Sakai Chemical Industry : New Medium-Term Management Plan Briefing Presentation Transcription [

Sakai Chemical Industry Co., Ltd.

New Medium-Term Management Plan Briefing Session

May 28, 2024

Event Summary

[Company Name]	Sakai Chemical Industry Co., Ltd.
[Company ID]	4078-QCODE
[Event Language]	JPN
[Event Type]	Medium-term Management Plan Announcement
[Event Name]	New Medium-Term Management Plan Briefing Session
[Fiscal Period]
[Date]	May 28, 2024
[Number of Pages]	32
[Time]	16:00 - 16:42
	(Total: 42 minutes, Presentation: 26 minutes, Q&A: 16 minutes)
[Venue]	Webcast
[Venue Size]
[Participants]
[Number of Speakers]	2
	Toshiyuki Yagura	President, Representative Director
	Shinji Ogama	Executive Officer

Sakai Chemical Industry Co., Ltd. New Medium-Term Management Plan Briefing Session

Presentation

Moderator: We would like to continue with the explanation of the new mid-term management plan. President Yagura, please start.

Yagura: Once again, I am President Yagura. Thank you.

I will now explain our new mid-term management plan, "Transformation: BEYOND 2030."

First, please take a look at this title. We have set a three-year plan, "Transformation: BEYOND 2030," for the period from the fiscal year ending March 31, 2025, to the fiscal year ending March 31, 2027.

Unlike previous plans, this mid-term management plan is a plan to create a vision for people's lives, society, and the Company in the future, while continuing to make changes, with a clear distinction between businesses that will grow toward that vision and businesses that will shrink or withdraw from the market. The title reflects this concept.

Sakai Chemical Industry Co., Ltd. New Medium-Term Management Plan Briefing Session

Please look at the first page. This is the key slide among all pages.

I am pleased to present the entirety of this plan and express my determination to complete this transformation with my commitment.

As the future vision of Sakai Chemical Industry, we will transform ourselves into an excellent company capable of contributing to society with Smart Material. In order to move toward this vision, we have positioned "Transformation: BEYOND 2030" as a stage of change for the future. And with determination, we intend to complete these three transformations. I would like to ask for your continued support.

Sakai Chemical Industry Co., Ltd. New Medium-Term Management Plan Briefing Session

I would now like to explain the future direction of Sakai Chemical Industry, or BEYOND 2030.

We have imagined life in the year 2050, a future beyond 2030.

As a result, we have four major images. One is a society where virtual space and real coexist. Even in such a world, human contact and communication will not disappear but will continue, based on the premise of a society in which people intervene. I also imagine that lifestyles will continue to diversify, and that communication will be both remote and real.

With this lifestyle in mind, we, as a chemical company, thoroughly discussed what we could do with chemistry, and came to the following three conclusions.

The first is to protect nature, the second is to support the development of an advanced information society, and the third is to support people's health. In other words, we want to be a company that can contribute to society in the three business areas of environment/energy, electronics, and life science/healthcare.

Then, how exactly will we contribute to society in the three business areas? It is shown on the next page.

Sakai Chemical Industry Co., Ltd. New Medium-Term Management Plan Briefing Session

In fact, this page is one of my favorites.

While exchanging various opinions with young engineers and researchers, we came up with various themes that we are working on, want to work on, or need to work on. Here is a pictorial representation of it. The center in the foreground is the present, and the outward direction is toward the future.

Our management mission is Chemistry for a Friendly Future, or creating materials that support the comfort and security of society, and we are a company with many such seeds. The items listed here are representative, and there are many smaller items, some of which are still under confidentiality agreements and cannot be written about, and many more to come. Additionally, if we gather the power of the group, we can process it and distribute it from right to left.

We intend to actively invest management resources in highly profitable business seeds that can contribute to the future.

Sakai Chemical Industry Co., Ltd. New Medium-Term Management Plan Briefing Session

In order to do so, we must first liquidate the businesses that are currently unprofitable.

Therefore, we have positioned the mid-term management plan "Transformation: BEYOND 2030" as a three- year period to move toward the ideal state of Sakai Chemical Industry. While reorganizing our businesses, we will grow through the dual pillars of inorganic and organic chemistry, and shift to businesses that are useful to society with an eye on the future.

Our numerical targets for the fiscal year ending March 31, 2027, are operating income of JPY9 billion and ROE of 8%. And we will aim to achieve ROE of 12% by 2030.

To return to the original topic, we had initially planned to announce the new mid-term management plan by the end of 2023. When we announced our financial results a year ago last year, we also promised that we would announce it by the end of the year.

However, due to the poor performance and the large deviation from the plan, we were told by various investors and also harshly told by outside directors at the Board of Directors' meeting that we must first thoroughly reflect on the previous mid-term plan, SAKAINNOVATION 2023.

Therefore, we have reflected on the previous mid-term plan carefully.

Sakai Chemical Industry Co., Ltd. New Medium-Term Management Plan Briefing Session

This page shows how we have looked back, dividing into the results and issues. In this new mid-term plan, we will accelerate the results and steadily address the issues.

In the following pages and beyond, we would like to explain the issues we face.

Sakai Chemical Industry Co., Ltd. New Medium-Term Management Plan Briefing Session

First of all, I would like to talk about quality and safety.

As for the quality issue, at the end of last year, Kaigen Pharma received an administrative sanction for violating the Act on Securing Quality, Efficacy and Safety of Products Including Pharmaceuticals and Medical Devices. In response, we have announced and implemented an improvement plan. We will disclose our progress as appropriate. We will not make the same mistake again.

At the end of last year, I also visited the Okusawa Plant, where the improper act at Kaigen Pharma took place, and discussed it at length with the employees. I am also planning to visit the Nagano Plant this July. I will continue on-site visits and employee dialogue not only with Kaigen Pharma but also with our other affiliates.

Two fire accidents also occurred. Giving the highest priority to safety, not only I, but also the executives and safety personnel have taken the initiative to walk around the plants and have dialogue with employees, and we will continue to do so.

Individual measures are as described here. We would like you to take a look at them later.

Sakai Chemical Industry Co., Ltd. New Medium-Term Management Plan Briefing Session

Next are the results against the numerical targets.

In the previous mid-term plan, the targets for the final year that ended March 31, 2024, were an operating income of JPY8 billion and an ROE of 6%. In the fiscal year ended March 2020, we have achieved a reasonable level of performance, but there was no continuity. The previous fiscal year ended in a significant underachievement. We need to continue to improve our performance.

Sakai Chemical Industry Co., Ltd. New Medium-Term Management Plan Briefing Session