
Limit usage to 0.3 t 3. Amount of T, X, EB*3） in products Maintenance of the FY2015 Maintenance of the FY2015 Target 4. Reduction of nonylphenols Conduct enquiry into elimination by 2022 sold*4） results results achieved
Target 1. ISO 14001 activities Continued implementation 1. ISO 14001 activities Continued implementation Continued implementation achieved
2. Preparation of environmental Target 2. Preparation of environmental accounting information Continued publication Continued implementation Continued publication Environmental accounting information achieved Environmental Conservation Conservation Activities Activities 1) Environmental measured Target 1）Environmental measured values Within standard values Within standard values Within standard values 3. Prevention of 3. Prevention of values achieved environmental environmental pollution 2）Security and disaster prevention 0 cases pollution ２) Security and disaster Incidence of leakage into soil: Target not 0 cases prevention 1 case achieved Accidents involving loss of at least one workday: 0 1. Number of occupational accidents Accidents involving loss of at Accidents involving loss of at Target cases 1. Number of occupational accidents Health and least one workday: 0 cases least one workday: 0 cases achieved Environmental Safety Provision of safety education to local employees Safety and Assurance ●Provision of safety education 2. Safety assurance at affiliated companies overseas simultaneously with safety diagnosis at affiliated ●Provision for safety Health Environmental in Japan to overseas trainees companies overseas Health and education of overseas (5 people from ASEAN, and Safety and Safety trainees others) Health Assurance 2. Safety assurance at affiliated ●Provision for safety Target 1. Energy consumption (per unit of production) 3.0% reduction from the FY2018 level ●Provision of safety companies overseas education of local employees achieved education to safety at the same time as safety representatives in JV (3 2-1. CO2 emissions (per unit of production: Production diagnostics at affiliated people from Turkey, 3 people division including incinerators) 2-1 Maintenance of the FY2018 results per unit of companies overseas from China, and others) Reduction of 2-2. CO2 emissions (total: Production division, production Operational Technology division, Head Office and so on including 2-2 16.5% reduction from the FY2013 level 1. Energy consumption (per unit of 3.0% reduction from the 9.1% reduction from the Target Environmental incinerators) production) FY2015 level FY2015 level achieved Impacts 3. Waste generated (per unit of production) 3.0% reduction from the FY2018 level 2. CO2 emissions (total: including 38% reduction from the 35.5% reduction from the Target not Reduction of incinerators) FY1990 level FY1990 level achieved Operational 4. Waste recycling ratio Maintenance of 99% or higher Environmental 3. Waste generated (per unit of 3.0% reduction from the 9.7% reduction from the Target Impacts production) FY2015 level FY2015 level achieved ・Entrenchment of a system for complying with environmental regulations in Japan Maintenance of 99% or Target 1. Compliance with environmental laws and regulations 4. Waste recycling ratio Full-year average: 100% ・Consideration and development of a system for higher achieved in Japan and overseas User-and complying with environmental regulations overseas in Compliance with revisions to Customer- Market and accordance with market developments ●Entrenchment of a system related governmental and Environmental for complying with related ministerial ordinances such as Safety environmental regulations in Environmental the Industrial Safety and Activities Japan 1. Compliance with environmental Health Act and the Ordinance Safety 2. Environment management system enhancement Development of required systems ●Consideration and laws and regulations in Japan and on Prevention of Hazards Due development of a system for User- and overseas to Specified Chemical complying with Market and Substances, the Export Trade 3. Product liability complaints : 0 claim 0 claims related to the Product Liability Law Customer- environmental regulations Implementation Environmental Control Order, and Poisonous related overseas in accordance with continuing Safety and Deleterious Substances Environmental market developments for each item Activities Control Act, etc. 1. Publication of CSR Report Safety Environmental Information 2. Environment management system Development of required Continued publication of Integrated Report Revision of labelling/SDS Disclosure enhancement systems system 2. Publication of Corporate Report Kansai Paint, Kansai Paint 0 claims related to the 3. Product liability complaints Sales, Kansai Paint Marine, *1）Amount of lead (Pb): amount of elemental lead content Product Liability Law Kanpe Hapio: 0 claims *2）Amount of hexavalent chromium (Cr VI): amount of elemental hexavalent chromium content *3）“T, X, and EB”: abbreviation for “toluene, xylene, and ethylbenzene” June publication of *4）Finished products: includes thinners sold 1. Publication of CSR Report Environmental and Social Environmental Information Report (Japanese) Information Continued publication disclosed as Disclosure 2. Publication of Corporate August publication of planned Report Corporate Report (English)
*1）Amount of lead (Pb): amount of elemental lead content *2）Amount of hexavalent chromium (Cr VI): amount of elemental hexavalent chromium content *3）“T, X, and EB”: abbreviation for “toluene, xylene, and ethylbenzene” *4）Finished products: includes thinners sold
25 26 ESG activities INTEGRATED REPORT 2019
Materials Balance Environmental Accounting
Results for FY2018 Environmental conservation costs for FY2018 amounted to a total of \2,380 million, with \394 million for capital Recovery and Recycling Raw Materials investments and \1,986 million for costs. FY2018 Purchasing Category Main activities Investments Costs Total Pollution prevention 86 166 252 ●Investments and costs required to prevent pollution (air, water, soil, noise, odors, etc.) costs Costs within Global environmental business areas 100 228 328 ●Investments and costs required to save energy, prevent global warming, etc. INPUT conservation costs Recycling costs 0 345 345 ●Investments and costs required to cut waste, recycle, etc.
E e i ts ●Development and operation of environmental management systems Management activity costs 78 36 114 ●Disclosure of environmental information (publication of CSR report) E ect ic e ｋWｈ e issi s 34,700ｔ-CO ●Costs for initiatives aimed at reducing environmental impact ti it as ｍ e issi s 2.7ｔ ●R&D costs for products contributing to environmental conservation, etc. R&D costs 28 1,105 1,133 ●R&D costs to reduce environmental impact at all stages, including manufacturing, logistics a e eav i ｋＬ S e issi s 5. 2ｔ and sales ●Costs relating to environmental measures, such as greening, beautification and maintenance e se e e issi s Social activity costs 57 106 163 ｋＬ 0.6ｔ of landscapes (excluding plants) R&D and ●Costs incurred redressing environmental harm caused by our business activities G ｋＬ t aste e e ate 18,9 0 0ｔ Environmental damage costs 45 0 45 Production ●Costs of restoring natural environments, etc. t aste ate t eate 11,70 0ｔ ate es ce i ts Total 394 1,986 2,380 (unit: Millions of yen)
t aste e itte ea ate ｍ 2 3ｔ Breakdown of R&D costs: (total amount of research costs at R&D Center) × (ratio of R&D employees) × (ratio of research themes connected with the environment)
G ate ｍ e ica s sta ce e issi s 92ｔ Calculation methods used for environmental accounting in FY2018 st ia ate ｍ ●Refer to Ministry of the Environment’s “Environmental Accounting ●Do not include so-called expected effects based on suppositions such as risk ta ate se ｍ Guidelines” aversion ●Calculate investments, costs (including depreciation costs) and effects ●Scope: 6 plants and the R&D Center of environmental conservation activities ●Period: April 1, 2018–March 31, 2019 ●In the case of effects, calculate the effects of environmental OUTPUT conservation in our business activities (physical unit) and economic effects of environmental conservation measures (monetary value) INPUT
e ● As in FY2017, we continued upgrading to energy-saving-type facilities. Logistics Topics ● We made capital investments for developing environmentally friendly technologies and products. ＣＯ e issi s t a s t e ati s t ● Environmental damage costs include treatment costs for a leakage incident that occurred at our Hiratsuka Plant. OUTPUT
Effects of environmental conservation Economic effects of environmental (reduction volume) conservation In FY2018, production volume decreased by 2.8% Compared with the previous fiscal year, economic effects Use compared with FY2017, and cogeneration systems in FY2018 increased to \73 million. (Customers) aste c tai e s etc operated smoothly. Energy usage therefore decreased by Using an adjusted comparison taking into consideration 4.3% in comparison with FY2017, including the business activity volumes in the previous fiscal year, OUTPUT technology division (reduction of 33,556 GJ). We also cut economic effects increased in the region of \27 million. the energy consumption rate of the production division Breaking this down, energy increased around \22 by 2.8% per production unit compared with FY2017, and million, water usage decreased around \4 million, and are maintaining efficient production. waste treatment increased around \9 million, with We will continue working to make further cuts by setting energy-saving making the main contribution. Energy inputs Amount of energy used in business activities targets for each plant in our ISO 14001 management We will continue working to save energy and water, and Water resource inputs Amount of water used in business activities system. to prevent waste. Reduction Economic Amount of waste generated Amount of waste generated from business activities (excluding wastewater) Category volume Category effect (unit: Millions of yen) Amount of waste emitted External intermediate disposal and external final disposal volume of waste generated from business activities Conservation Energy usage (GJ) 11,502 effects of resources CO2 emissions (t-CO2) 529 Economic effects resulting from 2 2 21.9 CO emissions Amount of CO emitted from business activities invested into energy-saving at plants business activities Water usage (1,000 m3) 41.4 SOx emissions Amount of SOx emitted from business activities Reduction Economic effects resulting from cuts in -3.9 Air pollutants SOx (t) -2.101 in costs water and sewerage costs Conservation NOx emissions Amount of NOx emitted from business activities NOx（t） 0.01 effects relating to Smoke and soot (t) -0.01 Economic effects resulting from cuts in Amount of substances subject to notification under the PRTR system in the Chemical Substances environmental 8.5 Chemical substance emissions Water pollutants COD (t) 0.20 waste treatment costs Management Act emitted into the atmosphere from business activities impact and waste emitted through Industrial waste; Amount generated (t) 701 Total 26.5 Amount of water discharged from business activities (amount treated as wastewater treated + amount business activities Amount of wastewater treated Amount outsourced for treatment (t) 172.7 incinerated) *Economic effects of environmental conservation = costs for the previous Environmental conservation effects from environmental conservation measures were year − costs for the current period COD emissions Amount calculated by multiplying the COD concentration in wastewater by the amount of wastewater calculated using an adjusted comparison of business activity volumes with FY2017. Economic effects of environmental conservation calculated using an adjusted Environmental conservation effects from environmental conservation measures comparison of business activity volumes with FY2017. Fuel Diesel oil used in transport = FY2017 environmental impact volume × (FY2018 production volume/FY2017 Economic effects of environmental conservation (reduction of costs) = costs for production volume) − FY2018 environmental impact volume FY2017 × (FY2018 production volume/FY2017 production volume) − costs for CO2 emissions from transport operations Amount calculated from the amount of fuel used in transport (estimate) FY2018
27 28 ESG activities INTEGRATED REPORT 2019
Prevention of Global Warming Water Resource Reduction and Water Pollution Prevention
Our company consumes resources and energy to produce the products it provides to society. During FY2018, we once again took steps to reduce our water usage by effective use of coolant, promoting water This means we consume fossil fuels, a nonrenewable energy source, in the process emitting carbon dioxide, a cause of conservation measures, such as measures to prevent water leaking from pipes. global warming. Therefore, when updating our facilities, we are putting in place measures to save energy based on the belief that our Water conservation at production plants Water pollution prevention at production plants role as a manufacturer is to reduce our energy consumption (CO2 emissions) at all stages of production. Water usage in FY2018 decreased by approximately The amount of COD discharge, the indication of the 12.7% from the FY2017 level, and water usage per unit amount of water pollutants discharged, decreased by Reduction of CO2 emissions Energy conservation of production also decreased by 10.4%. Kansai Paint will approximately 27.2% from the FY2017 level in FY2018, continue efforts to efficiently use water resources, taking as a result of an increase in production volume. Most of As a result of production in FY2018 decreased by 2.9% The amount of energy used by the production division in measures to save water by devising equipment cleaning this decrease was a result of outsourcing water from the FY2017 level, the amount of carbon dioxide FY2018 decreased by 4.5% from the FY2017 level, methods, and so on. treatment of our wastewater for a period as we replaced emitted by the production division also decreased by resulting in a decrease of 1.6% in energy consumption wastewater treatment plants at some of our production 4.0%. per production unit from the FY2017 level. This result is Change in water usage plants. Kansai Paint will continue efforts to prevent water CO2 emissions per unit of output were 116kg-CO2/ton, attributable to power-saving measures taken at a ate G ate st ia ate a e i ate sa e e it cti pollution by strengthening plant management to ensure down 1.7% from the FY2017 level. worksites and the practice of more efficient production that wastewater treatment plants operate appropriately. methods. We intend to continue engaging in energy （ ） （ ） 800 4 conservation activities. Change in the amount of COD discharge
t ta 638 （t） 600 3.05 585 3 Change in CO2 emissions *including incinerators Change in energy consumption 2.79 537 2.65 510 2.50 511 2.50 261 ta e issi s i cti ivisi e issi s e cti it ta e e c s ti i cti ivisi E e c s ti e cti it 204 ta e issi s i tec ivisi ta e e c s ti i tec ivisi 400 195 172 181 2 （t ） （ t） （ ） （ ） 2 0 000 00 700 3,500 200 289 1 289 303 344 291 575 533 1 503 511 0 9 0 9 0 000 200 500 488 3,000 0 ※ 0 88 53 35 37 39 0 0 1 2 000 0 9 2 00 2014 2015 2016 2017 2018 2 00 2,750 2 00 2 00 2,630 0 20 000 129 12 100 300 2,460 2,430 2,500 201 201 201 201 201 119 11 11 2,390
263 2 260 257 248 242 *Errata: In our CSR Report issued in 2018, we mistakenly reported that the CO 12 000 12 000 emissions level in FY 2017 was 1.27 tons, but the correct figure was 0.81 tons. 11 00 11 00 11 000 10 000 0 100 2,000 201 201 201 201 201 2014 2015 2016 2017 2018 Waste Reduction
Waste reduction initiatives Air Pollution Control Kansai Paint launched a company-wide waste reduction team in FY1999 to contribute to the creation of a Air pollution control at production plants recycling-oriented society by promoting the “3Rs” of The Kansai Paint Group’s definition of zero emissions: industrial waste: reducing the generation of industrial We have our own set of stringent standards in place that Change in SOx, NOx, and dust emissions waste (Reduce), recycling of waste that is generated A state of zero emissions is achieved when the annual give consideration to the local characteristics of each (Recycle), and reusing materials (Reuse). As a result of recycling rate is 99% or higher. （t） plant based on ISO 14001, going beyond the standards S st efforts to achieve zero emissions of industrial waste set out in laws and ordinances. In addition, we have generated through production activities, the production 2 taken steps to clean up effluent gas by switching from Reuse+Sale+Recycle externally division has kept a recycling rate of 100% from FY2016. Recycling rate = ×100 heavy oil to city gas to fuel our boilers. During FY2018, We will continue striving to ensure that we maintain zero Amount of waste generated none of our plants exceeded the limits set out in laws emissions. 2 and regulations (regulated values) or agreed upon in 1 The amount of waste generated in FY2018 decreased by 2 consultation with municipalities, etc. 2 6.0% compared with FY2017. Under ALES ECO PLAN While we continue to maintain reduced levels of NOx 2 1 9 2018, waste reduction is progressing as planned in emissions, SOx emissions are increasing. The reason for 1 FY2016. this is due to the influence of sulfur constituents (within 1 the standard value) contained in the heavy oil A used at 0 0 0 00 0 02 0 0 0 02 0 0 Change in the amount of industrial waste generated (production division) some of our plants. Breakdown of waste recycling and amount of waste generated 201 201 201 201 201 （t） We will continue taking initiatives to reduce air pollution. 25,000 t e e ate i st ia aste ●Sulfur oxides (SOx) E te a ec c i E te a i te e iate cessi Sulfur oxides are generated when fuels such as heavy oil and kerosene and waste materials that contain sulfur are burned. SOx comprise sulfur dioxide and small amounts of sulfur trioxide. Sa e e se 20,290 20,000 ●Nitrogen oxides (NOx) i a a i t aste Nitrogen oxides are contained in exhaust gases from boilers, incinerators, 18,260 is sa e e ate trucks, and other equipment. NOx comprise nitrogen monoxide, nitrogen 17,410 17,630* dioxide, and other gases. t s 16,580 ●Dust Dust is defined in the Air Pollution Control Law as particulate matter 15,000 comprising soot and cinders that is generated accompanying the combustion 2014 2015 2016 2017 2018 of fuels and other materials or the use of electricity as a heat source. *Errata: In our CSR Report issued in 2018, we mistakenly reported that the amount of industrial waste generated in FY2017 was 17,500 tons, but the correct figure was 17,630 tons.
29 30 ESG activities INTEGRATED REPORT 2019
PRTR Substances: Emission/Movement Volumes Management of Chemical Substances Every year, we calculate the emission and movement year, with the total of these comprising 94% of our air volumes for substances for which notification needs to be emissions. Chemical substances with a particularly high toxicity or substances which are discharged in large volumes from made under the Act on Confirmation, etc. of Release Concerning toluene, xylene and ethylbenzene in manufacturing plants pose a risk to paint users and manufacturers, as well as the environment. Amounts of Specific Chemical Substances in the particular, we are limiting usage volumes in products and In order to reduce the impact as much as possible, we are focusing our efforts on setting a target for reduction of the Environment and Promotion of Improvements to the are taking steps to maintain emission volumes. volume and use of such substances alongside our Medium-term Management Plan in the ALES ECO PLAN Management (Thereof governmentally-designated chemical substances) and substances which fall under ta v es a e s sta ces i t self-management under the Japan Chemical Industry Management of chemical substances Association (JCIA) (JCIA substances) and we publish the i e issi s （t 0 2 ％） Amount of lead contained in products sold (relative Amount of lead contained in products sold results of this in a report. cti amount with FY2003 taken as 100) During FY2018, each of our factories submitted s t etic esi ai t （ ） notifications to the authorities on the 59 required ve e t （t 0 5％） The Japan Paint Manufacturers Association (JPMA) has 100 100 substances among the 462 governmentally designated. issued a declaration regarding the elimination of ec c i （t 0 1％） 80 Of the governmentally-designated chemical substances pigments containing lead. In line with the JPMA t aste （t 0 03％） and JCIA substances, the ten substances with the largest s ti declaration, we have continued to reduce the amount of （ 03％） 60 emission volumes were the same as the previous fiscal lead compounds in order to completely eliminate them
by FY2018. 40 List of emission/movement volumes for PRTR substances and self-controlled substances (all plants) In FY2018, we discontinued products which use 24 Kansai Paint target items pigments containing lead or replaced these with 20 alternative pigments, and ceased manufacturing and 10 8 Ordinance Air emissions Movement Ordinance Air emissions Movement 3 no. PRTR substances （kg） （kg） no. PRTR substances （kg） （kg） sales of products containing lead for general purposes. 0 0.5 0.4 2003 2013 2014 2015 2016 2017 2018 （ ） 2 acrylamide 0 1.8 297 1,3,5-trimethylbenzene 1140 8610 In regard to products containing lead for special 3 ethyl acrylate 0 12 298 tolylene diisocyanate 0 3.5 purposes, we are continuing work to reduce lead 4 acrylic acid and its water-soluble salts 0 9.2 300 toluene 30730 42100 volumes with the aim of ceasing manufacturing and sales 6 2-hydroxyethyl acrylate 0 21.9 302 naphthalene 16.1 1531 by 2020, the cutoff point for the elimination of pigments 7 n-butyl acrylate 0 29.3 305 lead compounds (lead (Pb) equivalent) 0 26.5 containing lead. 8 methyl acrylate 0 2.4 306 hexamethylene diacrylate 0.3 3.8 9 acrylonitrile 0 2.6 309 nickel compounds (nickel (Ni) equivalent) 0 14 16 2,2'-azobisisobutyronitrile 0 7.5 320 nonylphenol 0 48 30 n-alkylbenzenesulfonic acid and its salts 0 69 321 vanadium compounds (vanadium (V) equivalent) 0.1 565.7 Amount of hexavalent chromium contained in Change in the amount of hexavalent chromium in products sold (relative amount with FY2003 taken as 100) 31 antimony and its compounds (antimony (Sb) equivalent) 0 39 329 polycarbamate 0 27 products sold （ ） 100 100 34 3-isocyanatomethyl-3,5,5-trimethylcyclohexylisocyanate 0 64 349 phenol 0.9 60.8 In ALES ECO PLAN 2018, we set out a plan to reduce 37 4,4'-isopropylidenediphenol 0 214.7 354 di-n-butyl phthalate 0 96 hexavalent chromium by 78% from the FY2003 level, and have been taking steps to this end. 80 51 2-ethylhexanoic acid 0 2.7 355 bis(2-ethylhexyl) phthalate 0.1 132 In FY2018, we mainly discontinued anticorrosive 53 ethylbenzene 26440 72370 368 4-tert-butylphenol 0.1 0.7 60 pigments or replaced these with alternative products, 71 ferric chloride 0 0 391 hexamethylene diisocyanate 1.1 50.5 resulting in a reduction of 85% compared with FY2003, 80 xylene 29360 80640 392 n-hexane 22 25.1 40 34 thus achieving our target. 30 83 cumene 356 1523 401 1,2,4-benzenetricarboxylic 1,2-anhydride 0 6.6 26 Although anticorrosive pigments that contain hexavalent 20 86 cresol 0.4 45 411 formaldehyde 75.6 72.3 18 16 15 chromium are mainly used for applications that require 87 chromium and chromium(Ⅲ) compounds (chrome (Cr) equivalent) 0 82.4 413 phthalic anhydride 0 160 long-term durability, we will continue to develop and 0 88 chromium(Ⅵ) compounds (chrome (Cr) equivalent) 0 82.7 414 maleic anhydride 0 1.4 offer alternative products and reduce the use of 2003 2013 2014 2015 2016 2017 2018 （ ） 132 cobalt and its compounds (cobalt (Co) equivalent) 0 4.3 415 methacrylic acid 0 7.6 hexavalent chromium. 239 organic tin compounds (tin (Sn) equivalent) 0.5 1540 416 2-ethylhexyl methacrylate 0 7.5 240 styrene 0 9.5 417 2,3-epoxypropyl methacrylate 0 10.5 243 Dioxins (unit: mg-TEQ/year) 0.09384 0 418 2-(dimethylamino)ethyl methacrylate 0 5.1 256 decanoic acid 0 25 419 n-butyl methacrylate 0 13.4 259 tetraethylthiuram disulfide 0.1 130 420 methyl methacrylate 0 84 270 terephthalic acid 0 2.6 438 methylnaphthalene 1.5 51.4 277 triethylamine 179 668.7 447 methylenebis(4,1-cyclohexylene)diisocyanate 0 0.3 Toluene, xylene and ethylbenzene contained in Change in the amount of T, X, and EB in coating and thinner 278 triethylenetetramine 0 28 448 methylenebis(4,1-phenylene) diisocyanate 0 54.5 products sold (relative amount with FY2015 taken as 100) products sold 296 1,2,4-trimethylbenzene 3570 30230 In ALES ECO PLAN 2018, we set a target of maintaining （ ） the amount of toluene, xylene, and ethylbenzene 150 147 Transition over the years of the 10 substances with the highest emissions Excluding substances subject to governmental notification (hereafter, T, X, and EB) in products sold at the FY2015 (10 substances with largest emissions falling under JCIA) et e e e e e t e e t acetate level. In FY2018, Kansai Paint continued to transition t a c et t et e et acetate 105 104 Name of substance subject to Air emissions Movement （e issi s ） 100 101 100 98 100 et a c et et et e a c from solvent-based to waterborne coatings, and to self-imposed controls （kg） （kg） 35,000 replace T, X, and EB with less hazardous alternative butyl acetate 30700 43600 30,000 solvents. The results showed the same level as FY2015. butyl alcohol 17030 58410 25,000 We will continue to develop and promote sales of 50 methyl butyl ketone 13770 32680 20,000 products that use alternative solvents and strive to avoid ethyl acetate 9690 12020 increasing the amount of T, X, and EB in products sold. methyl alcohol 4560 7180 15,000 0 2003 2013 2014 2015 2016 2017 2018 （ ） methyl ethyl ketone 3862 7947 10,000 propyl alcohol 3840 10027 5,000 cyclohexane 1390 1221 acetone 1337 6685 0 2014 2015 2016 2017 2018 （ ） ethylene glycol mono-n-butyl ether (butyl cellosolve) 1152 31520
31 32 ESG activities INTEGRATED REPORT 2019
Quality Assurance Relations with Business Partners
Quality assurance activities Kansai Paint understands global environmental problems to be one of the greatest challenges facing our world. As such, with regard to procurement, in accordance with our Company Policies Concerning the Global Environment, we aim to Our RC Committee for Company-wide Promotion of Quality assurance policies achieve sustainable procurement as stipulated by ISO 20400. In addition, we work to build good relations with business Quality Control and Environmental Protection meets four Our Corporate Mission sets out our group-wide quality policies. partners and to construct robust supply chains for the future. times a year, and each plant’s QA Committee meets once Our basic philosophy is contained in Article 1 of our Corporate a month to promote quality assurance activities through Mission, which is, “To build company credibility in general and to technology and production. contribute to society by providing products and services that achieve customer satisfaction.” As such, our employees seek to CSR procurement Plants where we carry out our production activities have contribute to the betterment of customers and society based on acquired ISO 9001 certification, and we have drawn up a sense of fairness and benefits for all. Based on the Kansai Paint Corporate Code of Conduct, Classifications of materials used when purchasing materials (raw materials, containers, quality policies based on our Corporate Mission as a From the perspectives of global environmental equipment, devices, products, etc.), we not only give means of implementing quality assurance activities in line conservation, workplace safety and hygiene, preventing consideration to the quality, quantity, technical services, with ISO Standards. pollution and product liability (PL), Kansai Paint has price and turnaround period that suit our needs, but we identified usage categories for raw materials under its also promote sustainable procurement at the global corporate regulations and discloses specific information, level, giving consideration to the following policies. including the Kansai Paint Environmental Management Substances List, to its business partners. We also strive to obtain raw materials that reduce environmental Consumer Protection impacts. Kansai Paint procurement policies Materials containing more than a defined amount of Provision of safety information 1. Kansai Paint promises to conduct fair and impartial business Banned raw materials banned substances whose use is prohibited transactions with its partners. regardless of the reason. Coatings become effective once they have been applied, Consumer protection policy 2. Kansai Paint ensures proper quality and a stable supply. Raw materials containing more than a defined 3. Kansai Paint complies with all laws and regulations, and when they turns into dry coating film. To ensure product safety for consumers, when developing Restricted raw materials amount of restricted substances whose use is respects social norms. The incorrect use of even a safe product can lead to an markets for new products and using new materials, the Kansai reduced or limited to certain applications. 4. Kansai Paint gives consideration to the global environment and Paint Group conducts investigations based on internal Raw materials containing more than a defined accident. Kansai Paint provides information on the safety (promotion of green procurement). regulations relating to safety confirmation and supplies safe Dangerous and amount of dangerous or hazardous substances hazardous properties of products and handling 5. Kansai Paint respects intellectual property rights and manages products to customers. The provision of safer products has the hazardous raw materials whose use is subject to more rigorous information. precautions in safety data sheets (SDS), container labels added benefit of contributing to improvement in working management than general raw materials. 6. Kansai Paint respects human rights and working environments. and other sources. We prepare SDS and labels that Raw materials where use is subject to normal environments at paint manufacturers. Regular raw materials comply with applicable laws and regulations, JIS management. standards, and guidelines issued by the Japan Paint Manufacturers Association. We will promptly revise the content of SDS and labels in response to amendments to applicable laws and regulations, JIS standards, and Supply chain management guidelines and appropriately add and provide to users At all stages of its business activities, from research and procurement activities which take into consideration the information necessary for the safe use of products. development and the procurement of materials to the health and safety of all, including employees, local production, distribution and sales of products, as well as communities, and customers. the use and disposal of products, Kansai Paint carries out
Environmental conservation Legal compliance Kansai Paint recognizes that environmental conservation In addition to complying with related laws and Customer Relations is a necessary aspect of a company’s existence and regulations in Japan and overseas, such as the Act business activities, takes into consideration sustainable against Delay in Payment of Subcontract Proceeds, Etc. Ristorante Sabatinidi Firenze Tokyo, an authentic Italian conservation of the global environment and prioritizes to Subcontractors, social norms and internal rules, we restaurant that has been in business for four decades in business partners whose environmental management consciously set fair and appropriate terms and conditions Ginza, moved to a new location and reopened following systems are based on a spirit of green procurement in all our transactions, and do not engage in acts which remodeling work. when procuring materials. deviate from healthy business practices or which go Continuing in the 100-year tradition of the flagship against social norms. restaurant in Florence, this new restaurant interior, which Supplier greenness survey Furthermore, we recognize the importance of intellectual draws inspiration from days of old, features beautiful Kansai Paint ascertains whether producers have created property, including trade secrets, and carry out arches modeled on the architecture of Italy’s renowned environmental management systems based on the ISO production activities in ways which do not harm the cathedrals. For finishing the arches, we received a 14001 certification status and are making efforts to intellectual property of other companies and at the same request from the restaurant’s owner for the use of ALES- maintain and improve these systems. time protect our own rights. SHIKKUI, a product which enables lime plaster, a We only collect internal information and personal Raw materials management traditional Japanese medium boasting deodorizing and information from business partners within the necessary antibacterial effects, to be applied using a roller. Kansai Paint manages chemical substances contained in scope of, and with no other intention than for carrying The restaurant’s designer selected ALES-SHIKKUI’s raw materials which it uses in its products by obtaining out procurement activities and we protect all confidential casual texture that would fit with the overall design, and information on such substances from its business information in our possession. our lime plaster paint, which can also be applied to partners through SDS, etc. In addition to reflecting the curved surfaces, now graces the symbolic arches of the results in safety and hygiene information for our Respect for human rights and working environments ceiling. products, we comply with laws relating to chemical Kansai Paint works with business partners that prohibit The moment they step through the doors, visitors to the substance regulations, both in Japan and overseas, acts of harassment or discrimination based on race, restaurant often remark how they feel like they have including ELV, REACH and the Chemical Substances nationality, age, gender, religion, family background, traveled to Italy. Control Law of Japan. physical handicaps, etc; workplace violence and Also, when it comes to raw materials containing conflict excessive forms of discipline; and inhumane forms of minerals mined from the Democratic Republic of the labor such as forced labor, child labor, long working Congo and surrounding countries – i.e. tin, tungsten, hours, and low wages; and which also ensure that tantalum and gold ore – every year we carry out a workers are granted the right to organize groups and screening of business partners in production regions and maintain workplace safety. procure only materials which do not contain conflict minerals.
33 34 ESG activities INTEGRATED REPORT 2019
Treatment of Employees
Personnel policies (promotion of motivation, sense of achievement and diversity among employees) 1. Invigoration of individuals and organizations Kansai Paint utilizes a diverse range of human resources, prevent employees from having to work long hours but Our personnel system 2. Kansai Paint aims to achieve and maintain fair treatment and an improved awareness of and provides them with opportunities to maximize their will also allow us to put in place flexible worker-friendly management participation based on the principle of independence and autonomy. abilities. Through this we aim to be the kind of company environments enabling employees to strike a balance that can respond flexibly and dynamically to rapid between work and childcare giving. This, we believe, will changes in the environment, and continue to create new help increase motivation among employees and give kinds of value and competitiveness. them a fuller sense of achievement, and will also enable Human resource development and training The promotion of work-style reforms will not only women to flourish at work. Kansai Paint is enhancing the human resource development plan with the aim of increasing motivation, ai i t a a e e t Measures for work-style reforms the most important factor in human development. ai i i e a a e e t Prevention of long working hours Promoting women’s participation and advancement (since FY2016) Human resource development concept and structure ai i s e vis s ai i i ca ee e ees We are taking steps to prevent employees from having to In FY2016, three Women’s Participation and Kansai Paint has defined five themes as key pillars of the O work long hours with the aims of removing the physical Advancement Forums were held at the Hiratsuka R&D human resource development plan: assistance with J ai i e e ees actica t ai i and mental burden resulting from long working hours, as Center. These events were followed in FY2017 by a self-development, a long-term human resource T well as eliminating other indirect impacts, such as fourth forum at the Head Office of Kansai Paint and development plan, expansion of professional duties, employees having no free time in their daily lives due to company-wide survey for female employees. transformation of organizational culture, and a training the encroachment of work into their private time. These roundtable discussions and survey highlighted a system. e cati a tsi e se i a s We recognize that cutting overtime and making sure that number of issues, including concerns about the current a e ta s cc ati a t ai i employees take more paid holidays are issues recognized evaluation system and a lack of awareness on the part of Systematically organized training system t ai i （Q.C., safety, etc.） by both labor and management in common. When it male employees, and expectations toward career As shown in the diagram on the right, the Kansai Paint Se ective t ai i comes to overtime in particular, our levels continue to advancement plans and flexible workstyles, such as training system is centered on OJT (on-the-job training) te ati a i ati t ai i remain below the upper guidelines set in Japan’s Labor working at home. and complemented with various training courses Function-specific training Standards Act, and we have entered into agreements on In light of this, in FY2018 we undertook a concrete systemized correspondingly to training objectives and working hours with our union. review for constructing a system of at-home work while levels. We have a system in place whereby employees are monitoring the situation surrounding the construction of The objective is to enhance the specialized skills of *OJT = On the Job Training. Training conducted in the course of daily work. required to apply in advance when seeking to do such a system as a way of promoting flexible working employees and foster their overall competency as overtime (including holiday work). In addition, we are styles. Further at the same time, after negotiations professionals. working in other ways to improve our labor situation, between the management and the union, an agreement such as by holding discussions with our union on ways to was made regarding the combined use of shortened- further cut overtime and ensure that employees take work-for-childcare and flextime systems starting from more paid holidays. FY2019. Over these past three fiscal years, the average overtime Going forward, we will focus our efforts on adjusting the Internationalization training hours/month per employee (union members) are as working environment and creating a system, as we follows. believe that a good working environment for women is a Our group, which extends its operations globally, planned This program enables young employees to meet people good working environment for all. internationalization training programs to nurture globally in their own age group from different cultural and FY2016 FY2017 FY2018 competitive human resources to act as bridges between lifestyles backgrounds. The aim is to help employees to different areas of the group. By doing so, we aim to broaden their perspectives and develop respect and 8.4hours/month 5.3hours/month 5.0hours/month Ratio of female employees, ratio of female managers, ratio facilitate the sharing and utilization of different business flexibility by encouraging them to take an interest in the of newly-hired female employees, average number of years models and know-how on techniques, skills, etc. cultures and value systems of other countries. of continued work by sex Teleworking trials possessed by the various regions in our group. FY2016 FY2017 FY2018 We have been conducting teleworking trials since FY2018 Dispatch of trainees to overseas group companies Acceptance of trainees from overseas group companies with the aim of allowing employees to work from home. Ratio of female employees 10.1% 10.1% 10.2% In addition to enabling employees with time restrictions In FY2017, we introduced a program to send young Trainees come to Kansai Paint from overseas subsidiaries such as childcare, caregiving or hospital visits to utilize Ratio of female managers 2.5% 2.8% 2.7% employees to overseas subsidiaries. in many locations. their time more effectively at the same time as creating We hope to improve employees’ communication skills Trainees learn basic Japanese before traveling to Japan Ratio of newly-hired female results, we hope to create a flexible, less stressful and their capacity to understand and adapt to diversity for short-term training or programs lasting up to one employees (university graduates 15.4% 16.7% 26.3% working environment for our employees. and above) and work in a different cultural environment by giving year. Participants study hard with the aim of acquiring Average number of years them opportunities to live in other countries and work knowledge about Japanese business management, of continued work among Male 18.6 19.0 19.5 with local people. including production systems, technology, and corporate Employment of persons with disabilities employees (excluding Female 19.1 19.4 19.4 In the first year of the program, trainees were sent to culture, that they can apply to the development of We work to expand employment opportunities for people re-hired workers) India and South Africa. In FY2018, we expanded the structures in overseas subsidiaries. with disabilities. We also help people with disabilities to range of destinations to include China and Europe. realize their potential and work with confidence and pride Hiring of foreign nationals by developing working environments suited to their No. of trainees from overseas group companies abilities and aptitudes. As a global company, we actively seek to hire overseas No. of trainees sent to overseas group companies In FY2018, the employment rate dropped due to factors nationals in Japan in addition to local hiring at our Region FY2017 FY2018 FY2019 (planned) such as the expiration of term of re-hired employees. overseas group companies. Region FY2017 FY2018 FY2019 (planned) China 3 1 ー India 1 1 1 Asia 15 7 5ー8 Hiring of employees who have reached retirement age Africa (South Africa) 1 1 ー We have set up a re-work system for employees who Kansai Paint employment rate of people with disabilities have reached the retirement age of 60 and who wish to China ー 1 ー FY2016 FY2017 FY2018 continue working to a maximum age of 65, with the aims Europe ー 1 1 Kansai Paint employment of providing vitality to the elder generation and passing 2.03% 2.03% 1.76% rate for FY2016 on and utilizing the techniques, skills and knowledge of Statutory employment older employees. rate 2.00% 2.00% 2.20%
35 36 ESG activities INTEGRATED REPORT 2019
Creating conditions for a healthy work-life balance Addressing human rights issues Voice from employee Kansai Paint recognizes the importance of achieving a good VOICE who used maternity leave system In keeping with the fundamental principle that a company religion, lineage, physical handicap, or any other reason. work-life balance. In addition to paid annual leave, we have exists for the happiness of people and society, the Kansai We have set out details on the above in the Kansai Paint established special paid leave programs comprising cumulative Industrial Coatings Division Paint Group strives to maintain wholesome working Corporate Ethics Pocketbook, a booklet handed out to leave that can be used to provide caregiving for relatives, Technical Dept. Functional Materials No. 2 (Tokyo) environments where people are free from harassment or group company executives and staff, and work to raise engage in voluntary activities, or recover from illness. There is Mariko Matsushita discrimination because of race, nationality, age, gender, awareness of human rights through training, etc. also a refreshment leave program. Previously, employees were able to use their annual paid leave I was able to use this system without hesitation as I knew in day or half-day units, but since FY2017, it has been possible that many employees return to work after maternity leave, Awareness-raising activities during human rights week to use leave in one-hour units up to a total of five days per and was given proper guidance from the company on the We respect the UN’s Universal Declaration of Human Rights. year. This change is part of our efforts to create an procedures I needed to undertake for maternity leave. During Human Rights Week, which runs from December 4 to Maternity leave went by in the blink of an eye. I was able environment in which employees can more easily make use of 10 every year as set out in the declaration, we hold activities to watch my child grow and whilst I was thrown into my their paid leave. first ever experience of childcare, it was an irreplaceable to promote awareness of human rights, and run a contest We also help employees to balance work with childcare. time for us both to develop as parent and child. for employees, including those from group companies, to Systems designed to support employees with childcare When I thought I’d try to juggle both childcare and a job, come up with their own human rights slogans. responsibilities include childcare leave, and the reduction of after experiencing the systems and the environment in In FY2018, we received around 900 entries for this contest. working hours until children graduate from elementary school. place to allow me to do this firsthand, I was so grateful. Furthermore, we are also creating environments where Today, I continue to make use of the company’s system of reduced working hours, and am giving my all every It's not just about “liking” – look that person in the face employees who are involved in caregiving for relatives can a when you greet them, that’s what’s important! day, both at home and work. I’m very satisfied. i ts s a continue working while providing care, including the reduction i i Thank you. What wonderful words for recognizing others. e t ies of working hours and leave that can be used to care for Accept and don't reject differences. The future opens up relatives, as well as a family care leave system which allows with a little understanding. employees to take up to a total of 365 days off. Human rights training in progress Initiatives aimed at tackling human rights issues Health management from the perspective of a company Through alliances with the Corporate Federation for The Health and Hygiene Subcommittee was established FY2018, it worked to improve mental health care for Dowa and Human Rights Issues, Osaka; the Industrial within the Environment Safety and Health Committee as employees, mainly through Employee Assistance Federation for Human Rights, Tokyo; and other industrial a dedicated organization that engages in health Program (EAP) services, in accordance with the Mental committee for the promotion of human rights; management for employees of Kansai Paint Group. In Health Promotion Plan. we actively participate in the projects of human rights groups and training held by government. Mental health care and follow-up after periodic health examinations • In FY2018, the following mental health training was conducted. Occupational Safety and Health
Trainees Training content The mandating of stress checks for employees Following the mandating of stress checks for employees, Occupational safety and health activities Change in the number of occupational accidents New employees Self-care Kansai Paint engaged industrial physicians to conduct e i st ia acci e ts t e i i ti e Newly appointed supervisors Line care and self-care stress check tests in each region of Japan and followed Kansai Paint considers its employees to be treasured 10 e i i ti e a e up by means including industrial physician interviews and company assets. Employees newly transferred overseas Self-care EAP counseling for employees with high levels of stress. We have initiated a range of activities aimed at stamping 8 Serving supervisors Line care and harassment out occupational accidents, helping all of our treasured assets to work in safety and good health. 7 7 Periodic health examinations In FY2018, we were able to achieve our goal of zero 6 Kansai Paint periodically holds training seminars in each accidents requiring time off work (one day or more off) 5 5 5 5 5 Mental health training for newly appointed and serving supervisors region to deepen employee understanding of mental for the first time in two years. 4 In mental health training for newly appointed and serving health care and lifestyle-related diseases. We have also We have some of the lowest figures for the frequency of 3 3 occupational accidents and severity of occupational supervisors, case studies were used to confirm the duty of care instituted a system for following up on employees 2 2 and the role of supervisors in mental health support and promote accidents in the manufacturing industry. However, our diagnosed with medical conditions after periodic health target is for nobody to become injured while at work. We 1 1 1 1 understanding of things to bear in mind in the workplace, and examinations and are striving to maintain and promote will continue to remain vigilant in our safety activities to 0 0 0 0 0 0 introduced communication techniques beneficial in team member the health of employees. ensure zero accidents, including minor injuries which do support as well as methods of overcoming crises. not require time off. 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 （ ）
Change in the frequency of occupational accidents Change in the severity of occupational accidents
Health seminar （ e e c ati ） Seve it 2.0 a sai ai t i st ies a act i e ica 0.2 a sai ai t i st ies a act i e ica 1.83 In 2018, we held a health seminar, 1.75 0.17 1.62 1.62 1.66 1.61 1.63 1.66 which was run by a guest instructor from 1.61 1.59 1.60 a major sports gym. Consisting of study 0.13 1.20 0.12 0.12 0.12 and training, the seminar aimed to raise 1.12 1.15 0.11 1.05 1.00 1.06 1.06 1.02 1.0 0.99 0.98 0.94 0.1 0.10 0.10 0.10 0.10 0.10 awareness among employees of the 0.09 0.09 0.09 0. 09 0.84 0.81 importance of good health and to help 0.72 0.72 0.07 0.09 0.88 0.85 0.88 0.90 0.07 them prevent lifestyle-related diseases 0.56 0.82 0.76 0.81 0.08 0.08 0.08 0.61 0.07 and get into shape by reevaluating their 0.06 0.06 0.29 0.29 0.30 0.30 lifestyles. 0.02 0.04 0.04 0.04 0.01 0.01 0.03 Health seminar held at Kansai Paint’s head office 0 0.00 0.00 0.00 0.00 0.00 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 （ ） 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 （ ）
Frequency ratio for accidents = Severity = (Lost-work days/Total man-hours) × 1,000 37 (Lost-work accidents (number of victims)/Total man-hours) × 1,000,000 38 ESG activities INTEGRATED REPORT 2019
Communication
Environmental safety and health inspections by management Distribution of original Japanese paper fans coated with ALESSHIKKUI MONTYART During these environmental safety and health inspections, the board. Also, while at the time of inspection there were In 2017, we worked together with a business group in traditional products and the functions of Japanese lime members of Kansai Paint’s top management check with their some facilities that had yet to repair the damage from Fukui Prefecture to develop a type of functional “washi” plaster, which has been used as an outstanding building own eyes the state of safety procedures at our seven plants, recent earthquakes or typhoons, all the repair work has one center, and 13 affiliated companies in Japan. since been successfully completed. Furthermore, from this (traditional Japanese paper), which adds the functions of material in Japan since ancient times. These inspections are conducted from September to October fiscal year, we began flooding drills at facilities located in Japanese lime plaster, “shikkui”, to the decorativeness of In addition, the fact that all employees have the same every year by a ten-person inspection team made up of a close proximity to the sea. These examples of independent washi, promoting traditional Japanese products and fan helped improve motivation among employees and central HSE manager as team leader and a central health remedial measures taken at facilities are also now being helping grow regional industries by the promotion of new increased our group’s sense of unity. manager, a coordination sub-team, and a sub-team of applied throughout our company via inspections. demand through this collaboration between Echizen experts in machinery, electricity, health, the environment, In light of the fact that other companies in the washi, one of Japan’s three major traditions of and so on. During the inspections, the team analyzes manufacturing industry continue to experience a series of papermaking, and our ALESSHIKKUI MONTYART, a equipment irregularities caused by such things as an accidents, we are providing particularly stringent guidance plaster coating that can be applied to flexible materials. insufficient understanding of safety measures, outdated on measures for safety assurance and disasters, and static To celebrate Kansai Paint’s 100th anniversary, we facilities, etc. electricity measures. Concerning safety management within During FY2018, the inspections focused mainly on the individual plants, we have been advising each and every produced a special Japanese paper fan, made from progress of a range of key areas based on the slogan employee to remain vigilant in taking responsibility for Echizen washi coated with ALES-SHIKKUI MONTYART, “Accident-free workplace through early detection and ensuring safety on a daily basis, which includes guidance for which we gave out to around 15,000 employees in our immediate remedial action for abnormalities”, chosen from partner companies working within factories and partnership group, both in Japan and overseas. among entries solicited from our group companies. The requests. Some of these employees took pictures of themselves inspections focused on: holding the fans and posted these together with •Status of implementation of static electricity measures explanations on SNS, etc. This initiative helped to •Risk assessment procedure showcase to a global audience the charms of Japanese •Handling of chemical substances •PCB disposal and plant wall perimeters •Safety assurance and disaster prevention measures and training •Horizontally organized procedures for disasters. Meaning the dissemination of disaster report case studies and spill prevention methods for cross-organizational implementation of recurrence prevention measures •Information sharing with on-site business partners Vietnam KANSAI-ALPHANAM PAINT CO., LTD. (Kansai Paint Official Facebook) From the inspections, we were able to confirm that countermeasures in response to accidents requiring workers to take time off in the previous fiscal year (in this case, becoming caught up in an agitator) had been taken across Central health, safety and environmental audit at an affiliated company
Safety and hygiene lectures Safety initiatives at overseas affiliates Every year, we invite guest speakers to come and give Kansai Paint affiliates do business worldwide and operate lectures to employees on the latest knowledge concerning production plants in China, Taiwan, the ASEAN region, safety and hygiene. India, Pakistan, Turkey, and other countries and plan Speakers come to give talks at multiple facilities, and we further expansion in the future. Kansai Paint employees also take steps to ensure that employees unable to attend assigned to these overseas production plants engage in on the day can listen to the lecture, such as through a live TV broadcast or by filming the lecture and handing out plant HSE management or support. Turkey KANSAI ALTAN BOYA SANAYI VE TIVARET A.S. U.S.A. U.S. PAINT CORPORATION Zambia KANSAI PLASCON AFRICA LTD. copies on DVD. This fiscal year, occupational therapist Yohei Sugawara (Euchronia Ltd.) gave a one-and-a-half-hour lecture on sleep Safety education and safety audits at Development Center: painting corridors at a nearby junior high school management, and how quality sleep can improve one’s overseas affiliates performance at work. Every year since 2009, we have been helping out with technical instructors from our company took part, including A total of 1,909 employees attended this lecture, including With the goal of preventing accidents and disasters at summer vacation volunteer work at elementary and junior former staff, helping deepen ties with the local community. members of the Head Office, Production Division, overseas affiliated companies, Kansai Paint systematically high schools neighboring the R&D Center (Hiratsuka City, Despite the intensity of the summer heat, around 50 people Technology Division, Business Division, and affiliated conducts safety audits of affiliates. In FY2018, we provided Kanagawa Prefecture), our group’s R&D hub. took part, including students, teachers and guardians, companies. safety guidance and conducted safety audits at affiliates in Painting work at the elementary school was cancelled due to watching them painting and enjoying themselves at the We learned that sleep is a physiological phenomenon, and Turkey and China. In the future, too, we will continue to that it is possible to get a good night’s sleep without turning implement such measures at joint ventures overseas. a typhoon, but painting at the junior high school went same time left quite an impression. to medicine by understanding biorhythms and the workings ahead as planned. In addition to providing the paint, five of the brain, and using this knowledge to make changes in one’s life. One’s quality of sleep is linked to safety and efficiency at work. We will apply what we learned through this lecture to reduce the number of accidents at work and improve efficiency.
Safety training at an affiliated company in China
Safety and hygiene lecture seminar at head office August 4: Preparing to start painting August 4: Painting in progress
39 40 ESG activities INTEGRATED REPORT 2019
Corporate Governance
Basic approach to corporate Corporate governance code Corporate governance organization governance We disclose our policies and initiatives concerning all of The corporate governance organization shown below ensures management transparency and soundness. Kansai Paint Group’s mission statement within our the principles set out in corporate governance code as corporate philosophy is “we leverage superior technology prescribed by the stock exchange. General shareholdersʼ meeting to contribute to our Customers and Society, in a For more details, please visit our website at the following i t e ts is issa s i t e ts is issa s i t e ts is issa s sustainable manner, with innovative Products and link: Services, through a competent workforce, built on a Policies and initiatives concerning the corporate a i ect s Eva ati c ittee it s e vis a culture of Customer Focus, Integrity and Respect to our governance code its te a i ect s tsi e i ect s Stakeholders.” https://www.kansai.co.jp/ir/governance/policy/index.html te a a it tsi e a it i ati c ittee s e vis s e vis i t e ts a its We believe that increasing the satisfaction of our a e e s a e e s customers through the coatings business, which is the core business of the Group, is the foundation and reason esi e t a a e e t c ittee for the Group’s existence, and that our commitment to contributing to the society at large by enhancing the i ati te a te a a it corporate value through the realization of customer it a iti Executive officers ate ve a ce c ittee satisfaction enables the Group to contribute to its i a cia a its office ia ce ti c ittee stakeholders including the shareholders, business partners, employees and local community. Corporate isis a a e e t c ittee a e a t e ts a governance is regarded as an important management affiliate companies ati a a e e t c ittee task in order to realize continuous improvement of corporate value. In order to ensure that the concept of “profit and fairness”, the cornerstone of our corporate activities, is understood and acted upon by Group officers Board of directors and employees, we will work toward improved awareness through putting into effect various measures. Outline of the board of directors (following general whom has experience as a CFO and possesses shareholder’s meeting, June 27, 2019) knowledge of finance and accounting. In terms of the The system of the Board of Directors consists of six diversity of these outside directors, they consist of one internal directors and three outside directors. One of the Japanese male, one Japanese female, and one non- internal directors is a non-Japanese national (president Japanese male, with all three individuals having Efforts to improve corporate governance of our subsidiary company in India). The three outside submitted notification as independent officers as directors are all former company managers, one of prescribed by the Tokyo Stock Exchange. Kansai Paint continues working to improve its corporate long term corporate values, as well as encourage governance while responding to amendments to laws coexistence and mutual prosperity between a range of e ce ta e i te a a tsi e e ce ta e a e a e a e e ce ta e a a ese a a a ese and listing rules, as well as changes in social and stakeholders, including shareholders, employees, i ect s t e a i ect s i ect s t e a i ect s i ect s t e a i ect s economic environments. By doing so, we aim to help our customers, business partners, and local communities. tsi e Group achieve sustainable growth and improve its mid to e e e t te a e a e a e a a ese a a ese Introduction of an executive officer system 2011 Following changes to our articles of association, the number of directors is reduced from 20 to 11 2013 Appointment of one outside director Appointment of two outside directors (including one woman) 2015 Introduction of a performance-linked stock-based compensation system Drawing up and disclosure of the Policies and Initiatives Concerning the Corporate Governance Code Board of Directors (Following general shareholder’s meeting, June 27, 2019) An evaluation committee is held to assess the effectiveness of the board of directors and rate the performance of 2016 directors and executive officers Affiliation Position Name Responsibilities and important concurrent positions Representative Director A nomination committee is held, and a review is held of candidate directors brought up at the general shareholders’ Kunishi Mori and President meeting of the same year Representative Director, Following changes to our articles of association, the term of appointment of directors is reduced from two years to Senior Managing Hidenori Furukawa In charge of Production, Technology, and Procurement 2017 one year Executive Officer Director, Managing Appointment of one non-Japanese director (internal) Jun Senoo General Manager of Corporate Business Development Div. Internal Executive Officer Introduction of a trust-type performance-linked compensation system to replace the performance-linked Director, Managing In charge of Sales, General Manager Coatings Business Div. and President Naoto Teraoka compensation system based on stock ownership Executive Officer of Kansai Paint Sales Co., Ltd Director, Senior Executive In charge of Management, General Manager Administration Div., General Manager 2018 Establishment of new Corporate Philosophy to mark Kansai Paint’s 100th anniversary Kazuhiro Yoshida Officer President's Office, General Manager Human Resources Planning Dept. Appointment of three outside directors (including non-Japanese/female members) → Comprising 1/3 of the board of Harishchandra Meghraj 2019 Director President, Kansai Nerolac Paints Ltd. directors Bharuka (Independent) Chairman of Nomination Committee, Chairman of Outside Director Keiji Yoshikawa Evaluation Committee Outside, (Independent) Nomination Committee, Evaluation Committee Independent Outside Director Tomoko Ando External Director (Audit & Supervisory Committee member), Press Kogyo Co., Ltd. Outside Director John P. Durkin (Independent) Nomination Committee, Evaluation Committee
41 42 ESG activities INTEGRATED REPORT 2019
Audit & supervisory board Executive officer system Outline of the audit & supervisory board (following prescribed by the Tokyo Stock Exchange. One of the We have instituted an executive officer system to clarify and flexibly to changes in the business environment. general shareholder’s meeting, June 27, 2019) internal audit & supervisory board members has many job responsibilities by separating management decision- Among the officers, the total number of non-directors is The structure of the audit & supervisory board consists of years of experience in our Group’s Finance and making and oversight functions from business execution 19 persons Japanese (male). two internal audit & supervisory board members and two Accounting Division, while one of the outside audit & functions and to establish a structure to respond speedily outside audit & supervisory board members. Both of the supervisory board members is a qualified chartered List of non-director executive officers (as of the general meeting of shareholders of June 27, 2019) internal audit & supervisory board members are Japanese accountant, with both individuals possessing knowledge males, while one of the outside audit & supervisory board of finance and accounting. Also, one of the outside audit Managing Hiromi Harakawa In charge of Quality and Environment, General Manager R&D Div. members is a Japanese male and one is a non-Japanese & supervisory board members is a qualified lawyer Executive Deputy General Manager Coatings Business Div, General Manager Technical Management of Automotive and Industrial Sawane Tagiri male. Both outside audit & supervisory board members overseas, and is learned in matters pertaining to law. Officer Coatings Business and Technical Development Div. have submitted notification as independent officers as Akihiko Yamanouchi Assistant to the Senior Managing Executive Officer in charge of Production General Manager Decorative and Protective Coatings Business Div, General Manager Corporate Business Div. No.4 Yoshinari Nakano Audit & supervisory board (following general shareholder’s meeting, June 27, 2019) Dept. Representative Director and General Manager Decorative Coatings Div. at Kansai Paint Sales Co., Ltd Senior Yoshihiro Nakamura Industrial Coatings Div., President of Kansai Paint (China) Investment Co., Ltd. Affiliation Position Name Responsibilities and important concurrent positions Executive Audit & supervisory board Officer Yasushi Nakao Assistant to the Senior Managing Executive Officer in charge of Production, General Manager Technical Planningiv. D Internal Akira Aoyagi member Takashi Morimoto General Manager Value Chain Strategy Office Audit & supervisory board Internal Hirokazu Hayashi Toshimitsu Muramatsu General Manager Technical Management of Decorative, Protective and Auto Refinish Coatings Business member Yu Akaki Corporate Business Development Div, Overseas Management Dept. (Independent) Nomination Committee, Evaluation Committee, Outside Audit Outside, Outside audit & Seiichiro Azuma & Supervisory Board Member of Nippon Steel Corporation Katsuhiko Kato Corporate Business Development Div., Overseas Management Dept. Independent supervisory board member Visiting professor of Ashiya University, Chartered accountant Hideyuki Teramoto General Manager SCM Division (Independent) Nomination Committee, Evaluation Committee, Lawyer, New Outside, Outside audit & Yoshizumi Matsuno Deputy General Manager Production Division, General Manager Hiratsuka Plant Colin P.A. Jones York State; lawyer, Guam General Manager Corporate Business Div. No. 3 Dept., Director and General Manager Protective Coatings Div. Kansai Independent supervisory board member Hiroshi Oka Professor of Doshisha University Paint Sales Co., Ltd. Executive Hideshi Hasebe General Manager Administration Division Financial Management Dept Officer General Manager Industrial Coatings Div, General Manager Corporate Business Div. No. 2 Dept., Director and General Kiyohide Toku Standards relating to the independence of outside directors and outside audit & Manager Industrial Coatings Sales Div. Kansai Paint Sales Co., Ltd. supervisory board members (excerpt) General Manager Automotive Coatings Div., General Manager Corporate Business Div. No. 1 Dept. Kazumasa Tomida Director and General Manager Automotive Coatings Sales Div. Kansai Paint Sales Co., Ltd. •Those with connections to Kansai Paint’s business partners Kansai Paint has set standards to ensure independence Hitoshi Nishibayashi Deputy General Manager Coporate Business Development Div. Overseas Management Dept. when appointing outside directors. Individuals to whom or donation recipients (including those to whom these any of the following apply are deemed not to possess criteria applied in the past) Junichi Kajima Deputy General Manager Automotive Coatings Div independence. •Those who have obtained money other than executive Tsutomu Araki General Manager Production Div compensation or other considerable assets from Kansai •Directors at Kansai Paint or its subsidiaries (excluding Paint (including those to whom these criteria has applied in outside directors at Kansai Paint or its subsidiaries), the last three years). Executive compensation executive directors, audit & supervisory board members •Relatives within the second degree of kindship and spouses (excluding outside directors at Kansai Paint or its of the aforementioned individuals (excluding those Total amount of compensation, etc. by executive category, total amount by type of compensation etc., and number of eligible subsidiaries), executive officers, accounting advisors (in individuals not considered significant) executives (FY2018) the event the accounting advisor is a corporate body, *Note that business partners with consolidated turnover of 2% or under, or Total amount by type of compensation, etc. (Millions of yen) including those employees expected to carry out these donation recipients/those who have received considerable assets of 10 millions Performance-linked of yen or turnover of 2% or under are deemed to be negligible and exempt Total amount of compensation Performance-linked duties), managers and other employees (including those Category Basic compensation stock-based No. of eligible executives from the above. (Millions of yen) compensation to whom these criteria applied in the past) compensation Directors (excluding 406 206 163 36 8 Number of board of directors’ meetings, audit & supervisory board members' meetings, evaluation committee and nomination outside directors) committee attended/number held, attendance rate (FY2018) Audit & supervisory board members Audit & supervisory Board of directors’ Evaluation Nomination (excluding outside Audit 65 65 ー ー 2 Division Position Name board members' Meetings (Total 21) committees a(Total 2) committees (Total 2) & supervisory board meetings (Total 13) members) Representative Director, President and CEO Hiroshi Ishino 21 (100%) － 2 (100%) － Outside executives 44 44 ー ー 5 Representative Director, Managing Kunishi Mori 21 (100%) － 2 (100%) － Executive Officer and COO 1. Compensation for internal directors Performance-based Stock Compensation for Board of Directors Director, Managing Executive Officer Masaru Tanaka 21 (100%) － － － Compensation for internal directors consists of basic and Its Details (https://www.kansai.com/investor-relations/ compensation, performance-linked compensation and meeting/index.html).” Director, Managing Executive Officer Koji Kamikado 21 (100%) － － － Internal performance-linked stock-based compensation. Performance-linked compensation and performance-linked stock Director, Managing Executive Officer Hidenori Furukawa 20 (95%) － － － Basic compensation is a fixed amount of monetary compensation compensation is determined as follows. First, the evaluation set according to the position and job content of directors. committee, a voluntary advisory committee comprising the Director, Managing Executive Officer Jun Senoo 21 (100%) － － － There are no set policies for determining performance-linked representative director, outside directors and outside audit & compensation by position. Performance-linked compensation is supervisory board members, evaluates the individual Director, Managing Executive Officer Shinji Asatsuma 21(100%) － － － monetary compensation which pays out an increased or performances of directors and executive officers, and reviews Director Harishchandra Meghraj Bharuka 21 (100%) － － － decreased amount calculated using the amount of performance- their executive compensation. Then, the board of directors makes linked compensation for the previous year, taking into a final decision based on the results of this process. An outside Outside Director Shigeaki Nakahara 4 (80%) － 2 (100%) － consideration the company’s performance and performance/ director is chosen as the chair of this committee, making for a Outside, Outside Director Yoko Miyazaki 21 (100%) － 2 (100%) 2 (100%) achievements of individual directors and is reviewed by the fairer, more transparent system. Independent evaluation committee. 2. Compensation for outside directors Outside Director Keiji Yoshikawa 16 (100%) － － 2 (100%) Performance-linked stock compensation is implemented at the Compensation for outside directors is determined taking into time of resignation of directors, etc. Under this system, directors Audit & supervisory board member Akira Aoyagi 20 (95%) 12 (92%) － － consideration the job content, and consists mainly of a fixed Internal are awarded points according to their position and level of amount of basic compensation. Outside directors are ineligible for Audit & supervisory board member Hirokazu Hayashi 21 (100%) 13 (100%) － － achievement, etc., of our targets for each fiscal year (EBITDA, performance-linked compensation and performance-linked stock Outside audit & supervisory board etc.). These points are then exchanged for stocks in our company compensation. Mineo Imamura 21 (100%) 13 (100%) 2 (100%) 2 (100%) etc. equivalent to the accumulated value of the issued points (or, Outside, member 3. Compensation for audit & supervisory board members Independent Outside audit & supervisory board “issuance of stocks in our company and payment of money or an Seiichiro Azuma 20 (95%) 12 (92%) 2 (100%) 2 (100%) Compensation for audit & supervisory board members is member amount equivalent to the conversion of these stocks into cash”). For more details, please see the sixth item of proposal of notice of determined taking into consideration the job content according to *Director Shigeaki Nakahara resigned at the 154th General Meeting of Shareholders, held on June 28, 2018, following the expiration of his term of office, and Keiji convocation of the 153th ordinary general meeting of whether the audit & supervisory board member is an internal or Yoshikawa was newly appointed as a directo r. shareholders entitled, “Determination of the Amount of an outside audit & supervisory board member, and consists As such, the number of meetings attended for both individuals differ from other directors. mainly of a fixed amount of basic compensation.
43 44 ESG activities INTEGRATED REPORT 2019
Compliance Discretionary advisory committees Our compliance systems and initiatives are as follows. Kansai Paint has established the following two discretionary advisory committees, which are working to strengthen its corporate governance. 1.Evaluation committee o an ro o on （1）Committee members (following the general shareholder’s meeting, June 27, 2019) This committee consists of two representative directors, three outside directors and two outside audit & supervisory
To comply with laws and regulations and fulfill our corporate social responsibility, Kansai Paint has clearly board members (chairman: outside director Mr. Yoshikawa). set out conduct guidelines that make “profit and fairness” the cornerstone of corporate activities. We also continuously instruct our employees about each situation. We also have set up a consultation desk for （2）Overview of most recent activities reporting compliance violations and appropriately deal with any reports through accurate information collection and disclosure. Period Agenda May, 2019 Evaluating the effectiveness of the board of directors (FY2018) June, 2019 Individual compensation and performance evaluation for directors and executive officers in FY2018 Kansai Paintʼs codes and rules *At this point in time, the committee consists of the following six members: Mr. Mori (president), Mr. Ishino (representative director), Ms. Miyazaki (director), Mr. Yoshikawa (director), Mr. Imamura (audit & supervisory board member), and Mr. Azuma (audit & supervisory board member).
o o o o on o o a or 2.Nomination Committee e e Et ics is a set i te a The Code of Conduct sets out provisions The Code of Behavior sets out standards （1）Committee members (Following the general shareholder’s meeting, June 27, 2019) regulations established with the aim of ensuring that executives and staff of for behavior for executives and staff of ensuring that executives and staff of Kansai Paint and its subsidiaries comply Kansai Paint and its subsidiaries, with This committee consists of three outside directors and two outside audit & supervisory board members (chairman: Kansai Paint and its subsidiaries conduct with various laws, regulations and social individual items including insider trading, outside director Mr. Yoshikawa). themselves in accordance with social norms. Anti-monopoly Law, various kinds of norms and morals, and that they pursue harassment, fair trading practices, etc. fair forms of business profit. （2）Overview of most recent activities Period Agenda January, 2019 Replacement of former president Mr. Ishino with new current president Mr. Mori r o o o a o r February, 2019 Regarding candidates to nominate as directors brought up during the general meeting of shareholders 1. Code of behavior concerning overall compliance 11. Code of behavior concerning the prevention of harassment 2. Code of behavior concerning antisocial forces a isc i i ati Regarding additional candidates to nominate as directors brought up during the general meeting of April, 2019 3. Code of behavior concerning the prevention of insider 12. Code of behavior concerning commercial transactions shareholders t a i 13. Code of behavior concerning dealings with business 4. Code of behavior concerning compliance with a t e s a t e e ate a ties *At this point in time, the committee consists of the following four members: Ms. Miyazaki (director), Mr. Yoshikawa (director), Mr. Imamura (audit & supervisory board ti a 14. Code of behavior concerning respect for intellectual member), and Mr. Azuma (audit & supervisory board member). 5. Code of behavior concerning the protection of security, etc. e t i ts 6. Code of behavior concerning social contributions, regional 15. Code of behavior concerning the gathering, recording and contributions and other public activities storage of information, and confidentiality 7. Code of behavior concerning the disclosure of information 16. Code of behavior concerning the handling of IT equipment About consultants/advisors with experience as company presidents 8. Code of behavior concerning the safety of products s c as c te s 9. Code of behavior concerning safety, health and the 17. Code of behavior concerning the handling of personal We have established a system of consultants and advisors. While these consultants and advisors sometimes undertake environment i ati business activities with industry organizations and business partners when current executives are too busy to attend, 10. Code of behavior concerning the effective utilization of 18. Code of behavior concerning the control of conflicts of assets a es ces interest between standpoints as an individual and an they are not involved in our company’s management. e ee Employment form/ Date of resignation as Name Position Term conditions president, etc. Tamotsu Shiraiwa Executive Advisor Part-time/Unpaid 2002/6/27 － Shoju Kobayashi Executive Advisor Part-time/Unpaid 2010/3/31 － Yuzo Kawamori Executive Advisor Part-time/Unpaid 2013/3/31 － Senior Corporate Until the end of the 2023 General Meeting Efforts to ensure compliance Hiroshi Ishino Part-time/Paid 2019/3/31 Advisor of Shareholders
1 n rna r or n y 3 o an ra n n
We have established a hotline for internal reporting as During training for new employees and managers, we Prevention of corruption/bribery part of a system enabling employees to make reports c ti e t c ct a se ies t ai i sessi s directly to the Compliance Promotion Committee rather overall compliance, as well as other training covering Our standards for the prevention of corruption and bribery are set out in our Code of Behavior, as follows. t a i t e a tes it i t e such things as competition laws and the prevention of organization. corruption for members of the Business Division or Code of behavior concerning compliance with the Code of behavior concerning dealings with business In addition, this hotline is run independently from those being posted overseas. In regard to insider management, with the stipulation that whistleblowers trading in particular, we hold drives four times a year Anti-monopoly Law partners and other related parties a e a te a it a tecte t i t a et t aise a a e ess a t ee e This code of behavior prohibits acts of all kinds which This code of behavior contains stipulations on how we disadvantageous treatment. understanding. conflict with the Anti-monopoly aw.L conduct ourselves in line with commonly-accepted norms During FY2018, we used the aforementioned corporate It also states that we shall comply with not only this law and social practices, declaring that we shall not engage ethics handbook to run study groups for executives and in Japan but also the equivalent laws of other countries. in acts which are in conflict with laws and regulations on 2 r on o a or ora an oo staff at major group companies, covering such areas as compliance with laws, regulations and social norms, and bribery, etc., such as refraining from giving gifts or We distribute a corporate ethics handbook and the prevention of corruption and harassment. entertaining staff from government offices or similar continuously provide compliance education to improve public organizations. It also states how we shall conduct employee awareness. ourselves in the same manner overseas, acting with an understanding of local customs, laws, regulations, etc.
We will continue holding compliance training with the goal of improving awareness among employees. Note that we have a completely clean record in this area, with not even a single legal violation involving bribery, etc.
45 46 ESG activities INTEGRATED REPORT 2019
Risk Management Other Initiatives
Risk management system IR activities The risk management system is as shown below. Kansai Paint carries out dialogue-oriented IR activities as individual meetings from institutional investors both a means of disclosing information in a fair, accurate and domestic and overseas. timely manner, and building excellent constructive We effectively utilize helpful opinions and concerns that relations with shareholders and investors. become apparent through dialogue to improve corporate e a esta is e t e isis a a e e t ittee t e se eve ti a Specifically, we hold a financial result briefing every half a values by providing feedback to top management and r ana n responding to risks that may have a significant impact on the business, to improve awareness on year for domestic institutional investors, attended by our related departments. o c isis c t a t e ic e cati a e i te e t a iate acti i c ises top management. For overseas institutional investors, our top management Content of main activities during FY2018 conducts IR activities overseas, and also participates Financial results briefings for domestic 2 ana n n actively in conferences held for overseas institutional institutional investors and analysts investors in Japan, thus creating opportunities for Conferences for overseas institutional The Risk Management Guidelines are a set of basic guidelines to help executives and staff of 5 a sai ai t a its s si ia ies e a a s e a e te tia is s a t e a e t e dialogue. investors t es t a acc ate i a e e e c t i i i e t e a a e Individual meetings for institutional Also, employees in charge of IR at our Corporate Around 220 Planning Office take the lead in dealing with requests for investors and analysts
ana n an a e is a a e e t a a as a t vi e a asic e sta i t es t a acc ate i a e e e c t i i i e t e a a e Other ESG data
ESG Index FY2016 FY2017 FY2018 Note
3 3 3 on an a Volume of waste water 184,213 m 215,246 m 191,991 m e cti a a vi es i ivi a sets a vice t ea it is s it a i Amount of industrial waste generated 17,410 t 17,500 t 16,340 t i e i cc e ce E Industrial waste recycling ratio 100% 100% 100% Plants with ISO 14001 certification 4 4 4 Ratio of female employees 10.1% 10.1% 10.2% Ratio of female managers 2.5% 2.8% 2.7% Average number of years of work 18.6 19.0 19.5 Risk management Male Female 19.1 19.4 19.4 In FY2018, an incident occurred at Kansai Paint’s and we were able to avert major damage at our plants, New recruits Female recruitment ratio 14.0% 10.8% 15.2% Hiratsuka Plant in which water-based paint spilled from a etc. Our safety confirmation system, introduced in the Number of employees taking maternity paint storage tank and leaked into underground soil (for previous fiscal year, came into full operation, helping us 9 36 14 more details, please see the press release issued on June assess the situation promptly. Another step we took as leave Total 1, 2018 https://www.kansai.co.jp/ir/news/index.html). part of our regular operations was to remind employees Male 0 23 7 Once the situation had become apparent, our Crisis to remain vigilant over phishing mail, etc., which have Female 9 13 7 Management Committee worked with the related become more frequent since the previous fiscal yea r. S Number of employees taking relatives 0 0 1 divisions to confirm the facts and assess the information, Overseas, our activities have included contacting care leave endeavouring to disclose and explain the details in a employees posted overseas urging them to exercise prompt and accurate manner and take measures. As a caution over demonstrations, etc., that have been Voluntary separation rate 0.75% 0.32% 0.70% Number of fatal accidents result, no impacts on the local environment were occurring in their respective countries. 0 0 0 confirmed, such as leakage outside the plant premises or In the future, we will continue scrutinizing information so (full-time employees) contamination of underground water. As such, the as to detect crises in advance, both in Japan and Number of fatal accidents 0 0 0 incident did not have a major impact on our track record. overseas, and will take care to deal with situations as (fixed-term employees) Today, we continue to remove as much contaminated soil and when they arise and reinforce our crisis Number of safety and hygiene as possible and monitor water quality. management systems. This will enable us to achieve Number of safety training attendees 2,071 1,981 1,909 lecture attendees, including from In addition, we also took measures to cope with traffic stable business management, which in turn will gain us related companies in Japan disruption across Japan caused by natural disasters, such more trust among customers and society and allow us to Donation amount (consolidated) 24,299,992yen 24,579,473yen 12,108,831yen as by having employees leave work early. As a result, all make even greater contributions to society. Fines and penalties relating to of our employees and their families remained unharmed, G 0 0 0 corruption *Items without descriptions are non-consolidated.
Information management policy Information management To ensure the legality of the business activities of Group In the past, we had only issued summaries of financial companies and promote efficient operation, the Company statements in Japanese, but have now starting issuing properly handles and collects information necessary for such statements in English. We will continue working to the conduct of business activities and correctly records provide overseas investors with information that they can and retains the results in accordance with laws and understand. regulations. To increase the transparency of business activities, the Company endeavors to disclose in an accurate and timely manner matters stipulated by laws and regulations, important information concerning business management, and information useful to society relating to business activities except for information recognized as trade secrets under normal social conventions.
47 48 Financial Section INTEGRATED REPORT 2019
10-Year Summary of Consolidated Financial Indicators ※Percentages are truncated beyond the first decimal point.
Consolidated Financial Indicators 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Net sales（Millions of yen） 222,401 236,984 256,590 294,053 320,453 349,333 328,118 330,235 401,977 427,425
Sales by Business Segment（Millions of yen）
Automotive 74,055 79,935 78,604 89,338 100,871 111,015 103,256 103,431 111,235 112,985
Auto Refinish 13,166 14,054 17,239 20,020 20,601 21,054 19,640 19,372 23,262 24,097
Industrial 56,790 64,517 67,137 75,031 81,944 87,309 81,888 83,448 111,887 122,193
Decorative 44,169 46,025 61,151 77,103 83,232 93,532 83,221 86,670 103,550 112,310
Marine & Protective 20,229 19,274 18,801 19,097 18,999 19,893 22,440 20,793 22,586 22,081
Others 13,990 13,178 13,657 13,461 14,804 16,528 17,670 16,519 29,455 33,758
Sales by Region（Millions of yen）
Japan 143,445 146,808 145,223 146,900 154,287 154,004 155,367 151,416 155,552 159,339
India 35,820 40,409 42,091 50,075 54,956 69,521 65,800 74,694 83,432 86,922
Asia 34,007 40,169 36,623 50,100 59,548 66,232 58,897 56,623 63,300 63,828
Africa − − 21,718 32,105 34,801 39,543 29,251 28,026 35,132 39,446
Europe 8,569 9,100 − − − − 17,772 16,830 59,098 71,934
Others 557 496 10,933 14,870 16,860 20,031 1,029 2,643 5,461 5,954
Ratio of Overseas Net Sales（%） 40.0% 42.6% 47.2% 53.4% 55.6% 59.6% 57.6% 58.9% 65.3% 66.1%
Operating income（Millions of yen） 20,505 21,101 19,315 24,171 29,636 31,580 34,772 35,310 35,802 32,306
Operating income to net sales ratio（%） 9.2% 8.9% 7.5% 8.2% 9.2% 9.0% 10.6% 10.7% 8.9% 7.6%
Ordinary income（Millions of yen） 22,602 23,534 21,446 28,353 35,471 37,725 39,714 40,025 33,241 34,838
Ordinary income by Region（Millions of yen）
Japan 12,041 12,494 12,903 15,562 18,347 17,760 21,469 23,535 19,051 19,552
India 4,964 4,935 4,888 5,423 5,392 7,799 9,195 11,622 13,366 11,051
Asia 4,878 5,390 3,204 5,703 8,363 8,293 7,651 6,569 431 5,398
Africa − − 14 476 1,186 1,443 -594 -3,732 -4,965 -4,043
Europe 659 418 − − − − 703 1,024 4,395 2,360
Others 59 295 435 1,185 2,180 2,428 1,289 1,004 963 518
Adjustment -0 0 1 1 − − − − − −
Ordinary income to net sales ratio（%） 10.2% 9.9% 8.4% 9.6% 11.1% 10.8% 12.1% 12.1% 8.3% 8.2%
Net income attributable to owners of the parent（Millions of yen） 11,830 12,675 13,996 17,758 21,560 20,409 28,343 24,168 17,701 17,405
EPS（Earnings per share）（Yen） 44.56 47.73 52.70 66.62 80.91 76.61 106.41 93.16 68.80 67.68
Adjusted ROE（Return on equity）（%） 7.7% 7.7% 8.3% 9.6% 10.2% 8.3% 10.9% 9.5% 6.7% 6.4%
Dividend payout ratio（%） 22.4% 21.0% 19.0% 18.0% 18.5% 19.6% 17.9% 23.6% 39.2% 44.3%
Dividends per share（Yen） 10.00 10.00 10.00 12.00 15.00 15.00 19.00 22.00 27.00 30.00
Capital expenditures（Millions of yen） 5,175 6,277 13,559 18,867 15,509 13,034 11,443 13,617 16,782 23,018
R&D expenses（Millions of yen） 5,516 5,582 5,184 5,141 5,268 5,323 5,046 5,297 6,592 6,547
Depreciation（Millions of yen） 7,052 6,976 7,167 6,984 8,446 10,289 9,742 10,153 13,176 13,917
Cash flows from operating activities（Millions of yen） 19,582 18,252 10,358 25,079 25,486 31,957 31,470 29,146 33,509 35,632
Cash flows from investing activities（Millions of yen） -7,673 -14,246 -21,949 -13,360 -16,145 -19,544 -14,789 -97,020 -33,756 -17,461
Cash flows from financing activities（Millions of yen） -3,220 -4,741 14,684 -3,424 -6,511 -9,632 -14,834 60,264 8,059 -6,964
49 50 Financial Section INTEGRATED REPORT 2019
Consolidated （Millions of yen） （Millions of yen） Consolidated Statements of Income （Millions of yen） As of March 31, As of March 31, As of March 31, As of March 31, Fiscal Year ended Fiscal Year ended Balance Sheets 2018 2019 2018 2019 March 31, 2018 March 31, 2019
Assets Liabilities Net sales 401,977 427,425 Current assets Current liabilities Cost of sales 269,945 294,161 Cash and deposits 65,088 74,614 Trade notes and accounts payables 73,592 71,140 Gross profit 132,032 133,264 Trade notes and accounts receivables 114,556 112,486 Short-term borrowings 27,414 12,135 Selling, general and administrative expenses 96,230 100,958 Securities 8,579 3,148 Short-term borrowings from unconsolidated subsidiaries and affiliates 80 130 Operating income 35,802 32,306 Finished goods 35,914 37,549 Current portion of long-term debt 4,307 162 Non-operating income Current portion of convertible bonds Work-in-process 5,027 5,569 − 40,126 Interest income 1,407 1,342 with stock acquisition rights Raw materials and supplies 25,658 26,121 Dividend income 1,546 1,680 Accrued expenses 9,273 9,908 Other 11,371 9,758 Equity in earnings of unconsolidated subsidiaries and affiliates − 2,786 Income and enterprise taxes payable 4,211 4,219 Allowance for doubtful receivables （3,038） （3,076） Miscellaneous income 1,510 1,096 Provision for bonuses 5,330 4,864 Total current assets 263,158 266,172 Total non-operating income 4,465 6,905 Provision for loss on guarantees − 2,219 Non-current assets Non-operating expenses Other 12,069 12,903 Property, plant and equipment Interest expense 1,509 1,872 Total current liabilities 136,279 157,810 Buildings and structures, net 54,196 55,100 Loss on disposal of inventories 232 374 Non-current liabilities Machinery, equipment and vehicles, net 26,141 28,898 Equity in losses of unconsolidated subsidiaries and affiliates 1,364 − Convertible bonds with stock acquisition rights 100,937 60,160 Tools, furniture and fixtures, net 6,968 6,787 Provision of allowance for doubtful receivables 2,316 823 Long-term debt 369 8,434 Land 25,230 24,226 Foreign currency exchange loss 459 635 Deferred tax liabilities 28,491 25,182 Construction in progress 11,376 12,432 Miscellaneous expenses 1,144 667 Net defined benefit liability 8,237 8,607 Total property, plant and equipment 123,913 127,444 Total non-operating expenses 7,025 4,373 Retirement benefits for directors and corporate auditors 104 109 Intangible assets Ordinary income 33,241 34,838 Provision for management board incentive plan trust 39 95 Leasehold right 3,270 3,215 Extraordinary income Other 4,444 3,074 Software 2,845 2,547 Gain on sale of property, plant and equipment 137 150 Total non-current liabilities 142,625 105,664 Software in progress 194 461 Gain on sale of investment securities 1,573 2,015 Total liabilities 278,904 263,474 Goodwill 47,203 39,782 Gain on sale of shares of subsidiaries and affiliates − 855 Net assets Other 24,232 21,320 Gain on liquidation of subsidiaries − 31 Shareholders' equity Total intangible assets 77,745 67,327 Gain on revision of retirement benefit plan 760 − Common stock 25,658 25,658 Investments and other assets Total extraordinary income 2,472 3,053 Capital surplus 13,232 22,342 Investment securities 99,812 84,032 Extraordinary losses Retained earnings 230,255 237,721 Investments in capital 16,347 16,458 Loss on sale or disposal of property, plant and equipment 555 431 Treasury stock, at cost （25,264） （25,537） Loans receivable 163 111 Impairment loss 301 673 Total shareholders' equity 243,882 260,185 Write-down of securities and investment securities − 50 Loans receivable to unconsolidated 604 − Accumulated other comprehensive income subsidiaries and affiliates Loss on liquidation of subsidiaries − 294 Net unrealized holding gains on securities 36,363 29,876 Loss on disaster − 144 Net defined benefit asset 10,217 10,436 Deferred gains on derivatives under hedge accounting 1,423 622 Early extra retirement payments 597 410 Deferred tax assets 6,678 6,764 Foreign currency translation adjustments （6,732） （21,439） Provision for loss on guarantees − 2,219 Other 8,232 12,992 Remeasurements of defined benefit plans 1,393 770 Total extraordinary losses 1,455 4,225 Allowance for doubtful receivables （5,544） （7,604） Total accumulated other comprehensive income 32,447 9,831 Income before income taxes and non-controlling interests 34,258 33,666 Total investments and other assets 136,512 123,190 Non-controlling interests 46,096 50,644 Income taxes – current 15,156 13,172 Total non-current assets 338,172 317,963 Total net assets 322,425 320,661 Income taxes – deferred （3,334） （760） Total assets 601,330 584,135 Total liabilities and net assets 601,330 584,135 Total income taxes 11,821 12,411 Net income 22,437 21,254 Net income attributable to non-controlling interests 4,735 3,849 Net income attributable to owners of the parent 17,701 17,405
Consolidated Statements of （Millions of yen） Fiscal Year ended Fiscal Year ended Comprehensive Income March 31, 2018 March 31, 2019
Net income 22,437 21,254 Other comprehensive income Net unrealized holding gains（losses） on securities 4,537 （6,163） Deferred gains（losses） on derivatives under hedge accounting 1,423 （800） Foreign currency translation adjustments 6,175 （12,209） Remeasurements of defined benefit plans 598 （622） Shares in other comprehensive income of equity method affiliates （10） （5,892） Total other comprehensive income 12,724 （25,689） Comprehensive income 35,161 （4,434） Comprehensive income attributable to： Owners of the parent 30,673 （5,210） Non-controlling interests 4,488 776
51 52 Financial Section INTEGRATED REPORT 2019
Consolidated Statements of Changes in Net Assets Consolidated Statements of Cash Flows （Millions of yen） Fiscal Year ended Fiscal Year ended Fiscal year ended March 31, 2018 （Millions of yen） March 31, 2018 March 31, 2019 （April 1, 2017 - March 31, 2018） Shareholders' equity Cash flows from operating activities Common stock Capital surplus Retained earnings Treasury stock Total shareholders' equity Income before income taxes and non-controlling interests 34,258 33,666 Balance at the beginning of the year 25,658 14,421 218,880 （25,088） 233,872 Depreciation and amortization 13,176 13,917 Changes during the period Impairment loss 301 673 Cash dividends paid （6,326） （6,326） Amortization of goodwill 3,687 4,780 Net income attributable to owners of the parent 17,701 17,701 Increase in allowance for doubtful receivables 4,044 2,249 Purchase of treasury stock （175） （175） Decrease in net defined benefit liability （3,016） （492） Disposal of treasury stock 0 0 0 Interest and dividend income （2,954） （3,022） Purchase of shares of consolidated subsidiaries 6 6 Interest expense 1,509 1,872 Change in transactions with non-controlling shareholders （1,196） （1,196） Equity in earnings（losses） of unconsolidated subsidiaries and affiliates 1,364 （2,786） Change in treasury stock arising from change in Gain on sale of investment securities （1,573） （2,015） （0） （0） equity in entities accounted for using equity method Write-down of investment securities − 50 Net changes in items other than shareholders' equity Gain on sale of shares of subsidiaries and associates − （855） Total changes during the period − （1,189） 11,374 （175） 10,009 Loss on sale or disposal of property, plant and equipment, net 417 281 Balance at the end of the year 25,658 13,232 230,255 （25,264） 243,882 Increase in trade notes and accounts receivables （9,802） （2,408） Increase in inventories （4,003） （6,783） Accumulated other comprehensive income Increase（decrease） in trade notes and accounts payables 11,691 （90） Net unrealized Deferred gains on Foreign currency Total accumulated Non-controlling Total net Remeasurements of 3,326 6,519 holding gains on derivatives under translation other comprehensive interests assets Other, net （ ） defined benefit plans securities hedge accounting adjustments income Subtotal 45,775 45,556 Balance at the beginning of the year 31,229 − （12,548） 794 19,475 42,817 296,165 Interest and dividends received 4,709 5,275 Changes during the period Interest paid （1,555） （2,078） Cash dividends paid （6,326） Income taxes paid （15,420） （13,121） Net income attributable to owners of the parent 17,701 Net cash provided by operating activities 33,509 35,632 Purchase of treasury stock （175） Cash flows from investing activities Disposal of treasury stock 0 Payments into time deposits （3,344） （1,344） Purchase of shares of consolidated subsidiaries 6 Proceeds from withdrawal of time deposits 269 805 Change in transactions with non-controlling shareholders （1,196） Net decrease in securities 731 5,629 Change in treasury stock arising from change in （0） Purchase of property, plant and equipment （15,486） （21,210） equity in entities accounted for using equity method Proceeds from sale of property, plant and equipment 396 1,294 Net changes in items other than shareholders' equity 5,133 1,423 5,816 598 12,971 3,278 16,250 Purchase of intangible assets （755） （1,250） Total changes during the period 5,133 1,423 5,816 598 12,971 3,278 26,260 Purchase of investment securities （147） （212） Balance at the end of the year 36,363 1,423 （6,732） 1,393 32,447 46,096 322,425 Proceeds from sale of investment securities 2,037 3,083 13,367 1,122 Fiscal year ended March 31, 2019 （Millions of yen） Purchase of investments in subsidiaries resulting in change in scope of consolidation （ ） （ ） （April 1, 2018 - March 31, 2019） 436 0 Shareholders' equity Payments for investments in capital （ ） （ ） 294 677 Common stock Capital surplus Retained earnings Treasury stock Total shareholders' equity Payments of loans receivable （ ） （ ） 378 429 Balance at the beginning of the year 25,658 13,232 230,255 （25,264） 243,882 Collection of loans receivable 2,794 975 Changes during the period Payments for settlement of derivative, net （ ） （ ） 943 1,911 Cash dividends paid （7,617） （7,617） Other, net （ ） （ ） 33,756 17,461 Net income attributable to owners of the parent 17,405 17,405 Net cash used in investing activities （ ） （ ） Purchase of treasury stock （274） （274） Cash flows from financing activities 18,678 14,570 Disposal of treasury stock 0 0 0 Net increase（decrease） in short-term borrowings （ ） 304 5,431 Change in transactions with non-controlling shareholders 9,110 （2,322） 6,788 Proceeds from long-term debt 2,248 795 Net changes in items other than shareholders' equity Repayments of long-term debt （ ） （ ） 175 9 Total changes during the period − 9,110 7,465 （273） 16,302 Purchase of treasury stock （ ） （ ） 6,326 7,617 Balance at the end of the year 25,658 22,342 237,721 （25,537） 260,185 Cash dividends paid （ ） （ ） Cash dividends paid to non-controlling interests （2,105） （1,630） Proceeds from share issuance to non-controlling shareholders − 12,235 Accumulated other comprehensive income 4 − Net unrealized Deferred gains on Foreign currency Total accumulated Non-controlling Total net Purchase of investments in subsidiaries without change in scope of consolidation （ ） Remeasurements of holding gains on derivatives under translation other comprehensive interests assets Other, net （62） （8） defined benefit plans securities hedge accounting adjustments income Net cash provided by（used in） financing activities 8,059 （6,964） Balance at the beginning of the year 36,363 1,423 （6,732） 1,393 32,447 46,096 322,425 Effect of exchange rate changes on cash and cash equivalents 1,044 （2,171） Changes during the period Increase in cash and cash equivalents 8,857 9,035 Cash dividends paid （7,617） Cash and cash equivalents at beginning of period 52,314 61,171 Net income attributable to owners of the parent 17,405 Cash and cash equivalents at end of period 61,171 70,207 Purchase of treasury stock （274） Disposal of treasury stock 0 Change in transactions with non-controlling shareholders 6,788 Net changes in items other than shareholders' equity （6,486） （800） （14,706） （622） （22,616） 4,548 （18,067） Total changes during the period （6,486） （800） （14,706） （622） （22,616） 4,548 （1,764） Balance at the end of the year 29,876 622 （21,439） 770 9,831 50,644 320,661
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2019
INTEGRATED REPORT
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