SustainabilityMessage from the President and CEO
INTRODUCTION
In May 2025, an incident occurred at our Aboshi Plant that resulted in the death of one of our employees. We sincerely mourn the loss of this employee and extend our deepest condolences to his family, and we also sincerely apologize to all those who have been concerned about this incident. Human life is our top priority, and these kinds of incidents should never occur. As a company, we will stand by the bereaved family and offer the fullest support, and we will fully cooperate with on-site inspections and investigations by the relevant authorities to determine the cause as quickly as possible and fulfill our corporate responsibility. As a company that upholds safety, quality, and compliance as the priority foundations of our business activities, we will reaffirm our commitment to these foundations among all employees and proceed with our business activities with a strong determination to never allow such incidents to occur again.
Thoughts upon Assuming the Position of President and CEO
In April 2025, I took over from former President Ogawa and assumed office as President and CEO.
Recently, our operating environment has been changing rapidly, with global environmental issues and natural disasters, the worldwide spread of novel infectious diseases, conflicts between nations, and the emergence of rapidly advancing technologies such as AI. We need to build a greater capacity to respond to changes than ever before for the Daicel Group to continue sustainable growth in such times.
During my time as Senior Managing Executive Officer, I was engaged in extensive discussions with the then President and CEO and project members to formulate the fourth Long-Term Vision, DAICEL VISION 4.0, with the goal of achieving it by FY2031/3. The vision we set forth, “to achieve both a sustainable society and growth of the Daicel Group while contributing to the creation of a circular society,” represents our aspiration and pride as a chemical manufacturer. It also indicates the pathway for embodying our Basic Philosophy of “the company making lives better by co-creating value.”
Under the Mid-Term Management Strategy, Accelerate 2025, based on the Long-Term Vision, we have pushed forward transformation of our business structure through selection and concentration, focused on improving productivity as well as asset and capital efficiency, and expanded value co-creation through collaboration with diverse partners. I am assuming the position of President and CEO as we pass through the final year of the Mid-Term Management Strategy and enter the latter half of realizing the Long-Term Vision, and I recognize my mission as steadily reaping returns on the growth investments made up to now, developing businesses that I hope will become the Daicel Group’s earnings pillars in the next generation, and socially implementing and commercializing the innovative technologies we have seeded and developed. We will clearly demonstrate our commitment to growing these areas into contributing revenues by 2030 and linking them to further growth beyond FY2031/3. All officers and employees of the Daicel Group will work together to achieve these goals, and we will also focus on developing the next generation of management candidates who will discuss and realize our vision for the future.
My Origins as a Businessperson
In 1984, I joined Daicel, which was then a mid-sized chemical manufacturer, and was assigned to the sales department of the current Materials SBU, which handles organic chemicals, and took my first steps as a member of society. During my Monozukuri Training (manufacturing training) at the plant, despite knowing little about the challenges of reaction control in organic synthesis, I engaged in a candid discussion with senior colleagues on the production floor who treated me as an equal, even though they referred to me as a bold youngster. I still have not forgotten how, when I returned to headquarters after six months of training, my seniors recognized my growth and sent me off with smiles.
The turning point came when, at 32, I was dispatched as President and CEO and sales manager to our Singapore subsidiary, which was then newly established. I spent a very intensive five and a half years there. Upon arrival, the Company was struggling with cash flows, and I worked tirelessly with the accounting staff to devise improvement strategies. During this time, Singapore was in the midst of the high economic growth period, and I experienced both the extremes of the bubble economy and the subsequent severe economic downturn triggered by the Asian financial crisis that began in Thailand. While striving to expand sales, we faced significant challenges such as order cancellations due to reduced demand, credit issues, and postponed investments, which had a significant negative impact on our business operations. However, as the Asian economies returned to a growth trajectory and the efforts made up to that point bore fruit, sales at the local subsidiary saw significant growth. These experiences provided a valuable opportunity for me to reaffirm the importance of risk management and the differences in speed among overseas companies. Within the Company, I also faced challenges in human capital development and team management, but through trial and error, I gained valuable insights, not only from successes but even more from failures. In my greeting to new employees in FY2026/3, I said, “There is growth that can only be gained through failure. I hope you will use failure as an opportunity for your own growth.” Looking back on my working life, I remember more clearly the times when I overcame crises and failed, and the many people who helped me through those times, than the times when things went smoothly. While also gaining a sense of accomplishment in my work, I was able to build relationships with many people with whom I remain close today, and this was a major turning point in my working life. These experiences formed my foundation as a businessperson and continue to serve as a source of strength in my management work.
Coal mine inspections in Australia during my time in raw material procurement, and my period in Singapore
Our Vision and the Daicel Group’s Strengths
The goal we aim for, of course, is to realize our Basic Philosophy as “the company making lives better by co-creating value” and our Long-Term Vision of a circular society. To this end, we will continue to provide value unique to Daicel in the areas of health, safety/security, convenience/comfort, and environment, which are among the many social issues facing society today and where we can leverage the strengths of the Group.
However, in order to achieve this, it is essential that the Daicel Group maintain a strong corporate structure that can sustain growth regardless of the changes in the operating environment. Under the current Mid-Term Management Strategy, we have been accelerating the transformation of work styles by reviewing research and development and production systems in each business area, and reforming corporate organizational structures and the human resource system under the company-wide strategy of selecting and concentrating businesses through portfolio management and improving the efficiency of management through asset compression and cost reduction to continuously enhance profitability and the ability to create business.
The Daicel Group has significant strengths that cannot be easily replicated by other companies.
First, we are the only manufacturer in Japan that produces acetic acid, which has a wide range of applications, we have built a strong acetyl chain based on acetic acid, and provide products that boast top market share both in Japan and overseas. In particular, cellulose acetate, based on technologies accumulated over many years, has been widely adopted in acetate tow, polarizing protective film for liquid crystal displays, and other applications, and recently it is expected to see growing demand as an environment-friendly resin. In polymer chemistry as well, we supply engineering plastics essential for automotive weight reduction and electrification and the advancement of electronic devices, and demonstrate a global presence. At the same time, we are expanding our business in a wide range of fields, including automobile airbag inflators, pyro-fuse, and drug delivery devices, utilizing our unique pyrotechnics technology.
Furthermore, we have developed, the DAICEL Production Innovation, a plant operation support system, which has brought about dramatic improvements in the stability, safety, and productivity of chemical plant operations, as well as cost reductions. In FY2021/3, we developed the Autonomous Production System enhanced with AI and are currently implementing it in various plants. We are advancing efforts so that Daicel’s manufacturing contributes not only to our own value but to that of the entire supply chain. As a first step, we are optimizing operations at our Aboshi Plant, Ohtake Plant, and Toyama Filter Tow Co., Ltd. (hereinafter, “Toyama Filter Tow”), which became a wholly owned subsidiary in April of this year, in order to optimize the entire chain from upstream raw materials such as methanol and pulp to downstream products such as acetate tow, thereby expanding the scope of value co-creation beyond the boundaries of the Group.
Another feature of the Group is that, together with universities and partner companies, we are advancing innovative technology development as with approach unique to Daicel for building a circular society. These technologies include Ultra Solar-reduction, which uses nanodiamonds to reduce CO2 to CO and convert it into raw materials using only sunlight, a Microfluidic Device Plant, which reproduces conventional large-scale, energy-intensive chemical plants in an energy-efficient desktop size, and the Biomass Value Chain Concept, which applies technology to gently melt wood and circulate Japan’s forests as a renewable resource. Although the timeframes for realizing these technologies vary, we will materialize the establishment of and exit strategies for them, and work toward their social implementation.
While expanding our business into various fields such as medicine, electronics, automobiles, and daily necessities, the Daicel Group, which aims for groundbreaking technological innovation, may seem like a difficult-to-understand chemical company to outsiders. However, I believe that it is precisely because of these unique businesses and technological innovation capabilities that we can secure a distinctive position as an interesting chemical manufacturer that stands out from other comprehensive chemical manufacturers, and grow while balancing ecology and economy. To achieve this, we will expand our top-line revenue by strengthening our core Materials Business, which serves as the foundation for our earnings, and our Engineering Plastics Business and Safety Business, which are driving growth, while nurturing our Medical/Healthcare Business and Smart Business, which are next-generation growth initiatives, and we will then develop these five businesses into major revenue pillars. In addition, we will increase the number of businesses and product lines that contribute to society in the environment field, which is one of our focus areas. Some of these goals cannot be achieved by the Company alone, and collaborations and M&As will also be necessary. We will continue to pursue all possibilities with an open mind, refine the strengths of the Group, and work together with all employees to continue as a company full of resilience and growth potential and endowed with high potential and unique characteristics. This is how I see the Daicel Group’s vision. Precisely because change is rapid and the outlook is uncertain, we at the Daicel Group will not hesitate to make a drastic transformation and move forward toward our vision.
Review of FY2025/3 and Outlook for FY2026/3
Looking at the current situation, although the world economy in FY2025/3 was affected by China’s economic slowdown, the situations in Ukraine and the Middle East, and rising prices, the Group’s main markets were supported by a recovery in demand, and for automotive- and electronics-related products we steadily captured sales opportunities and increased volumes.
As a result, sales increased in almost all business segments, with net sales reaching 586.5 billion yen (up 5.1% year on year), marking five consecutive years of revenue growth, and EBITDA reached a record high of 102.4 billion yen (up 6.5% year on year). However, operating income was 61.0 billion yen (down 2.2% year on year) due to an operational issue that occurred at a plant for the carbon monoxide (CO), which is a raw material for acetic acid. We carried out equipment upgrades and maintenance enhancements at the CO plant in FY2025/3 and implemented permanent measures during regular maintenance in FY2026/3. Going forward, we will maintain stable operations, stabilize raw material procurement by expanding the types of coal that can be used as raw materials, and steadily realize cost advantages through the long-term oil-coal differential.
For the FY2026/3, although the global economy remains uncertain due to factors such as Trump’s tariffs, the Chinese economy, and the situation in the Middle East, we expect revenue to increase due to higher sales volumes resulting from the increased production of engineering plastics, which we have invested in for growth, as well as the continued full production and sales of acetate tow. Operating income is expected to decrease due to factors such as the resolution of CO plant issues; an increase in depreciation and amortization expenses as well as temporary, but regular maintenance costs; and foreign exchange effects. However, we anticipate an increase in net profit and EPS due to the reduction of extraordinary losses from business restructuring in FY2025/3 and the continued sale of cross-shareholdings. Also, EBITDA is expected to decrease slightly but remain near the 100 billion yen level. To secure steady growth, we will continue business-structure reforms with a focus on our business portfolio, including selection and concentration of businesses, and swiftly complete short- and medium-term cost-reduction initiatives such as lowering variable costs through process changes for key products and substantially cutting inventory costs to practice well-organized management.
Growth Strategies Focusing on the Business Portfolio
As reflected in our low PER, I recognize as a manager that a major issue for management is that expectations for the Group from outside are low on a broad level, not only in the stock market, and that we have not fully communicated our growth strategies in a way that is fully understood. In fact, although earnings have trended upward over the past five years, compared with the future vision drawn up when formulating the Mid-Term Management Strategy, businesses that were meant to become new earnings pillars have struggled to grow, resulting in an earnings structure overly dependent on certain products. As previously mentioned, the future growth strategy for the Daicel Group is to steadily reap the benefits of growth investments to boost top-line growth, and then use the generated cash to develop businesses that we expect to serve as the next-generation earnings pillars and to increase the number of businesses that drive growth. In addition to such organic growth, we aim to raise corporate value to the next level by socially implementing innovative technologies through co-creation. We will present details of our growth strategies in the Daicel Report 2025, including the Mid-Term Management Strategy and Business Strategy, but the basic concept is as shown in the figure below.
We are currently analyzing the outcomes and issues of the Mid-Term Management Strategy “Accelerate 2025,” while formulating the next Mid-Term Management Strategy that will serve as a roadmap for the FY2027/3-FY2031/3 period. The issues we place particular emphasis on are expanding the scale and improving the profitability of the Medical/Healthcare Business, which provides materials and solutions for life sciences and healthcare, and the Smart Business, which supplies products to the electronics market, and these businesses are both positioned as next-generation businesses. Both businesses boast products with world-leading market shares and several themes with promising commercial potential, and we will work to expand the businesses through appropriate resource allocation and increased speed. Another important issue is clarifying the exit strategies for our R&D themes. We will allocate resources according to short, medium, and long-term themes and aim to contribute to earnings as soon as possible.
People and Organizations that Execute Growth Strategies
Human resources are the most important asset in corporate management. The business activities of the Daicel Group are supported by more than 10,000 employees. I believe that the driving force behind Daicel is the fact that each and every employee, with their diverse perspectives from around the world, respects and cooperates with one another, demonstrate their individual strengths, and that the growth of people is the growth of the Company. What is important is foremployees themselves to think about what kind of company they want to work for and what kind of workplace they want to create, and to make daily efforts in their respective workplaces. Based on this, the Company has made continuous efforts to improve the internal workplace environment. Specifically, we have implemented various measures centered on the corporate department, including the human resource system, salary structures, welfare programs, women's empowerment, career challenges, promotion of young employees, and the active participation of senior employees. We will continue to focus on enhancing the internal environment based on people-centered management.
I have visited many companies, met management leaders and employees, and observed how they worked. Based on that experience, I believe thriving companies share one common feature. It is that middle managers, such as department heads and team leaders, act as true leaders, uniting their teams and expressed their candid opinions, even to superiors or top management. It is a form of energy that is invigorating even to onlookers.
I want the Daicel Group to be that kind of company. Of course, among the Group’s middle managers, diverse human capital are active, including people with engaging personalities, with advanced skills, and who demonstrate outstanding technologies and skills. However, I believe there is still room for growth, where these individuals can further demonstrate their potential and create an organization with explosive growth. Although top-down management is important for maintaining discipline, bottom-up vitality is equally essential for developing people and organizations. We aim to be a company where leaders accumulate a wide range of experiences and learn from both successes and failures before assuming leadership roles, thereby maximizing organizational vitality through a well-balanced approach. To accelerate this development, we are also pursuing the establishment of foundational systems and mechanisms, such as a more appropriate human resource system, from the perspective of human capital investment.
As priority initiatives to enforce compliance, we are advancing the creation of Visualize, Voice, Listen and Respond workplaces where everyone can freely speak and listen to opinions, and “Bad News First & Fast,” under which matters that are hard to report or likely troubles are reported and consulted at an early stage with the team, and swift and appropriate responses are taken to minimize a negative impact, in an aim to strengthen field capabilities in an environment where individuals can work comfortably. We position these activities as important not only for compliance but also for enabling individuals to maximize their capabilities while generating strong power as an organization and team. By fostering a corporate culture that is more open and vibrant than ever before, we believe that we will be able to promote co-creation across departments and divisions and resultantly generate innovative ideas and themes that will change the future of Daicel. We plan to incorporate new frameworks to realize this vision into our next Mid-Term Management Strategy.
To Our Stakeholders
The Daicel Group is advancing its business strategy and financial strategy in two areas: expanding the scale of its business and building a lean and robust financial structure, in order to meet the expectations of our stakeholders, including our shareholders and investors, for continued growth.
We will enhance corporate value and shareholder value by managing with a focus on asset and capital efficiency. With our aspiration to be “the company making lives better by co-creating value,” we aim to enhance our own corporate value and broaden co-creation with supply-chain partners; universities; research institutes; government bodies; industry competitors; and parties from other fields industries that share the same aspiration, to deliver greater value to society.
We will continue to deepen dialogue with and seek understanding and cooperation from various stakeholders including business partners, shareholders and investors, and local communities, working to realize people’s well-being and a sustainable society.