CEO Message

Accept Changes as an Opportunity for Reform and Continuously Provide Value to Stakeholders

Since its founding, the NAGASE Group has handled products which support many aspects of individual lifestyles with chemicals as its base. The NAGASE Group is always looking ahead at technological trends and identifying the products, technologies and services that will be needed in the future. In this way, the Group continues to transform its business on a flexible basis. Unconstrained by the existing business foundation, the NAGASE Group continues to expand the domain and scope of its business.

In 2020, the COVID-19 pandemic has led to dramatic social and economic changes on a global scale. With the continuing trade tensions between the U.S. and China, and the further rise of protectionism, the situation we find ourselves in grows ever more uncertain. As the international balance of power predicated on free trade continues to shift, we understand that it will be extremely important for the NAGASE Group to find its place.

The global spread of COVID-19 has served as a keen reminder of the importance of our employees and families’ well-being, securing an emergency supply chain, and a stable financial base. We accept the sudden changes in the times, the environment, and the needs of all our stakeholders as opportunities for the NAGASE Group to reform and will work quickly to generate new value creation.

Under these conditions, we believe it is important to maintain the position we have held up until now, which is to conduct investment towards the future. We will continue our prior investment in DX (Digital Transformation) and also invest in next-generation information communications-related businesses such as 5G, which will become critical to future communications infrastructure, regardless of results in the short term.

NAGASE’s Business Designer Initiatives Embody “Identify, Develop and Expand”

The concept of a Business Designer has been very important since I became president of the Company. Not limiting ourselves to trading, we will align the six functions of the NAGASE Group (Trading, R&D, Investment, Logistics, Global Network, and Manufacturing) and generate business alongside our partners. Through this concept, we embody the NAGASE Group’s value proposition: “Identify, Develop and Expand.”

I believe that the best thing about being a trading company is the degree of freedom. We are able to work on new businesses unconstrained by a single product or technology. If we add the NAGASE Group’s unique manufacturing and development capabilities to the equation, the possibilities of a Business Designer are endless. We currently possess six functions, but do not intend to limit ourselves to this number. For instance, entirely new functions such as AI may be added. Thinking about the situation in that way is exhilarating.

We continue to share and maximize knowledge within the NAGASE Group as well as strengthen collaboration to create new business and values. We are also crossing business and segment boundaries to launch new initiatives such as business related to next-generation information communications and materials for 3D printers. We hope that our customers can count on us to deliver new and improved value.

Looking Back on the Fourth Year of the Mid-Term Management Plan ACE-2020

Reform of Our Profit Structure

In fiscal 2019, the NAGASE Group completed the fourth year of its mid-term management plan ACE-2020. We are now seeing both what we could and could not accomplish. Although there are some companies that have not disclosed their outlook for the current fiscal year, we disclosed our outlook based on the presumption that the impact of COVID-19 on the NAGASE Group’s business domains will largely improve in the second half of the fiscal year. The inability to meet our goals for ACE-2020 is something that I take very seriously as a manager. Since this is the final year of the plan, we will continue to pursue our targets. Meanwhile, we will be required to reform swiftly in anticipation of an end to the COVID-19 pandemic. I believe that balancing our ACE-2020 goals with the current situation is the critical issue for this year.

With regard to reform of our profit structure among our KPI (key performance indicators), we saw improved profits in the focus areas of Life & Healthcare and Manufacturing as well as major developments in the North America region.

The acquisition of U.S.-based company Prinova in August 2019 spurred reform of our profit structure in the Life & Healthcare segment, and also largely improved the NAGASE Group’s overall portfolio. We also established the new Food Ingredients Department in April 2020 to expand the NAGASE Group’s food ingredients business. Although Europe and the U.S. are currently our main focus in this division, we are also beginning to develop measures to branch out into Asia.

In the Electronics Business, we steadily took on challenge after challenge, but have not achieved the success we had expected due in part to the market environment. We understand that portfolio reevaluation within the segment is required. Businesses such as next-generation information communications systems and semiconductors are undoubtedly growing fields, so we will continue to pursue profitability in those areas.

Another major KPI is the improved profitability of our Manufacturing Business. Remarkable progress toward this effort was made in various indices through the efforts each NAGASE Group company put into reform. We are also continuing to withdraw from unsuccessful businesses which we have determined do not have future potential. I believe the Manufacturing Business is headed in the right direction.

One of the major themes of ACE-2020 is inorganic growth through the introduction of a new earnings model. We made it a goal to spur inorganic growth, which will become a growth engine in the future. This will be in addition to organic growth, which has made full use of existing management resources. However, right now there appear to be a number of measures that are not producing concrete results. Regretfully, this happened because our feasibility assessment of business investments was overly optimistic. This is one point we will improve when it comes time to draft the next mid-term management plan.

Reform of Our Corporate Culture

As for reforming our corporate culture, I believe that the C* in ACE—that is to say, commitment—is extremely important. Under our previous corporate culture, we were unable to seriously assess achievement of the objectives laid out in the mid-term management plan. Yet after thoroughly implementing a PDCA cycle, we have seen satisfactory progress, including a sense of responsibility toward the results and an awareness of working together toward a common goal.

The existence of Prinova was also a major factor. In welcoming Prinova to the NAGASE Group, we became keenly aware of the need to not forcefully impose Japanese methods but to construct a new system while listening to the other party’s ideas. As a result, the degree of understanding and awareness of the completed system was extremely high. This, combined with a sense of speed, resulted in a PMI (Post-Merger Integration) that is capable of producing satisfactory results. I think that this will be a tremendous asset for the NAGASE Group, which aims to be a true global company. From now on, I would like to keep a global perspective when making efforts such as reevaluating employees’ working styles.

Improve the Efficiency of Board of Directors Meetings

Although we have not deliberated on the separation of management and execution, we are aware of the immense importance of that division. That is part of the reason we increased the number of outside directors from two to three and aim to more actively promote strategic discussions. We anticipate that the opinions of these three outside directors will be better reflected at Board of Directors meetings. We established the likes of a Nomination Committee and a Compensation Committee to ensure greater transparency. We think that this will further enhance the effectiveness of the Board of Directors and, in turn, raise corporate value.

Making Full Use of Various Management Resources to Create New Value

Food Ingredients Business

In the NAGASE Group, Nagase ChemteX Corporation has treated enzymes as a food ingredient. After incorporating Hayashibara Co., Ltd. as a subsidiary in 2012, the NAGASE Group honed its unique manufacturing capabilities. However, for many years, securing an overseas distribution route was a challenge for the NAGASE Group as a whole. When the NAGASE Group made a subsidiary of Prinova, which possesses a strong sales network in Europe and the U.S., in 2019, all the pieces were finally put into place. As the undeveloped market of Southeast Asia expands, we intend to rapidly accelerate development while expanding our product lineup and services. Establishing the Food Ingredients Department was merely the first step; in the future, we hope to group all related organizations together and operate on a global scale. Because safety is number one when it comes to food ingredients, we are making even greater efforts to deal with international laws and regulations as well as BCP.

Next-Generation Information Communications Business

Looking ahead to 5G, which has recently been put into practical use, and even further ahead to 6G, we can see that in the future there will undoubtedly be a need for many chemical ingredients with entirely new properties. We believe that the next-generation information communications business is a business in which the NAGASE Group can contribute to the development of cutting-edge infrastructure by maximizing the technology and networks it has amassed up until now. Cutting-edge research development is always advancing, and needs are constantly being created. If chemical ingredients possessing new properties are utilized as the basic technology of next-generation information communications, then new value will be created which can help change the world. We will work together by utilizing the NAGASE Group’s unique strengths which are focused on ingredients and ingredient processing technology.

Digital Transformation

The NAGASE Group is working on developing a Group-wide digital marketing platform as the first step toward producing its own form of Digital Transformation (DX). The NAGASE Group launched a team in the U.S., where there is an abundance of talented individuals with specialized skills. Then in April 2020, it also established a new organization in Japan called the Global Marketing Office to make digital marketing widespread throughout the entire Group. Yet digital marketing is not NAGASE’s only form of DX. For instance, services for a new material development system using AI (material informatics, or “MI”), which the NVC (New Value Creation) Office developed in cooperation with IBM, is scheduled for release within the current fiscal year. Other projects include information sharing and streamlining of the NAGASE Group’s in-house manufacturing business and management of overall supply chain logistics using blockchains. We hope to advance these projects in an integrated manner and create a model that will outpace our competitors.

Looking Ahead to the Next Mid-Term Management Plan

We have spent time discussing measures for the next mid-term management plan starting from fiscal 2021. Social and economic conditions were radically altered at the beginning of the year due to the spread of COVID-19. However, we believe that the so-called “post-coronavirus” world will practically overlap with the world we envisioned when discussing the next mid-term management plan with regard to matters such as the acceleration of digitalization. We were fortunate that we were able to get a jump start in that regard, but feel that we must accelerate efforts even more.

We uphold the phrase “maintain the highest standards of integrity” as our management philosophy. From now on, the way we do business as a trading company will change as digitalization progresses. Nevertheless, we believe that deep down what customers seek from us is quality and trust. No matter the business environment, we always go back to this mentality of “highest standards of integrity.” We aim to achieve a sustainable world where people live with peace of mind.

I kindly ask for your continued understanding and cooperation.