A Message from the President

“Building on Our 110-Year History to Drive New Growth and Evolution Ensuring that DIC remains a unique global organization that is trusted by society Representative Director,President and CEO DIC Corporation Kaoru Ino

Building on Our 110-Year History to Drive New Growth and Evolution
Ensuring that DIC remains a unique global organization that is trusted by society

In the period under review, I assumed the reins as representative director, president and CEO of DIC. Having accepted the appointment, I believe that my mandate is to do my utmost to carry out my duties, the most important of which is to build on the foundation established by my predecessors to drive new growth and evolution.
In fiscal year 2018, we are celebrating the 110th anniversary of DIC’s establishment. Printing inks, a key business since the start, continue to account for the bulk of our sales. While marveling at the fact that we have inherited a 110-year-old business from our founders, I recognize that today we operate in an environment characterized by changes that differ in nature from anything we have ever faced before. For example, the telephone took more than 50 years to come into widespread use. In contrast, Facebook took only a year to gain worldwide popularity. Social structures continue to change drastically, owing primarily to three key factors, namely the next wave of advanced digital technologies, falling birth rates and issues related to financial resources to support the social safety net. The pace of change is astonishing. In a sense, I see this as the new normal. Amid such rapid and drastic changes, how do materials manufacturers contribute to society going forward? As we work to adapt resilient businesses passed on to us by our founders to this new normal, we must also look at how to handle change. I see responding effectively to these issues as an important mission.
In fiscal year 2017, the second year of our current threeyear medium-term management plan, DIC108, we succeeded in achieving record consolidated income results. Net sales for the period amounted to ¥789.4 billion. Operating income and ordinary income were ¥56.5 billion and ¥57.0 billion, respectively.Net income attributable to owners of the parent was ¥38.6 billion. During the period, businesses that we expect to drive growth—notably functional pigments,polyphenylene sulfide (PPS) compounds and packaging materials, in which we are concentrating our allocation of management resources on a global basis—continued to expand steadily, as we laid the groundwork for future growth, including through advance investments. Despite some of our businesses feeling the impact of rising raw materials prices and other external factors, we responded effectively by focusing our attention on launching products that meet market need and expand sales of environment-friendly highvalue-added offerings. Thanks to these and other efforts, we made solid progress toward achieving the objective of a key strategic initiative spearheaded by my predecessor, Yoshiyuki Nakanishi, namely, the realization of a robust earnings structure that is impervious to fluctuations in external factors such as raw materials prices and exchange rates.
In fiscal year 2019, we will embark on a new medium-term management plan. In considering the content of this plan and our mission, which defines what we ultimately aspire to be, we will endeavor to address increasingly varied and compelling social imperatives and contribute to the realization of a sustainable society. To this end, we must cultivate new businesses, in addition to printing inks, pigments and compounds, in which we have the potential to earn global market-leading positions.

Formulating a new medium-term management plan

In preparation for the launch of our new medium-term management plan, in fiscal year 2018 we are promoting extensive debate and discussion to determine critical changes needed for us to fulfill our mission, based on which we will formulate strategies from a medium- to long-term perspective. Our determination to respond to the dramatic changes taking place in society—to the new normal—remains firm.
In pondering our image of the DIC Group in the future, the key will be our Color & Comfort brand slogan. This unique slogan really conveys DIC’s DNA. It encapsulates our desire to leverage the power of chemistry, drawing on our wealth of core technologies, to bring color and comfort to people’s lives and, in so doing, to contribute to the realization of a richer, more vibrant society. This slogan is of course based on our management vision, Color & Comfort by Chemistry.
I have narrowed my focus for achieving these goals to areas that offer potential synergies with base technologies in our printing inks, pigments, polymers and other core businesses, implementing measures designed to bolster corporate value and build new businesses. Taking a distinctively DIC approach, we will focus on environmentfriendly printing inks and polymers, packaging and healthcare businesses that contribute to food safety, and on liquid crystals (LCs), inkjet inks and pigments that enable us to provide rich color materials. Such efforts would position us to resolutely fulfill our role in helping to address social imperatives and deliver value to society while concurrently adding muscle to our high-value-added businesses. Examples include packaging inks, which are unquestionably printing inks but unlike other printing inks are expected to see market growth in the future, as well as conductive and insulating inks, which from a technology perspective are completely different from conventional printing inks. For us, the challenge is as big as cultivating businesses in brand new domains. We intend to look at areas peripheral to businesses in which we have base technologies. At the same time, we will seek to further expand our business portfolio, and to improve its efficiency and soundness.
We will discuss ideas and encourage debate internally while at the same time envisioning what we aspire to 10 years down the road. From there, we will use backcasting to formulate our next medium-term management plan, which will kick off in fiscal year 2019. We will publish details of the plan—tentatively called DIC111—as soon as they are available.

Emphasizing innovation to drive further evolution

In January 2017, DIC announced a capital and business alliance with Taiyo Holdings Co., Ltd. Partnering with Taiyo Holdings, which commands a top-class share of the global market for solder resist, will position DIC well to develop products for the electronics sector, notably for printed wiring boards(PWBs). Under DIC108, we have identified electronics as a key next-generation theme, alongside low carbonization, packaging and life sciences.
In the area of business development, Mr. Nakanishi was the first to demonstrate the importance of breaking free from our reliance on independent efforts and actively encouraging open innovation to capitalize on external resources. We are also promoting participation in global venture networks. Through such efforts, we are working to, among others, identify and promote new next-generation development themes and swiftly secure cutting-edge technologies to accelerate the creation of new businesses. We are also making flexible use of strategic investments, having budgeted ¥150.0 billion for this purpose over the three years of DIC108, to outline a new growth trajectory to internal and external stakeholders. By the final year of our next mediumterm management plan, we aim to achieve a stable return on equity (ROE) of 10%-plus, underpinned by the value created through such new innovation, as well as consolidated net sales of around ¥1,000 billion and consolidated operating income in the area of ¥100 billion, thereby meeting the longterm targets set forth in DIC108.

Global value creation: The essence of the DIC Group

DIC株式会社 代表取締役 社長執行役員 猪野 薫

In considering our image of the DIC Group in the future, it is impossible to gloss over the importance of a global perspective. We conduct our operations through a network of 171 companies in 64 countries and territories. We are the world’s leading manufacturer of printing inks; organic pigments, the principal raw material used in printing inks;and PPS compounds—key engineering plastics—with global market shares of around 30%, 20% and 27%, respectively. Approximately 60% of consolidated net sales are outside Japan. In other words, a global perspective is critical for many reasons. One of these is the need to manage exchange rates that go hand in hand with our business activities, which is not one on one with the U.S. dollar, but involves multiple currencies, including the euro, the Turkish lira and the Indian rupee. It is all extremely complicated, but we have established a mechanism that enables us to effectively manage factors that cause exchange rate fluctuations.
I see our global character as a vital growth driver. We have established printing inks, polymer and PPS technical centers in key locations in Asia, Europe and elsewhere, enabling us to accurately grasp and swiftly address local needs. We are currently taking steps to reinforce our global management structure, including appointing a local executive to head up a key product division, as well as our regional headquarters, to ensure we remain abreast of rapid market changes. These moves have positioned us to maximize our unique strengths as a multinational group with R&D facilities and diverse human resources around the world. Since fiscal year 2016, we have been promoting ambitious global branding initiatives to bolster awareness of the value that we provide to stakeholders and encouraging employees to apply that awareness to their everyday work, and in doing so to help instill a greater sense of solidarity across the Group.

ESG as a central element of management

The DIC Group launched its corporate social responsibility (CSR) program in fiscal year 2007, later changing the designation used across this program from “CSR” to “sustainability.” Since then, we have steadily implemented initiatives in line with 11 key themes, ranging from “Compliance” to “Business models that respond to social imperatives.” In light of increasing awareness of social imperatives pertaining to environmental, social and governance (ESG)-related issues, effective from fiscal year 2018 we established the ESG Unit.
As a leading chemicals manufacturer, we are working to secure safety, reduce environmental impact and ensure the stringent management of chemical substances, which we view as fundamental to our operations and an essential responsibility. We are also taking steps to combat climate change—a universal challenge—including setting mediumto long-term targets for reducing our global emissions of CO2 worldwide and focusing on the development of products that contribute to a low-carbon economy. In addition, we are deepening awareness of and redoubling efforts to address other critical issues, including minimizing industrial waste by recycling and reusing materials and addressing water risks.
In the area of global human resources, we acknowledge the importance of advancing diversity, including by valuing different philosophies and values. We have spelled out a goal of marshaling the diversity of the individuals that make up our labor force, recognizing the fact that we are in an age today where individuals can change society. In other words, we understand the absolute importance of promoting diversity in management. A key component of this is to advance opportunities for female employees, a theme for which we have set a key performance initiative (KPI). As a group with roughly 20,000 employees in 64 countries and territories around the world it is important to remain aware that we have a vast range of exceptional human resources that we must manage in a way that maximizes latent capabilities. To marshal the diversity of individuals, we will also work to ensure that employees feel like active participants.
Finally, on the subject of governance, we have established a structure based on Japan’s Corporate Governance Code and in fiscal year 2017 increased the number of independent outside directors on our Board of Directors with the aim of further reinforcing governance functions. We are also working to fortify our foundation as a global organization through measures ranging from reinforcing the governance capabilities of our subsidiaries, thereby strengthening the overall framework that underpins Group management, to strengthening our quality management system and ensuring compliance with new laws and regulations.
In Japan, you sometimes hear the phrase “a company is a public entity of society.” In the future, companies will be evaluated not only for their success in responding to change but also for their ability to be agents of change. From this perspective, as a distinctive global manufacturer of fine chemicals, we will continue to be guided by our Color & Comfort brand slogan as we actively take on the challenge of creating value for society.


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