2017 Medium-Term Management Policies
In the midst of a surge in global competition, the NGK Group maintains its steady path of growth and evolution in the pursuance of its corporate mission: to provide value to its customers, shareholders, employees-as well as society as a whole-at all times. Through efforts firmly grounded in its unique ceramic technologies, the NGK Group is active in its "Triple-E" primary business domains of energy, ecology, and electronics.
The NGK Group's fundamental policies for fulfilling its corporate mission are outlined below.
First, through selective concentration of resources and investment, the NGK Group will establish new technologies surpassing those of its competitors, to create new businesses and new products that will secure the top positions in their respective fields ("Strategic Growth").
Next, the NGK Group will seek to increase return on equity (ROE) by defining clearly the roles of group member companies and implementing efficient management that makes the most of each company's capacity for dynamism and individuality, all based on consolidated group business management ("A Highly Efficient Organization").
Furthermore, the NGK Group will disclose information to shareholders and investors in a timely and proactive manner. In addition, while communicating information broadly to society at large through its public relations activities, the company will bear its corporate social responsibilities in mind, contributing to society through means such as providing support for foreign-exchange students ("Being a Good Corporate Citizen").
Target performance indicator
Regarding ROE as an important indicator of business performance, the NGK Group promotes management with a focus on its shareholders. In addition to increasing earnings by investing business resources efficiently to expand existing core businesses and launch new businesses, we seek to improve capital efficiency based on a minimum medium-/long-term target ROE of 10%.
The NGK Group's capitalization strategy reflects our desire to contribute to sustained growth in corporate value based on communication with shareholders and investors. In addition to balancing the securing of earnings beyond capital costs and financial soundness, we take a proactive approach to shareholder returns based on a medium-/long-term perspective. Based on key indicators including ROE, the dividend payout ratio, and the dividend on equity (DOE) ratio, we seek to maintain sound levels of profitability, capital turnover, and financial leverage consistent with our business strategies.
The Company's medium-/long-term management strategy and issues to address
The energy, ecology, and electronics sectors--the business domains in which the NGK Group operates--are expected to present expanding business opportunities against a backdrop of societal demand and technological innovations. Given these conditions, the NGK Group plans to implement capital investments on the scale of JPY300 billion over the next three years, primarily to expand production of automotive products and ceramics products for use in semiconductor manufacturing equipment and for mass production equipment for other new products. During fiscal 2017, we will implement the following measures to address priority areas, including improvements in infrastructures for future growth and the ongoing steady establishment of new businesses.
1) Enhancing the competiveness of existing businesses: new/reformed manufacturing structures
The NGK Group is striving to increase product value based on advanced technologies and to increase productivity through innovative manufacturing processes. In the area of new/reformed manufacturing structures, we will focus on improving the utilization efficiency of existing facilities and prioritize new investments to link these efforts to consistent results.
For automotive products, while responding to growing global demand generated by increasingly stringent governmental emissions regulations and rising automobile sales in each country, we will seek to ensure sustained business growth by steadily deploying state-of-the-art production lines overseas and by establishing a high-efficiency global production structure. In addition to ensuring stable operations at Plant No. 2 in Poland (producing SiC diesel particulate filters) and the Ishikawa Plant (producing NOx sensors)--new plants that will begin full-fledged production during this fiscal year--we will also make steady progress toward initial operations at the Thailand Plant (producing HONEYCERAM). In the area of ceramics products for use in semiconductor manufacturing equipment, demand is growing against a backdrop of high-density integration of semiconductors and miniaturization; at the same time, technical requirements are becoming more stringent. To bolster competiveness, we will develop high-performance products and establish innovative manufacturing methods while making steady investments to expand production.
Additionally, we will proceed with our restructuring of the insulators business to ensure profitability even under conditions of low utilization. In the area of NAS batteries, while pursuing orders for grid equipment in Japan, we will strive to create new demand overseas through various efforts, including leveraging demonstration testing to gain access to the storage cell business.
2) Creating new products and new businesses: From 2017 Challenge 30 to Keep Up 30
The NGK Group is striving to create new products and news businesses under the group-wide goal called 2017 Challenge 30. This effort seeks to increase the share of net sales accounted for sales of new products to 30% by fiscal 2017, a goal we fully expect to reach. For the next fiscal year and beyond, we have set the Keep Up 30 goal of continuing to maintain sales of new products at 30% or more share of net sales.
As an example of new product initiatives, in April 2017, we established the optical parts and materials project. This project will promote the commercialization of products such as micro-lenses for UV LED use and gallium nitride (GaN) wafers, currently under development for LEDs, lasers, and other optical applications. Alongside the ceramic battery project launched last year, this project will make smooth progress in seeding new businesses based on the development of products and mass production equipment along with customer development efforts. Partners in this project include Corporate Manufacturing Engineering, Corporate R&D, business divisions, and Headquarters.
To ensure the sustained creation of new products, we will enhance our ability to propose solutions to customers and proceed with investigations to identify market needs accurately.
3) Enhancing global management
The NGK Group includes 46 companies operating in 20 countries overseas. Of these, 23 companies are engaged in manufacturing.
As our overseas businesses continue to grow, we plan to strengthen management transparency and autonomy by developing an environment in which all members of the Group can act based on an ethical, equitable outlook and decision-making criteria meeting global standards.
From the perspective of environmental management, all facilities involved in business activities will contribute to global environmental protection by making proactive efforts to minimize environmental impact in all processes. Under the Fourth Five-Year Environmental Action Plan, in addition to reducing carbon dioxide emissions and waste globally by linking new/reformed manufacturing structures to efforts to reduce environmental impact, we are also growing sales of products that contribute to the environment, particularly sales of products used to clean vehicle exhaust. In response to growing societal demand, we will also ramp up efforts to protect biodiversity, manage risks associated with water resources, and improve the efficiency of water use.
As part of our compliance structure, to prevent the recurrence of past violations of competition laws, we have established a system for implementing a global-standard compliance program with fair competition laws. Through various activities, including sustained internal outreach from top management and the distribution of Competition Law Handbooks prepared in various languages, which reflect the legal systems of each country, we are currently striving to ensure complete legal and regulatory compliance by all Group executives and employees in Japan and around the world. In addition, to prevent improprieties and illegal actions involving competition laws and laws against corrupt practices in countries abroad, we have established and continue to enhance a hotline that allows executives and employees of the NGK Group to submit whistleblowing reports directly to the Business Ethics Committee via outside legal counsel.
With respect to Headquarters support capabilities for global management, we will enhance cooperation among individual facilities while increasing specialization through activities intended to enhance Headquarters capabilities, thereby enhancing our ability to adapt to the changing business environment.
4) Human resource development and reforms in ways of working
In the area of human resource development, to train and develop the younger and mid-level human resources who will drive the Group's growth, we have revised the HR system for general employees. These efforts will establish a system under which any motivated employees can by striving energetically and through force of will rise to positions in which they can assume higher-level duties and responsibilities. We have also instituted a system of mandatory retirement at age 65 to create an environment in which employees can continue to work with peace of mind after 60 and make more effective use of experience, skills, and various types of specialized knowledge accumulated by veteran staff. In the future, we plan to enhance work-related programs available to employees with serious health conditions and those who need to care for family members. We have also launched several initiatives to create a company culture in which women employees can thrive and find rewarding work.
Employee numbers continue to grow alongside business growth. Beyond ensuring thorough compliance with the business fundamentals of safety, quality, the environment, and CSR, we will plant the seeds of future rapid growth within each business by taking steps to ensure that each individual is free to demonstrate his or her own abilities to the fullest.
The NGK Group will strengthen management foundations through these efforts, achieve sustained company growth and growth in corporate value, and maintain a management focus on capital efficiency and shareholders.
Medium-Term Estimates of Sales and Target Ratio