About NGK

2019 Medium-Term Management Policies

Basic Management Policies of the Company

NGK marked the 100th anniversary of its founding in 2019. On this occasion, we reviewed the NGK Group Philosophy with the aim of conveying the Company's purpose of existence to the Group's broad-ranging group member companies operating globally, employees showing greater initiative, and all the stakeholders, while succeeding the spirit we have adhered to since the founding of the Company.

The NGK Group's basic management policies for fulfilling its corporate philosophy are as follows.

First, through selective concentration of resources and investment, the NGK Group will establish new technologies surpassing those of its competitors, to create 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 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 and communicate information broadly to society at large in a timely and proactive manner. In addition, the company, bearing the social development goals (SDGs) in mind, will fulfill its social responsibilities through means such as protecting the environment, respecting human rights, and creating a safe and comfortable workplace environment, and contribute to the development of regional communities and society ("Being a Good Corporate Citizen").

Targeted Management Indicators and Capital Policy

Regarding ROE as an important indicator of business performance, the NGK Group promotes management with a focus on its shareholders. Aiming to achieve a minimum medium-/long-term target ROE of 10%, we will implement a capitalization strategy that is conducive to a sustained enhancement of corporate value by accommodating changes in business risks.

Capitalization strategy

The NGK Group will strive to reduce capital costs through communication with shareholders and investors, as well as investing business resources efficiently to expand existing core businesses, reduce costs, and launch new businesses, to secure earnings beyond capital costs. In addition, we will take a proactive approach to shareholder returns by referring to key indicators including the dividend payout ratio and the dividend on equity (DOE) ratio, while seeking to maintain financial soundness. Through these measures, we will aim to maintain good levels of profitability measured by ROE, capital turnover, and financial leverage consistent with our business strategies.

Medium- to Long-Term Management Strategies and Issues to Be Addressed

Business opportunities are expected to increase in the medium to long term in the NGK Group's business domains of energy, ecology, and electronics backed by the need for public/environmental solutions and technological innovations including the IoT, AI, and 5G. The NGK Group will work to expand revenues from its existing businesses based on the ceramic technologies it has cultivated since its foundation. In addition, the NGK Group will create new products that meet expectations of society, and will continue to provide inputs to development, etc. with an eye to becoming a company that continues to grow globally.

To this end, we will work on the following initiatives in FY2019.

  • (i) Enhancing the competitiveness of existing businesses: New/reformed manufacturing structures

  • (ii) Creating new products and new businesses: "Keep up 30"

  • (iii) Enhancing global management and compliance/governance

  • (iv) Ensuring active participation by a diverse range of human resources and work style reforms

(i) Enhancing the competitiveness of existing businesses: New/reformed manufacturing structures

The NGK Group, as part of new/reformed manufacturing structures, is working to improve product value based on advanced technologies and enhance productivity through innovative manufacturing processes. The NGK Group focuses on improving the efficiency of equipment using overall equipment efficiency (OEE) as the indicator, and also makes prioritized, carefully selected new capital investments, among others, to ensure it achieves results with the return on invested capital (ROIC) in mind.

With regard to the Ceramics Business Segment, the NGK Group aims to achieve sustainable business growth by building a cutting-edge, highly efficient global production system in response to the globally increased demand due to the reinforcement of emission regulations in various countries and growing sales of automobiles. In FY2019, the NGK Group will move ahead steadily with the launch of new equipment with the main focus on the second plant in China that produces GPF (Gasoline Particulate Filters) whose demand is expected to grow significantly with the tightening of emission regulations in China, as well as capital investments to boost production in the Thailand Plant (large-size HONEYCERAM).

With regard to the Process Technology Business Segment, the NGK Group will establish a system to boost production at the new plant in Tajimi, Gifu, for products for semiconductor manufacturing equipment whose demand is expected to grow increasingly in response to the trend toward multi-layered semiconductors and their microfabrication with the advancement of the IoT and introduction of 5G. In addition, the NGK Group will launch next-generation products to meet high technology and performance requirements. In the Industrial Process business, the NGK Group is expanding sales of kilns for cathode materials used in lithium-ion batteries and refractories used for the manufacture of electronic components, and is continuing to focus on low-level radioactive waste treatment systems for nuclear power plants, etc.

With regard to the Electronics Business Segment, the NGK Group expects demand growth for its high-functionality bonded wafers for SAW filters and piezoceramics actuators for HDD against the backdrop of the proliferation of technologies which allow for ever-faster mobile communication speeds and the expansion of investment in datacenter infrastructure. In addition, the NGK Group will work to expand sales of insulated circuit boards for on-board power modules in response to the trend toward adopting electromotors in the automobile industry. For these lines of products, the NGK Group will work to enhance production capacities at its production sites in Yamanashi and Malaysia.

With regard to the Power Business Segment, due to the restraint of capital investments by domestic electric power companies and tough business environment overseas, the NGK Group decided in March 2019 to dissolve an insulator production subsidiary in China. With regard to the insulator business, the NGK Group will work to bring the business back to profitability early by taking measures such as withdrawing unprofitable products and reallocating personnel. With regard to the NAS business, it is taking time to get orders to take off on a full-scale basis, despite increasing demand in Japan and overseas against the backdrop of the proliferation of renewable energy. Accordingly, we will work to keep the loss to a minimum by streamlining the business system, while steadily capturing opportunities to turn them into business growth.

(ii) Creating new products and new businesses: "Keep up 30"

With the company-wide goal of "Keep up 30"--which means maintaining the sales ratio of new products at 30% or more--the NGK Group aims to create next-generation new and commercialized products. Through such initiative, the NGK Group developed the EnerCera series of small, thin and high-capacity ceramic secondary batteries. The EnerCera series have gained a good reputation and received the Innovation Award at CES 2019, the world's largest consumer electronics trade show held in Las Vegas in January 2019, and the products were commercialized in April 2019. We plan to successively launch mass-production of the EnerCera series of ceramic secondary batteries, assuming their adoption for various applications such as smart cards, IoT devices, and wearable devices. In February 2019, NGK's large ceramic membrane capable of separating and recovering CO2 (DDR-type zeolite membrane) was adopted for use in a demonstration test to be conducted at an oil field in the U.S. jointly with Japan Oil, Gas and Metals National Corporation (JOGMEC) and JGC Corporation (JGC). The project represents the first-ever use of large ceramic membranes in CO2 recovery from associated gas during oil production. Based on the demonstration test, the NGK Group will strengthen product development. Furthermore, the NGK Group will continue to work on themes such as zinc secondary batteries and all-solid-state batteries, in order to create next-generation new products and new businesses using its unique ceramics technologies.

(iii) Enhancing global management and compliance/governance

The NGK Group operates 45 affiliates in 20 countries outside of Japan. Of those affiliates, 21 engage in manufacturing. In step with the increasing expansion of its operations overseas, the NGK Group is enhancing transparency and autonomy of management, and will strive to create an environment in which all members of the NGK Group can act in accordance with a fair set of values and valuation criteria of international standards.

Furthermore, the NGK Group, in January 2019, revised the NGK Group Code of Conduct that defines the behavioral guidelines for everyone within the NGK Group to comply with in performing their tasks by placing a premium on realizing a sustainable society through business activities, having respect for human rights, and strictly adhering to compliance. Taking this opportunity, the NGK Group established the ESG Meeting in April 2019 as a forum for sharing information, exchanging opinions, and discussing policies regarding E (Environment), S (Social), and G (Governance) within the governance system at the management level.

Regarding environmental management, the Fourth Five-Year Environmental Action Plan, which the NGK Group initiated in FY2016, has been steadily in progress toward achieving the FY2020 targets for the sales growth of products contributing to environmental production and reducing CO2 emissions, etc. The NGK Group will continue to promote the development and proliferation of products and services contributing to reducing environmental impact, while focusing on the development and introduction of production technologies capable of reducing environmental impact, to help preserve the global environment.

With regard to enforcement of compliance with various competition laws, the Foreign Corrupt Practices Act and other regulations, the NGK Group is ensuring thorough enforcement of compliance by means such as continually delivering top management messages, providing compliance training to directors and employees of the NGK Group companies in Japan and overseas, implementing the Competition Law Compliance Program in accordance with international standards, and utilizing the Competition Law Compliance Handbook.

With regard to quality compliance, in order to prevent the recurrence of an incident involving a delivery test discrepancy relating to insulators and other products, the NGK Group revised the internal compliance rules to clarify the quality compliance obligations of its directors and employees, and strengthened activities from the perspective of quality management, such as implementing a quality compliance program led by top management and providing direct guidance by top management at the Quality Committee, and thoroughly providing quality education to the management and employees. From the perspective of safety at work, the NGK Group is working to reduce risks of work injuries by taking measures such as strengthening the safety management system and promoting risk assessment at the Group companies in Japan and overseas.

With regard to corporate governance, to ensure transparent management and strengthen the supervision and monitoring functions of the Board of Directors, the NGK Group established the Nomination and Compensation Advisory Committee, the majority of whose members are Outside Directors, and the Business Ethics Committee, comprised mainly of Outside Directors, that manages fraud or illegalities involving senior management. These committees report to and make recommendations, etc. to the Board of Directors.

As a mechanism to prevent fraud or legal violations, in addition to the existing Helpline, an internal reporting system (Hotline) linked directly to the Business Ethics Committee was established with the aim of strengthening the Group's compliance structure. Through these initiatives, the NGK Group works to further enhance compliance awareness, reduce risks, and strengthen and reinforce the governance system to underpin its global management.

The NGK Group operates 45 affiliates in 20 countries outside of Japan. Of those affiliates, 21 engage in manufacturing. In step with the increasing expansion of its operations overseas, the NGK Group is enhancing transparency and autonomy of management, and will strive to create an environment in which all members of the NGK Group can act in accordance with a fair set of values and valuation criteria of international standards.

(iv) Ensuring active participation by a diverse range of human resources and work style reforms

The NGK Group set the retirement age at 65 in FY2017 to allow employees with abundant experience and advanced expertise to play active roles in the workplace. In addition, the NGK Group has a financial support system including lump sum payment for nursing care support for employees who need to provide home healthcare for family members or who have serious health conditions, as well as flexible working arrangements including the introduction of short working hours and three-day work weeks, in an effort to support work-life balance.

To encourage women's active participation, the NGK Group has taken steps such as integrating job groups aimed at expanding the scope of jobs and providing training for employees returning from childcare leave, as well as career design training. The NGK Group has also introduced an early return support system for employees returning from childcare leave and a work-from-home system. We will also focus on programs for candidates for management-level positions.

Furthermore, the NGK Group is working to expand the employment of persons with disabilities.

The NGK Group will focus on work style reforms by making efforts to create systems and environments to provide opportunities for diverse human resources to fulfill their abilities and work with a sense of security, and utilizing ICT (information and communication technology) and RPA (robotic process automation).

As the organization expands in step with the growth of its operations, all of us at the NGK Group will work on the underlying elements of our operations -- "Safety" "Quality" "the Environment" and "CSR" -- while acting proactively with a high degree of autonomy and accomplishing challenges with our best possible performance in order to be a global company accepted all over the world.

Through the implementation of the above initiatives in order to further strengthen the operating foundation, the NGK Group will continue to pursue sustainable growth and the realization of higher corporate value as it operates its businesses by placing importance on capital efficiency and shareholders.

GPF (Gasoline Particulate Filters)

Ceramic Products for Semiconductor Manufacturing Equipment

Bonded Wafers for SAW Filters

NAS Batteries

Chip-type Ceramic Secondary Battery "EnerCera" Series

DDR-type Zeolite Membrane