While serving as a profit center to support revenue, focus on the development of next-generation products and technologies related to carbon neutrality

Focusing on automotive-related parts, the Environment Business Group develops a wide range of businesses that contribute to the environment. While serving as a profit center for supporting revenues, we are also focusing on the development of next-generation products and technologies for carbon neutrality-related markets, which are expected to expand globally.

Review of the fiscal year ended March 31, 2023 and outlook for the fiscal year ending March 31, 2024

I feel that the fiscal year ended March 31, 2023 was a difficult year to steer in as the global economy became more uncertain due to the COVID-19 pandemic and the prolonged tense situation happening in Ukraine. Although business performance was affected by restricted economic activities in China and other factors, the Environment Business Group achieved an increase in net sales thanks to steady shipments of automotive-related products and effect of the weaker yen. However, profits fell due to factors such as increased labor costs and soaring prices of raw material and fuel.

For the fiscal year ending March 31, 2024, we expect sales to increase due to a recovery in automobile production based on the easing of supply shortages of semiconductors and other parts, and an expected increase in demand for each product due to stricter emission regulations. On the other hand, profits are expected to increase only slightly due to continued increases in labor cost as well as raw material and fuel prices.

Medium- to long-term growth strategies to realize the NGK Group Vision

The Environment Business Group must carry out two important missions to realize the NGK Group Vision. The first is to serve as a profit center for the NGK Group to support short-term profits. Although internal combustion engine-related markets are expected to contract in the future due to the ongoing vehicle electrification, demand will continue in the short term for products for emission control in response to stricter global emission regulations. Therefore, we expect to be able to maintain annual sales on the scale of 300 billion yen until around 2030, which will be source of funds for various growth strategies to be developed in the future. The European Commission has announced a draft to introduce new Euro 7 emission regulations starting in 2025. Since these regulations will require constant NOx concentration measurement for gasoline engines as well, demand for NOx sensors is expected to rise. To ensure that we can capture demand, we will accelerate development speed to launch high-performance products that comply with regulations while optimizing our production system.

The second is to take the lead in contributing to carbon neutrality, aiming to become a carbon-neutral company by 2050. Focusing on 2030, the year when demand for new carbon neutrality-related products is expected to increase, the Environment Business Group has a policy designed to transform itself into a sustainable business that contributes to carbon neutrality. Therefore, we will maintain our earning power to support the foundation of the NGK Group and promote the development as well as the commercialization of new products in the carbon-neutral field, focusing on a new era. It is important to quickly incorporate the needs of the market and customers and respond to those needs by collaborating with Corporate NV Creation, the Group’s specialized marketing organization. Some products are already under development, such as honeycomb products for direct air capture (DAC) of CO₂ in the air, and we aim to establish a system as a new source of revenue soon.

Value propositions for resolving social issues

As its name suggests, activities of the Environment Business Group are directly connected with solving various environmental issues. As we are in the midst of a period of change, until around 2030, when demand for vehicles with internal combustion engines is expected to persist, we will contribute to reducing the environmental impact that they cause by developing and providing products and services that help prevent environmental pollution, including ceramic substrates for catalytic converters for automotive for emission control and NOx sensors that measure nitrogen oxide concentration in automobile exhaust. From there on, by developing and providing products and services with our unique ceramic technologies at the core, we will continue to push for the realization of a carbon-neutral society. Our unique automotive-related part technologies make it possible to develop carbon neutrality-related products, such as ceramic membranes, industrial heating systems, filters, and reactors, that respond to various needs. In addition to our technological capabilities, we also have the strength of experienced human resources cultivated through global business activities. Providing value by utilizing these strengths, we contribute to a sustainable society.

Amid the trend of vehicle electrification, although we are experiencing turbulent times, “changes” also means “opportunities” under these conditions. We will continue to enjoy changes that have never been seen before and motivate ourselves to take on new challenges. Please look forward to the future of the Environment Business Group.

Note: This interview was conducted in May 2023.