A Message from the CFO

Sun Chemical Corporation President & Chief Executive Officer Myron Petruch

With the aim of achieving the goals of DIC Vision 2030, we have adopted ROIC as a metric and are working to realize business portfolio transformation.

Shuji Furuta
Head of Finance and Accounting Unit, CFO

Basic Approach

With the aim of ensuring we evolve into the organization envisioned in our long-term management plan, DIC Vision 2030, formulated in fiscal year 2022, we have adopted ROIC, which reflects investment efficiency and earning power, as a metric and are promoting the transformation of our business portfolio. Our approach to financial management centers on balancing three priorities: maintaining sound financial health, investing in growth and ensuring returns to shareholders that are commensurate with income growth. We will also actively place sustainability at the center of financing efforts.
In addition to ROIC, under DIC Vision 2030 we will emphasize the net debt-to-equity (D/E) ratio*1 to gauge financial health, the payout ratio to evaluate returns to shareholders, and earnings before interest, taxes, depreciation and amortization (EBITDA)*2 to judge ability to generate cash, as indicators of financial performance and efforts to maximize shareholder value.

Maximize cash generated

Emphasis on Boosting ROIC and Maintaining Sound Financial Health

We have set a long-term goal of boosting ROIC to 8.0%-plus in fiscal year 2030. To advance the transformation of our business portfolio and further bolster capital efficiency, we are making the most of cash generated in businesses with stable earnings bases through reinvestment in next-generation growth businesses and have established criteria for withdrawing from businesses with low growth potential and profitability.
We employ EBITDA and the cash conversion cycle (CCC) as metrics for cash provided by operating activities. In addition to using EBITDA to measure our ability to generate cash, we monitor the debt-to-EBITDA ratio to assess financial soundness from the perspective of cash flow. We also manage CCC, used to assess working capital, meticulously by, among others, setting regional targets.
Our goal for financial soundness is to maintain our net D/E ratio at around 1.0 times, underscoring our determination to uphold sound financial health while also pursuing an active investment strategy. We will also continue creating safety nets against sudden sharp fluctuations in the operating environment, including by procuring funds through subordinated term loans, a type of hybrid financing recognized by credit rating agencies as having equity credit attributes, establishing a global commitment line and keeping the percentage of total borrowings accounted for by long-term debt at 80%.

EBITDA

* ROIC: Operating income x (1 – effective tax rate) / (Net interest-bearing debt + Net assets)

Investments to Accelerate Growth

To achieve the targets of DIC Vision 2030, we will allocate a total of ¥300 billion to investments—comprising ¥230 billion for strategic investments and ¥70 billion for investments in infrastructure building—over the four years from fi scal year 2022 through fi scal year 2025. Strategic investments will focus on advancing Value Transformation in three of the fi ve priority business areas set forth in the plan (smart living, color science and sustainable packaging) to make these businesses more profitable, and New Pillar Creation in the remaining two (sustainable energy and healthcare) to establish these as new business pillars. Investments in infrastructure building will emphasize contributing to sustainability, including through the reduction of CO₂ emissions, enhancing our technology platform and promoting IT and digital transformation (DX).

Principal Strategic Investments

Promoting Sustainable Finance

We continue to accelerate efforts to secure sustainable fi nance with the aim of promoting the sustainability strategies of DIC Vision 2030, as a core category of strategies set forth in the plan. The term “sustainable fi nance” describes the practice of incorporating ESG criteria— including environmental issues such as climate change and social considerations such as human rights and poverty—into fi nancial services to help bring about sustainable outcomes. We are committed to entering into sustainable fi nance agreements to advance our sustainability strategies, as well as to contribute to the achievement of the SDGs.

Major Achievements in Sustainable Finance

Stable Returns to Shareholders

With the aim of continuing to ensure stable returns to shareholders, DIC Vision 2030 maintains our existing target for a consolidated dividend payout ratio of 30%, which will serve as a guideline for dividends over the medium term. In fiscal year 2021, we paid a fullterm dividend of ¥100.00, comprising an interim dividend of ¥50.00 and a year-end dividend of ¥50.00. We also anticipate an annual dividend of ¥100.00 in fiscal year 2022.

  • D/E ratio: Interest-bearing debt / Shareholders’ equity
  • EBITDA: Net income attributable to owners of the parent + Total income taxes + (Interest expenses – Interest income) + Depreciation and amortization