Message from CEO

We will work to give satisfaction to all our stakeholders

Dramatic changes in the world economy and business environment

The world is undergoing substantial changes, including climate change, depletion of resources, demographic changes, urbanization, multipolarization of the world economy, and changes in the feedstock/energy-resources market. Moreover, dramatic  echnological progress, such as in artificial intelligence and IoT technologies, is transforming our economy, society, and daily life.
On the other hand, we are doing business in an environment in which multiple factors are interrelated in complex ways, making it difficult for us to predict the future. For example, various countries' political trends have the potential to produce drastic changes in foreign exchange rates as well as in the price of crude oil and other materials. These challenges notwithstanding, we will continue to manage our business from a medium- to long-term viewpoint and avoid being easily swayed by short-term changes in the business environment. The Showa Denko Group is a unique chemical manufacturer engaged in a wide spectrum of business segments including Petrochemicals, Chemicals, Electronics, Inorganics, and Aluminum segments. By taking advantage of our unique qualities and deepening and fusing our inorganic, metal, and organic technologies, we will produce excellent individualized products to become a “company contributing to the sound growth of society” toward creating a society where affluence and sustainability are harmonized.

Results for 2017 and outlook for 2018

As for 2017, thanks to robust demand in the Asian petrochemicals market, we were able to secure a high profit margin in the Petrochemicals segment. In the graphite electrode business too we achieved results far exceeding the profit target, being backed by the recovery of the market in the latter half of the year. As a result, we broke our past records for all of our income indicators for the year, namely, operating income, ordinary income, and net income. In 2018, we will again break the records for operating income and net income by offsetting the cost of the large-scale equipment repair performed once every four years in the Petrochemicals segment and the decrease in profit in the hard disk (HD) media business by a substantial increase in profit in the graphite electrode business, whose size has been greatly expanded due to the business integration.
As a result of implementing multiple structural reform measures in and before 2016, we have successfully changed our corporate structure to one that allows us to take advantage of the favorable market environment. We have thus transformed our profit structure for the better.
For the term-end dividend per share, we increased it to 50 yen in 2017. We plan to increase the total amount of interim and year-end dividends to 90 yen per share in 2018. Based on the assumption that we will achieve record-high operating income and net income again in 2018, we will shift the use of funds from improving the financial structure to giving more consideration to growth investments and the return of profit to shareholders, thereby making improvements for greater corporate value.

(Billions of Yen)2017results2018revised forecast
Net sales 7,804 9,350*1
Operating income 778 1,370
Net income 640 1,315
Net income attributable to owners of the parent 335 850
Year-end dividends 50円*2 90円*3

*1.Announced on May 9, 2018.
*2.SDK paid dividends of ¥30 per share based on the record date of May 11, 2017. The table above does not include this amount.
*3.Announced on May 29, 2018.

Enhancement of the corporate structure to make high profits in a stable manner

■ 3-year accumulated operating income

Showa Denko launched its medium-term business plan, “Project 2020+,” in 2016. Under the plan it is deemed critical to improve profitability and minimize profit fluctuations.
For the improvement of profitability, we set the target of 143 billion yen for cumulative operating income for the threeyear period of the plan, and have made steady progress toward achieving this target. For the minimization of fluctuations in profit, however, we have yet to meet the challenge.
In 2019, we will start a new three-year business plan and aim to achieve cumulative operating income exceeding 200 billion yen for the next three years in a stable manner.
In order to continue generating high profits even after the business environment ceases to provide us with tailwinds, we must constantly foster business reforms to increase the robustness of our company. To this end, we unquestionably need to expand our individualized businesses.

 

Expansion of individualized businesses

For Showa Denko, the term “individualized businesses” refers to businesses that can maintain both profitability and stability at a high level in a sustainable manner. Specifically, it means businesses that have: (1) an operating income margin of 10%, (2) operating income of several billion yen, and (3) high tolerance to changes in the market environment. Three of our businesses, namely, the HD media,  lectronic-material-processing high-purity gas, and graphite electrode businesses fall under this definition.
The market sizes of these businesses are appropriate for our company. We have increased our presence in the respective markets by taking advantage of our high market shares as well as our unique technologies and logistics ability.
By 2025, we will have transformed at least 50% of our businesses into individualized businesses. To this end, we will categorize our businesses into businesses for which we will work to increase sales in growth markets and those for which we will focus on increasing the operating income margin in mature markets, and will then formulate specific strategies for both types of businesses.

Toward sustainable growth

森川幸平
July 2018
SHOWA DENKO K.K.
President and CEO
森川宏平

Recently, companies have been increasingly required to incorporate environmental, social and governance (ESG) viewpoints into their business management and give due consideration to the Sustainable Development Goals (SDGs). The Showa Denko Group has been regarding the fulfillment of its corporate social responsibility (CSR) as the basis for its business management.
We have been meeting the expectations of all our stakeholders by providing products, technologies, and services that meet the needs of customers and society in addition to conducting business activities in an environment-friendly manner. At the same time, we have been implementing measures to foster compliance, diversity management, and corporate governance.
While our business environment and the world economy are constantly changing, we have a clear and constant goal, which is to give satisfaction to all our stakeholders and to show them the present robustness and bright future of Showa Denko.
Under our next medium-term business plan, which we are now formulating, we will work to increase customer value by expanding our individualized businesses and will also increase our social value by giving consideration to ESG issues and the SDGs.
The Showa Denko Group is heading toward one goal, but that goal can be attained in multiple ways, not just one. Based on this recognition, we will take actions without being afraid of confronting change so that the Showa Denko Group can make tremendous achievements as a company contributing to the sound growth of society toward creating a society in which affluence and sustainability are harmonized.
We would like to ask you to pay attention to our Group’s future activities.

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