Medium-Term Management Plan

Review of the Previous Plan and Details of Medium-Term Management Plan "Cornerstone of the Group's Revitalization"

Tokuyama announced its Medium-Term Management Plan 2017 in July 2015 with the view of rebuilding its financial platform. In the ensuing period, the Group as a whole worked in unison to rebuild its management structure in a bid to secure profits. Based on these endeavors, the Company reported an increase in both net sales and operating income in fiscal 2015, the fiscal year ended March 31, 2016. Despite achieving a certain level of success, however, Tokuyama was forced to incur a net loss for the period owing mainly to a substantial impairment loss.

Looking ahead, forecasts for certain existing businesses indicate that the general-purpose product market in Japan will contract. At the same time, a slowdown in electronic materials business growth is also expected. Under these circumstances, and recognizing the need to create the necessary driving force to propel new profit growth, Tokuyama undertook a fundamental review of its previous Medium-Term Management Plan. Guided by the overarching vision of “New Foundation,” the Company put in place a five-year medium-term management plan, commencing from fiscal 2016, as the “cornerstone of the Group’s revitalization.”

Going forward, Tokuyama is committed to carrying out the following two priority management strategies by fiscal 2025, the fiscal year ending March 31, 2026.

1. Transition toward a robust business structure that is resilient against changes in the Company’s operating environment and is capable of sustainable growth
The Tokuyama Group has set the goal of becoming a global leader in advanced materials through unique technologies across growth businesses including the Specialty Products as well as Life & Amenity segment together with the development of new products. In such traditional businesses as the Cement and Chemicals segments, the Group will work to become a leader in Japan through strengthening competitiveness.

2. Transition to a Group-wide low-cost structure by undertaking a comprehensive review of existing work practices
The Tokuyama Group will reduce costs by adopting a cross-departmental approach that differs from conventional methods and undertaking strategic capital expenditures as a part of efforts to cut back principal costs including raw material, fuel, repairs and maintenance, and distribution expenses.

A number of factors led to the Company’s current difficult position. This is largely due to overdependence on Tokuyama Factory's competitiveness, inward posture spread among employees, corporate governance which was loosening owing to upswing in the profit of polysilicon business, and lack of management's leadership. Taking these factors into consideration, Tokuyama is cognizant of the vital need to overcome these issues and to create the necessary driving force to propel new profit growth. With this in mind, the Company will accordingly work to definitively change its organizational climate, rebuild its business strategies, strengthen Group management, and improve its financial position.

Outline of the plan

1) Positioning of the Plan

The Medium-Term Management Plan has been set up as a milestone toward achieving the Group’s aspirations. Through implementing the Plan, the Tokuyama Group will lay the cornerstone for the Group’s revitalization.

2) Term of the Plan

April 1, 2016 to March 31, 2021

3) Priority issues and measures

1. Change the Group’s organizational culture and structure
Steps will be taken to review personnel evaluation systems, actively promote the exchange of human resources between Group companies, and drastically reform structures and systems through a variety of initiatives including the vigorous introduction of outside personnel.

2. Rebuild the Group’s business strategies
The Group will strictly adhere to a customer-oriented approach on the conduct of its business activities. At the same time, the Group will transition to a research and development structure that is in tune with customers’ needs. Through these means, energies will be channeled toward cultivating new business domains that employ unique technologies.
The Group will reinforce management resources including personnel and information through alliance with other companies.

3. Strengthen Group management
Each company of the Tokuyama Group will once again clarify its role and position. Seeking to contribute to the Group’s growth strategy as well as the reduction of costs, particular emphasis will be placed on further strengthening the management of the Group as a whole.

4. Improve the Company’s financial position
Every effort will be made to restore the Company’s shareholders’ equity by steadily building up profits.
Tokuyama will issue classified stock (preferred stock) to quickly stabilize the Company’s financial position, thereby ensuring that the Group is well positioned to flexibly pursue opportunities including M&As that are designed to accelerate the pace of growth.

4) Targets to be achieved by the final fiscal year of the Medium-Term Management Plan

Net sales: ¥335.0 billion
Operating income: ¥36.0 billion
ROA: 10%
CCC: 55 days
D/E ratio 1.0

Exchange rate: ¥110/US$
Domestic naphtha price: ¥58,000/kl

Medium-Term Management Plan

Medium-Term Managemet Plan "Cornerstone of the Group's Revitalization" (FY2016 - FY2020)

Medium-Term Management Plan 2017 (FY2015 - FY2017)

Rolling Three-Year Plan (FY2014 - 2016)

Presentation(1.43MB) *Excerpt from Presentation for FY2013

Profit Improvement Plan (FY2013 - 2017)

Three-Year Management Plan (FY2012 – FY2014)
"Accelerating Our Growth Strategies"

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