Medium-Term Management Plan artience 2027|Integrated Report 2025 Management Strategy: Accelerate growth by investing resources to develop strengths

The Medium-Term Management Plan artience 2027 started with growth as the top priority as a plan to "go on the offensive." In fiscal 2024, the first year of the program, progress was generally made as planned, with net sales, operating income, and ordinary income all reaching record highs. Profits increased due to the depreciation of the yen and stabilization of raw material prices overseas provided a tailwind, while investment tax incentives in Turkey also boosted earnings.

artience In 2027, we place particular emphasis on transforming our business portfolio. We have set two main directions with the policy of utilizing the technology and know-how we have cultivated so far to further strengthen our strengths. The first is to transform into existing highly profitable businesses. We will further enhance the profitability of our existing businesses in which we have strengths and accelerate our development in overseas markets. The other is the creation of strategic priority businesses. We will create new businesses that will serve as pillars of future growth and grow them significantly. In FY2024, the former exceeded expectations, and we succeeded in capturing growth in the Indian market.

When you think of business portfolio transformation, you may generally think of large-scale business divestitures, divestments, and mergers and acquisitions. However, our business is characterized by a dispersed market and region. While this is less efficient than deploying a specific product to a large market, it is an advantage that can address a wide range of needs and is a barrier to entry for competitors. Another advantage is that if some businesses are sluggish, they can be supplemented by others.

Therefore, the transformation of our business portfolio is not simply a replacement of our business, but rather an expansion of products that meet market needs and high value-added products in each area. In order to achieve this, we will make the most of our strengths in existing markets and regions, such as sales capabilities, technological capabilities, and global networks.

Existing businesses are divided into three categories: "Growth Businesses," "Earnings-based Businesses," and "Structural Reform and Strategic Restructuring Businesses," and we have clarified the policies for each of these businesses.

Of these, we will concentrate our management resources on growth businesses, mainly in packaging-related fields such as liquid inks, pressure sensitive adhesives, and laminating adhesives. artience At the start of 2027, we had set a target of operating income of 9.0 billion yen in fiscal 2026, but we have already achieved a profit of 10.5 billion yen in fiscal 2024, which is significantly higher than our plan. In addition to our target India, Southeast Asia, and Turkey, this was due to the expansion of our business in Europe and the United States.

Rather than developing the domestic business model as it is, we believe that our strategy of adapting to the needs of each region has been successful. In the Indian market, for example, technical services make or break customer satisfaction. We have a system in place that allows us to immediately rush to the scene when any problems arise during the use of our products, and we have developed local national staff who are responsible for responding to the situation. In Thailand, we also made a local can coatings manufacturer a subsidiary and expanded our market share by developing products that meet customer needs, which led to an improvement in our ability to procure raw materials. In this way, we have raised the operating income target for this business for FY2026 to 12.0 billion yen as an area where growth is expected in the future.

On the other hand, there are still some countries that have room for growth. For example, in Indonesia, local companies have strong ties with each other, and it is not easy for foreign companies to enter the top of the market. We will address these issues with a view to forming alliances with local companies and M&A. In addition, we will focus on Africa as a new growth area. We already have a subsidiary in Morocco, but we will develop our business in earnest while selecting a place to expand into consideration of the vast market in Africa.

The earnings-based business is a strong business mainly in Japan, but we believe that future demand growth will be limited due to the impact of population decline and other factors. For this reason, we are striving to secure profits by increasing the ratio of high-value-added products, integrating product types, reviewing raw materials, and requesting revisions to appropriate prices. Our steady efforts under these policies have paid off, and we have already achieved 8.1 billion yen in fiscal 2024 compared to our target of 6.7 billion yen in operating income in fiscal 2026. However, in Japan, prices continue to rise due to the depreciation of the yen and the increase in costs of raw material manufacturers, and further efficiency and price revisions are indispensable. The revised target for fiscal 2026 is 8.0 billion yen from the perspective of maintaining the current level of profit. For business continuity, it is essential to save labor and labor, as well as to comply with environmental regulations. In particular, we will aim to create smart factories at our production bases so that we can reduce the burden on workers in order to acquire human resources.

On the other hand, with the progress of paperless and digitalization, the offset ink market in Japan is still shrinking. In order to respond to this situation, we have been thoroughly improving efficiency in accordance with the size of the market in the Structural Reform and Strategic Restructuring Project, and a breakeven is in sight. We believe that shifting personnel, utilizing business DX, consolidating bases, and reviewing our production system have led to cost reductions, and we will continue to do so in the future.

In the Printing & Information Business segment as a whole, operating income increased significantly from ¥2.4 billion in FY2023 to ¥4.9 billion in FY2024 due to our focus on UV-curable inks. This is an example of how shifting management resources to growth areas has yielded concrete results.

Classification of the main existing businesses and operating profit targets

In the creation of new businesses, the main axis is the mobility and battery-related business. We have made large-scale investments in carbon nanotube (CNT) dispersions, which contributes to improving the performance of lithium-ion batteries for EVs, as our next pillar of growth. In FY2024, the EV market stagnated due to the reduction of EV targets in each country, the reduction of subsidies, and delays in infrastructure development, and we were forced to revise our plans. However, the shift to EVs for environmental purposes is unwaveringly a global trend, and we are focusing on development with an eye on the future in collaboration with automakers and battery manufacturers. We are confident that our technologies and the superiority of our network with customers are becoming increasingly strong, and we will contribute to solving issues such as driving range, charging time, and cost in the spread of EVs.

In addition to cathode materials for ternary (nickel-cobalt-manganese) batteries, which are our main products, we also believe that it is necessary to support LFP (lithium iron phosphate) batteries and anode materials, which are highly price-competitive. In addition, we are working on the development of all-solid-state batteries, which are attracting attention as next-generation technologies, and LMFP (lithium manganese iron phosphate) batteries, which are an improvement over LFP batteries, with the aim of supporting all material areas of lithium-ion batteries in the future.

Another priority area, the Display & Advanced Electronics Business, performed well in FY2024, covering the delay in the CNT dispersions business. In this field, the scale of each product is not very large, but we will enhance our lineup of semiconductor-related products and develop them as a "product group" to increase our competitiveness and profitability.

Operating Income of Strategically Priority Businesses

From fiscal 2025 onward, we will continue to strengthen our business portfolio management by prioritizing overseas expansion and investing in strategic priority businesses. When it comes to transforming our business portfolio, all Director recognize the need and agree on the investment of resources. With regard to individual business plans, discussions from multiple perspectives are becoming more active.

The expansion of our overseas business to the current level is also the result of our bold investments in increasing production capacity during the period of the previous Medium-Term Management Plan. In order to continue this trend, we plan to invest 60 billion yen over three years in artience 2027, exceeding depreciation expenses.

It is also important to take environmental measures, such as reducing CO2 emissions and developing products that do not use organic solvents. As the movement toward decarbonization accelerates globally and environmental regulations become stricter in each country, we have set a target of increasing the sales ratio of sustainability-contributing products to 80% by 2030. This is in line with the needs of the times, and we will continue to respond flexibly to the different regulations and market characteristics of each country.

We are aiming for an overseas sales ratio of 60% or more by FY2026, and securing human resources globally is the key to further growth. In order to enhance our sales and technical support capabilities that adapt to the needs of each region, we will actively recruit local human resources and focus on their development. As a group, we will take an aggressive stance to achieve the goals of artience 2027 and strive to realize significant growth.