Breaking Through with the Chemistry of Hope:
New President Nishida’s Vision for
Growth as a Specialty Chemicals Company

In recent years, the chemical industry has been increasingly viewed negatively due to its significant environmental impact. As a result, some of our employees have had concerns and worries about the future of the chemical industry.

During a conversation with an ESG expert, I was told, "Chemistry is the hope that will support the future of all industries." He also said that, to solve the various challenges facing society and industries, including realization of decarbonization, the power of chemistry is essential. It was a perspective that greatly changed the negative image often associated with the chemical industry. So we distilled this way of thinking into our purpose, "Breaking Through with the Chemistry of Hope."

There are limitations to a passive attitude for overcoming challenges. I once thought, “We want to be the first company that receives a knock on the door when customers have problems. This way of thinking in itself isn’t wrong, but I want to take a step further - transforming us into the company that knocks on the door by ourselves, taking proactive action on customer and societal issues, and igniting a spark in every employee’s heart. These are the sorts of ideals that drove me to this new purpose.

The shift from basic chemicals to specialty chemicals was also a goal set in the previous medium-term management plan (FY 2022-2024). In the new medium-term management plan, we will further clarify and accelerate this transition.

For basic chemicals, we have decided to cease production of our ammonia chain, long a core business for us, by 2028. This takes into consideration issues such as aging equipment and the issue of greenhouse gas emissions.

Meanwhile, for specialty chemicals, we have invested in plant facilities in Louisiana, USA, for the production of dimethyl carbonate (DMC) and ethyl methyl carbonate (EMC), key materials used in electrolytes for EV lithium-ion batteries. Furthermore, we acquired the urethane systems business of Germany's LANXESS Corporation. We aim to achieve sustainable growth by expanding these low-impact specialty chemicals, which contribute to solving global environmental issues.

The EV market may experience a slowdown in the short term, but it is a field with definite long-term growth potential. Moreover, the United States not only has a massive market size but is also continuing to experience economic growth. Procuring raw materials is also easy. There is no other market as attractive as this on the planet.

Regarding the plant construction, there were initially concerns raised by locals in terms of the environmental impact. In response, we thoroughly explained our commitment to environmental considerations, our founding spirit of Coexistence and mutual prosperity. By persistently conveying our desire to contribute as a new member of the community, we were able to gain the understanding of residents and the approval of the council. At the groundbreaking ceremony held in Louisiana in February of this year, more than 100 of the approximately 180 attendees were locals, and I felt it was a moment when our philosophy truly resonated with the community.

If DMC and EMC are considered upstream in the C1 chemical chain, then the urethane systems business acquired from LANXESS represents the downstream segment. By successfully achieving two major overseas investments in a short time, we were able to rapidly systematize our chemical chain strategy, spanning from upstream to downstream.

Additionally, we have also inherited from LANXESS approximately 400-500 employees who had been involved in the urethane systems business. That includes many excellent researchers and marketers. By leveraging their expertise not only in the urethane systems business but also across our various business areas, we aim to create new value through the synergy of talent.

Our company places emphasis on "global leadership," not "global management." Of course, when it comes to corporate governance, it is necessary for the headquarters to properly manage each business location. On the other hand, though, in executing business strategies, it is important that each site demonstrates leadership tailored to the characteristics of its local region.

Since entering Spain and Thailand in 1993, we have adopted a policy of promoting local talent to top positions from an early stage. This is because there are limits to Japan-led management in regions where market conditions, business practices, culture and history differ from those in Japan. In my late 30s to early 40s, during my assignments in Germany and Spain, I came to realize those limits. Not just in communication skills, but also in building genuine trust that takes into account cultural and historical backgrounds. We will continue to uphold our commitment to respecting local leadership.

One of the most important issues is strengthening our R&D capabilities. Currently, our R&D expenses are about 2.5% of sales, but we plan to raise this to around 4-5%, a level more fitting for a specialty chemicals company.

Furthermore, when I assumed the position of president on April 1, I established the M&A Promotion Office. To accelerate our growth, we plan to continue to pursue M&A as an important growth strategy.

In addition, we have established a Talent Strategy Department. In this department, we focus on developing talented individuals with exceptional abilities. Starting next fiscal year, we plan to implement a fundamental reform of our personnel system, abolishing academic background-based classifications and introducing measures such as an accelerated promotion system. Without human capital management, growth as a specialty chemicals company cannot be achieved.

And above all, for sustainable growth, it is essential to develop overseas markets. We are planning to continue to actively pursue large-scale investments in our overseas operations.