A Message from the President

“Targeting growth over the long term by providing products that accurately address social imperatives Representative Director, President and CEO DIC Corporation Yoshiyuki Nakanishi

Building Robust Corporate Health and Growth Drivers

The DIC Group is a leading multinational chemicals organization comprising 174 companies in 63 countries and territories. Printing inks account for approximately 30% of consolidated sales, while organic pigments, the principal raw material used in printing inks, account for around 20%. We are the world’s leading manufacturer of polyphenylene sulfide (PPS) compounds—key engineering plastics—with a global market share of approximately 27%. We also supply a wide range of distinctive fine chemicals products, including polymers and liquid crystals (LCs) that contribute to the development of society and our customers. Having formulated a growth scenario that includes concrete long-term targets for consolidated net sales and operating income of ¥1,000 billion and ¥100 billion, respectively, in fiscal year 2025, we are currently implementing a variety of measures aimed at powering further growth.
In printing inks and synthetic resins, both businesses with stable earnings bases, we are shifting to a way of conducting business that will facilitate sustainable growth. To this end, we are taking steps to optimize production configurations and reduce costs in mature markets, notably North America, Europe and Japan, on the assumption that appropriate demand will decline. At the same time, we are emphasizing a shift to sustainable products such as waterborne and ultraviolet (UV)-curable resins and accelerating the expansion of our operations in promising markets, particularly in Asia, with the goal of reinforcing our already substantial global market presence.
We are concentrating our allocation of management resources on a global basis in businesses that we expect to drive growth, notably thin-film transistor (TFT) LCs, functional pigments, PPS compounds and packaging materials. With demand for packaging materials rising, we built production facilities for liquid inks for food and beverage packaging in Indonesia and Turkey. We also built a PPS compounds production facility in the People’s Republic of China (PRC), the automobile industry’s principal production base. All three of these facilities commenced operations in fiscal year 2016. In the inkjet inks business, we are promoting the development of new products that will facilitate our entry into promising new areas.
In addition, we are expediting efforts to create next-generation businesses that respond to evolving requirements in areas such as electronics materials, packaging and healthcare. In light of increasing social imperatives pertaining to environmental issues, artificial intelligence (AI) and the Internet of Things (IoT), among others, we are leveraging our proprietary technologies and ingenuity to provide high-value-added products to customers around the world.
Through these and other efforts, we are working to ascertain the needs of individual businesses to build a balanced, diversified business portfolio, thereby ensuring a robust earnings structure. By remaining abreast of social imperatives and realizing distinctive growth drivers that stimulate demand, we are confident that this will enable us to achieve our targets for fiscal year 2025.

Record-High Operating Income and Ordinary Income in Year One of DIC108

In fiscal year 2016, the first year of our current medium-term management plan, DIC108, we reported consolidated net sales of ¥751.4 billion. Operating income amounted to ¥54.2 billion, while ordinary income reached ¥55.8 billion, both record highs.Net income attributable to owners of the parent was ¥34.8 billion. Return on equity (ROE) was 12.9%. Dividends* were ¥100.00 per share, an increase of ¥20.00, while the payout ratio was 27.3%.

  • *Adjusted to reflect the impact of a consolidation of shares implemented on July 1, 2016.

Expanding Efforts and Picking Up the Pace

Fiscal year 2017, the second year of DIC108, is an important year for us strategically. When we kicked off DIC108, we described it as an extension of its predecessor, DIC105, under which we made progress toward improving our financial health—evidenced by a debt-to-capital ratio*1 of 47%, exceeding our target of 50%—and declared our intention to shift gears, that is, to adopt an active stance toward driving growth. To this end, we budgeted ¥150.0 billion over three years to strategic investments, including in mergers and acquisitions (M&As).
In January 2017, we announced that we had entered into a capital and business alliance with Taiyo Holdings Co., Ltd., which is engaged in the manufacture and sale of specialty inks, investing ¥24.9 billion. Taiyo Holdings is one of the world’s leading manufacturers of solder resist*2 for printed wiring boards (PWBs). We supply the company with materials used in these products, including polymers and pigments. In addition to expanding sales of existing products, we look forward to capitalizing on synergies yielded by the alliance to promote the efficient development of next-generation products, including materials for PWBs. Looking ahead, we will continue to actively pursue M&As that will further propel growth and will move appropriately and swiftly on a number of potential deals currently being explored.
In the area of R&D, we are breaking free of focus on exclusively independent efforts, making use of venture capital and other external resources through open innovation to accelerate the creation of new businesses. In January 2017, we commenced construction of a new technical building at the Central Research Laboratories in Japan with the goal of ensuring the effectiveness of efforts to grow technologies in such cutting-edge fields as printed electronics.

  • *1Debt-to-capital ratio (D/C) ratio: Interest-bearing debt / (Interest-bearing debt + Net assets)
  • *2Solder resist is an insulating materials used to protect circuit patterns on PWBs.

The “Color & Comfort” Brand Slogan

Representative Director, 
President and CEO DIC Corporation Yoshiyuki Nakanishi

Healthcare is a crucial area in which we are working to create next-generation businesses under DIC108 by capitalizing on our foresight and tireless R&D efforts. Since commercializing viable technologies for mass managed cultivation of the edible algae Spirulina in 1977, we have launched a variety of Spirulina-derived health food products and supplements. In recent years, we launched Linablue®, a natural blue food coloring. In 2013, Linablue® became the first natural blue food coloring to be approved by the U.S. Food and Drug Administration (FDA). Underscored by a rapid shift in consumer preference from artificial to natural food colorings, particularly in North America and Europe, Linablue® continues to attract attention from the perspectives of food safety and security.
Linablue® and our printing inks and pigments businesses underscore our affinity for businesses involving “color.” We have introduced a new brand slogan, “Color & Comfort,” with the aim of boosting recognition of the DIC name and bolstering corporate value and, since fiscal year 2016, have implemented an ambitious branding program. In October 2016, we introduced a new television advertisement in Japan that communicates the message of the DIC brand. We are currently implementing a variety of important branding initiatives in the 63 countries and territories in which the DIC Group has operations to bolster awareness of the value that we provide to stakeholders and in doing so to help instill a greater sense of solidarity across the Group.

Pursuing Sustainable Management and Realizing Record-Breaking Operating Results

Recognizing that incorporating environmental, social and governance (ESG)-related considerations is essential to our ability to provide products and services that support communities and industries, we have established key performance indicators (KPIs) for critical initiatives. Looking ahead, we will continue working to support our business foundation and ensure sustainable growth by promoting efforts to, among others, help reduce the use of substances that harm the environment and ensure the effective management of chemical substances. We will also continue to develop and launch products with a lower environmental impact that contribute to the resolution of key social imperatives, including water-based inks, waterborne resins, LC materials that use less electric power and PPS compounds for use as an alternative to metal materials in automobiles.
As a chemicals company, we understand that safety is our highest priority. Accordingly, we continue to focus efforts on the creation of frameworks to mitigate the impact of disasters and prevent the occurrence of occupational accidents and provide safety training. To reinforce safety in the workplace, we offer hands-on safety training, which seeks to foster awareness of latent risks, as a component of training for new employees, both in Japan and overseas.
We also understand that creating work environments that empower diverse employees to exercise their individuality and reach their full potential is essential to growth for employees and for the DIC Group as a whole. As part of our efforts to promote diversity across the Group, we employ a broad spectrum of individuals without regard to considerations such as gender, nationality, physical limitation or age. We also endeavor to foster a corporate culture that draws on our understanding and respect for diversity to produce creative ideas, as well as to incorporate the concept of diversity into management, thus creating workplaces that enhance job satisfaction.
DIC108 also positions the provision of returns to shareholders as an important priority. We will continue working to maintain a balance among financial health, investment in growth and shareholder returns and have set a target for dividend payout ratio of 30% over the three years of the plan. To this end, we will shift our emphasis to income performance–linked dividends based on a fundamental commitment to maintaining stable returns.
Looking ahead, we will continue to diligently implement the strategies outlined in DIC108 to expand and rationalize businesses that we expect to drive growth and promote rationalization, as we work to achieve our best performance yet in terms of operating income, ordinary income and net income attributable to owners of the parent. In these and all our efforts, we look forward to the ongoing support and guidance of our many stakeholders.

TOPIC Steady Progress in Strategic Investments

In fiscal year 2016, DIC kicked off a new medium-term management plan, DIC108. Having made a certain degree of progress in recent years toward improving its financial health, a key management challenge, the Company once again adopted an active stance toward driving growth under the plan, budgeting ¥150.0 billion for strategic investments, including in M&As, between fiscal year 2016 and fiscal year 2018. Accordingly, the Company has been on the lookout for investment opportunities that align with its fundamental DIC108 goals, which are to stabilize the earnings of its core businesses, expand businesses that will drive growth and create next-generation businesses.

1.DIC enters capital and business alliance with Taiyo Holdings, transforming the latter into an equity-method subsidiary

MID (artist’s rendering): MIDs do not require substrates or harnesses, and can thus be made smaller, lighter and thinner than conventional PWBs. The market for these components is expected to expand in the future.
MID (artist’s rendering): MIDs do not require substrates or harnesses, and can thus be made smaller, lighter and thinner than conventional PWBs. The market for these components is expected to expand in the future.

On January 25, 2017, DIC announced a capital and business alliance with Tokyo-based Taiyo Holdings Co., Ltd., as a result of which Taiyo Holdings became an equity-method subsidiary. Total investment by DIC amounted to ¥24.9 billion.
Taiyo Holdings is involved in the manufacture and sale of chemical products for use in PWBs and other electronics components and in semiconductors. Of note, the company commands a top-class share of the global market for solder resist, which is critical to the production of PWBs.
DIC sees the electronics market as particularly encouraging, primarily because it offers potential for stable growth into the future and a considerable scope for leveraging DIC’s proprietary technologies. In addition to providing synthetic resins, pigments and LCs, among others, to electronics manufacturers, DIC is actively promoting the development of materials for printed electronics, thermal materials and other high-value-added offerings that capitalize on its core technologies.
In addition to bolstering sales, the agreement brings together DIC’s materials development capabilities, which draw on core technologies cultivated over many years, and Taiyo Holdings’ firm understanding of market needs—underpinned by its extensive supply chain encompassing everything from solder resist to PWBs—and marketing prowess to promote the swift and efficient development of products for new PWBs, including molded interconnect devices (MIDs), and other next-generation materials. The two companies will continue working to maximize synergies with the aim of driving global business growth and expanding profits.

2.Sun Chemical and Alliance Holding Company form joint venture that is the largest printing inks manufacturer on the Arabian Peninsula

Sun Chemical’s headquarters in the United States
Sun Chemical’s headquarters in the United States

On March 17, 2017, Sun Chemical Corporation concluded an agreement with Alliance Holding Company Ltd to form a joint venture combining Sun Chemical’s operations on the Arabian Peninsula with the operations of Alliance subsidiary Ink Products Company, Ltd., a leader in the region’s printing inks market based in Riyadh, Saudi Arabia. Sun Chemical’s stake in the new company is 51%.
Recent years have seen a tapering of demand for publishing inks, owing to the move toward digital media. Accordingly, the focus of the global printing inks market has shifted to packaging inks, which are expected to continue seeing growth in advanced economies. Packaging inks account for more than 70% of printing inks sold on the Arabian Peninsula, where the annual market for such inks is projected to continue growing at between 5% and 10% for the foreseeable future. Sun Chemical thus recognizes the region as important from a strategic perspective.
The establishment of a joint venture brings together Ink Products’ marketing capabilities, which reflect its familiarity with the market, and Sun Chemical’s products and technologies. Sun Chemical and Ink Products will move with speed to maximize resulting synergies to provide top-quality products and superior services, with the aim of driving further growth. Sun Chemical and Ink Products boast a combined regional market share of roughly 30%. By leveraging the two companies’ strengths, the new joint venture will strive to lift this above 40% by fiscal year 2021.


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