Kuraray : Value Creation Process, Working to Strengthen Capital（275KB）

Kuraray Report 2024	Kuraray Group Businesses "For People and the Planet" Toward Realizing the Vision Three Challenges Business and Growth Strategies Management Foundation	Corporate Data	20

Value Creation Process

To contribute to improving the environment and enhancing the quality of life through our business activities. This is the mission of the Kuraray Group.

Building on six kinds of capital and the pioneering technology we have cultivated over the years, we will seek sustainable growth and carry out our mission through initiatives set out in the Medium-Term Management Plan "PASSION 2026."

Our Mission

We are committed to developing new fields of business using pioneering technology that improves the environment and enhances the quality of life throughout the world.

"For people and the planet-to achieve what no one else can."

Vision

"Kuraray Vision 2026" Long-Term Vision

Specialty Chemical Company contributing to cus- tomers, society, and the planet and growing sustainably by incorporating new innovation platforms into its own technologies.

Sustainability Long-Term Vision

As a sustainability leader, Kuraray will develop innovative solutions with unique products and cleaner technologies to improve the natural environment and enhance quality of life for people everywhere.

Input

Pioneering technology and

six kinds of capital cultivated over the years

Financial capital

Strong financial position and investments and M&A that create value

Human capital

Diversity of human resources

Intellectual capital

Pursue development that contributes to growth strategies and sustainability

Manufacturing capital

Global production framework

Social and relationship capital

Trust from customers, trust from local communities

Natural capital

Achieve carbon neutrality and expand lineup of products that contribute to the environment

Strategies and Business Activities

Materiality

Creating Value through Business

Improving the natural		Improving the living
environment		environment

Creating Value to Strengthen the Foundation of Kuraray

Effective use of	Improving	Building a "company
resources and
supply chain	that people can take
reduction of
management	pride in"
environmental impact

Building a more sophisticated business portfolio

- Assessing businesses and products for social and environmental value and economic value, while taking into account market growth.

- Setting target fields based on five macrotrends.

Improvement of the			Food and water security		Digitalization, high-speed
global environment
				communications
Effective utilization			Calls for higher quality of
of energy			life (QOL)		Target Fields P.16
Strategies: Three challenges
Medium-Term Management Plan	P.23
		"PASSION 2026"
	Sustainability as
	an Opportunity		P.28

(Sustainability Medium-Term Plan)

Innovations Starting	P.37
from Networking
Transformation of People	P.44
and Organization

Output and Outcomes

Asbestos substitutes, extending the life of building materials

KURALON™ PVA fiber

Biomass-derived or recycled raw materials

Liquid rubber made from biomass-derived materials

Environmentally friendly polyester fiber and textile products Recycled raw material-used CLARINO™ man-made leather

Water and air purification

Activated carbon

Lower logistical burden, food-loss reduction

EVAL™ EVOH resin PLANTIC™ biomass-derived gas barrier material

Make dentists' and patients' lives easier

Dental materials

High-speed communication, lightweight EVs

VECSTAR™ liquid crystal polymer film GENESTAR™ heat-resistant polyamide resin

Improving the natural environment

P.31

Improving the living environment

Kuraray Report 2024	Kuraray Group Businesses "For People and the Planet" Toward Realizing the Vision Three Challenges Business and Growth Strategies Management Foundation	Corporate Data	21

Working to Strengthen Capital

Importance of capital	Expansion of capital (FY2023 results)	Points to be reinforced under "PASSION 2026"

Financial capital

A sound financial foundation is essential to creating value. While securing our ability to generate cash flow, we will invest in areas that contribute to the natural and living environments, working to expand profits and enhance capital efficiency.

Net assets: ¥736.2 billion

Equity ratio: 56.9%

Capital investment: ¥67.3 billion (acceptance basis)

ROIC: 6.2%	ROE: 6.2%
EBITDA: ¥152.6 billion	EBITDA margin: 19.5%

Ability to generate cash flow to support the building of a sound financial position and growth investments Aggressive investment in areas that contribute to the natural and living environments

-Expanding capacity to meet growing demand, including investments to reduce GHG emissions; expanding lineup of products that contribute to the natural and living environments

Capital efficiency to bring about growth and shareholder returns

-Boosting capital efficiency; enhancing shareholder returns (total return ratio of at least 35%, annual dividend of at least ¥40 per share)

FY2026 target  ROIC: 8%EBITDA: ¥170 billion  ROE: 10%(Reference) EBITDA margin: 23%

Human capital

The Kuraray Group consists of people of various nationalities and backgrounds. To create innovation and continuously enhance corporate value, the active participation of diverse human resources is vital.

Number of consolidated employees: 11,906
Ratio of overseas employees: 41.7%
Ratio of female employees: 19.5%
Ratio of female employees in managerial positions: 11.3%
Diversity of core human resources*1: 16%	( P.34)

*1 Ratio of managers in Japan who are women, foreign nationals and mid-career hires, excluding production sites

Global talent development*2: 40%

Executive candidate development*3: 90%

Participants in DX talent development program
Gold 44, Silver 163, Bronze 5,114	( P.35)

*2 Ratio of senior managers taking global leadership training

*3 Ratio of candidates prepared for General Managers equivalent positions

Unified platforms for HR management

-Establishing globally unified employee grading system (for managers); human resources database (to visualize human resources status, leverage resources efficiently

Optimal staffing, encouragement to cultivate personal growth

-Global mobility system (to expand career opportunities, invigorate human resources exchanges); global human resources development program; DX Talent Development Project; systematically nurturing senior management candidates

Culture that encourages those who take on challenges

-Shift to personnel evaluation system that encourages those who take on challenges; promoting diversity and inclusion, spreading a culture that appreciates these values; making assistance programs available to support diverse workstyle options

FY2026 target  Participants in DX talent development program  Gold 180, Silver 1,200, Bronze 5,700 FY2030 target  Diversity of core human resources*1: 25%  Global talent development*2: 60% 

Executive Candidate Development*3: 200%

Intellectual capital				Development based on the customer perspective
Our business activities are grounded in our				-Establishment of Innovation Networking Center (pursuing global marketing activities, collaboration inside and
Number of researchers: 1,053			outside the Group); R&D based on backcasting
unique polymer and synthetic chemistry	R&D expenses: ¥24.4 billion			Development that contributes to sustainability
technologies. We will focus on R&D that helps			-Developing materials, offering solutions that contribute to the natural and living environments; accelerating development of technologies
Ratio of R&D to sales: 3.1%			to reduce GHG; establishment of Environment and Energy Research Laboratory (developing new biomass-derived carbon materials, etc.)
address social issues to pursue the creation of
			Planning, promoting IP strategies
new businesses.
			-Establishment of IP Management Center (proposing, promoting global IP strategies); further enhancing,
				capitalizing on IP such as patents that contribute to profit in various businesses, also making use of patent scores
Manufacturing capital				Reinforcing stable supply framework drawing on integrated production from the raw materials stage
Overseas sales account for about 80% of our	Production bases in Japan: 9			and global network
		Optimizing logistics
total net sales. To maintain our competitiveness	Production bases outside Japan: 46			Constructing new plants
in global markets, it is essential to have a			-EVAL™ EVOH resin; liquid rubber
product supply framework based on making and				Expanding production capacity
			-Optical-use poval film; water-soluble PVOH film; phase two construction for GENESTAR™ heat-resistant polyamide
selling products in the best-situated regions.
			resin in Thailand; VECSTAR™ liquid crystal polymer film; dental materials; LiB anode materials
Social and relationship capital	Number of investor briefings			Building stronger relationships of trust with stakeholders
The Kuraray Group rests on a solid customer	Institutional investors: 181; Sell-side analysts: 47;			Formulating human rights policy, implementing human rights due diligence
Management briefings (ESG, business briefings): 2;			Reinforcing safety activity management (gaining trust of local communities)
base and on relationships of trust with a range
Individual investors: 2	(	P.50)	-Forming Global Process Safety Management Audit Team made up of in-house experts from across the Group,
of stakeholders. We are striving for sustainable	Coverage of CSR procurement survey:			launching activities
		Strengthening quality management (gaining customer trust)
development by further deepening dialogue	82.5% (in Japan)*4, 81.7% (outside Japan) *4 FY2022 results
with stakeholders and co-creating with them.	Safety audits (outside Japan) United States: 4, Europe: 2, Asia: 1
Social contribution activities	(	P.35)
Natural capital				Initiatives to counter climate change
We believe it is important to offer products	Measures to address climate change			-TCFD-based disclosure; acquiring SBT (Science Based Targets) certification; use of internal carbon pricing system
		Targets for ongoing reduction in environmental burden
and services needed to realize a low-carbon	GHG emissions (Scope 1, 2): 2,700 thousand tons-CO2e			-More efficient energy (energy saving), effective use of waste, effective use of water resources (excluding seawater),
and environment-friendly society. We	Various measures for the ongoing reduction of environmental impact	emission management of chemical substances
Through use of Kuraray PSA system, expanding lineup of products that contribute to the natural and
manufacture our products in a way that
	(	P.29)
	living environments, building a more sophisticated business portfolio
minimizes environmental impact.
Sales ratio of products that contribute to the natural and living
	FY2026 target	Developing products that contribute to the natural and living environments  Sales ratio: 60%
	environments: 56%
			FY2030 target	GHG emissions (Scope 1, 2): 2,230 thousand tons-CO2e (30% less than 2019 benchmark)