the Value of Our Group

Transcription

1 Maximizing Value Maximizing the Value of Our Group Isao Uchigasaki President and Representative Director OUTLINE OF CONSOLIDATED RESULTS FOR FISCAL 2000 TWO CONSECUTIVE YEARS FOR RECORD SALES AND EARNINGS In Fiscal 2000, ended March 31, 2001, consolidated net sales for Hitachi Chemical Co., Ltd. ( Company ), grew 7.6%, to billion (US$4,728 million) and currentterm net income increased 3.5%, to 13.0 billion (US$105 million). It was the second consecutive year in which sales and earnings grew concurrently, and the third consecutive year in which current-term net income surpassed the previous record. The financial results for the term under review were conducted in accordance with the new accounting standard for auxiliary retirement benefits. By shifting to this new standard, the Company and its consolidated subsidiaries (collectively Hitachi Chemical ) were required to recognize auxiliary retirement benefits at the time the accounting standard was revised, and as a result incurred a one-time charge of 28.6 billion (US$231 million). Nevertheless, by strengthening our profitability on a consolidated basis, Hitachi Chemical was able to establish a new record for current-term net income. Four factors attributed to this success. First of all, a robust market for products such as personal computers, mobile phones, and data communications enabled Hitachi Chemical to increase sales of higher-value-added items, including 2 Hitachi Chemical Annual Report 2001

2 semiconductor-related products, liquid crystal displayrelated products, and printed wiring board-related products. Secondly, new applications and markets were further developed for existing Chemical-Related Products, leading to increased sales and revenues. Thirdly, our Housing Equipment and Environmental Facilities division achieved profitability. Finally, the reorganization of the group and the reduction of interest-bearing liabilities for the group resulted in improved efficiency. continues. Despite this decline, we will continue to build on our solid foundation by reducing our vulnerability to economic fluctuations and will maximize the operational efficiency of the entire group. We will make every effort to succeed in Building a Balanced and Diversified Business Portfolio and Building a Consolidated Management System. Every effort will be made to achieve our Fiscal 2001 aim of Maximizing the Value of Our Group A Bold Challenge to Achieve Sustainable Development. As a consequence of this strong performance, earnings per share rose from during the last term to (US$0.52). However, the net increase in earnings year over year was reduced to 3.5% after including charges for auxiliary retirement benefits as required by the new accounting standard. As a result, return on equity (ROE) decreased slightly from 10.6% to 10.1% for the same period. BUSINESS STRUCTURE REVITALIZATION BUILDING A BALANCED AND DIVERSIFIED BUSINESS PORTFOLIO Demand in the electronics market fell sharply from the second half of the fiscal year forcing high-tech venture companies to reformulate their business strategies. In the midst of such changes, obviously businesses that are overly dependent on the electronics market will not MAXIMIZING THE VALUE OF OUR GROUP A BOLD CHALLENGE TO ACHIEVE SUSTAIN- ABLE DEVELOPMENT Fiscal 2000 was a record year in earnings for Hitachi Chemical. However, during the second half of the fiscal year, the global economy suffered a setback in parallel with the slowdown of the U.S. economy. Reflecting this trend, Hitachi Chemical s sales revenues dropped sharply in the fourth quarter and unfortunately this serious downturn achieve long-term and sustainable growth. Stressing our slogan of Building a Balanced and Diversified Business Portfolio, Hitachi Chemical is fully committed to revitalizing and balancing the business structure of our group. Hitachi Chemical aims to achieve sustainable growth by reducing our exposure to economic fluctuations in any specific market. We will continue to invest aggressively in our Electronics-Related Products businesses, while at the same time prioritizing measures to revitalize our Hitachi Chemical Annual Report

3 Chemical-Related Products and Housing Equipment and Environmental Facilities divisions. We will also continue to apply selective resource allocation in evaluating the growth potential for products in these latter two business areas. To further increase sales of higher-value-added products, as well as providing the means to explore new frontiers and opportunities for existing products, Hitachi Chemical has utilized selective resource allocation. This stringent approach to restructuring empowers a shift identified three key markets: (1) the data communications market centering on electronic materials and module products used in optical transmission and wireless telecommunication for the IT industry, (2) the energy market including materials for next-generation batteries and fuel cells, and (3) the life sciences market focusing on providing gene analyzing instruments and related products. Hitachi Chemical is committed to growing these businesses with the combined efforts of the entire group. away from under-performing to higher-value-added MANAGEMENT INNOVATIONS BUILDING A CONSOLIDATED MANAGEMENT SYSTEM With regard to consolidated management, we will establish a unified management system for the Company and all subsidiaries. The purpose of this consolidation is to enable us to operate as a single entity, thereby optimizing our strategic advantages, responsiveness, and strength as a group. Increasing Competitiveness through Group Synergies, is one of our guiding principles. In Fiscal 2000, Hitachi Chemical announced plans to turn Hitachi AIC Inc., a publicly-listed company, into a wholly-owned subsidiary, and to convert our Housing Equipment and Environmental Facilities business into a separate company. In addition, Hitachi Chemical sold Nippon Muki Co., Ltd. and Hitachi Chemical Techno-Plant Co., Ltd., which offered limited synergistic potential. products. As a result, in Fiscal 2000, Hitachi Chemical achieved increased sales and record-level income as reported above. With regard to our Chemical-Related Products business, operating profit ratio soared to 6.3% compared to 4.1% in Fiscal Hitachi Chemical s strategy is to continually improve, combine, and fuse our wide-range technology platform, and to employ our Material System Solution, a valuable business model that provides optimal solutions based on specialized materials and process technologies developed for customers. This in turn helps to stimulate new product development in higher-value-added business areas and serves to revitalize our Chemical-Related Products and Housing Equipment and Environmental Facilities divisions. These strategies will ensure well-balanced growth for all business segments. With regard to high growth and higher-value-added business domains, Hitachi Chemical has 4 Hitachi Chemical Annual Report 2001

4 organizational structure and systems, thereby optimizing the strategies, strengths and resources of the group. For example, we are implementing a two-pronged approach to R&D. Under this policy, the Company will manage the group s Japan-based R&D. In addition, R&D functions will be incorporated into our company locations overseas, which are much closer to local markets. The desired result of this strategy will be the formation of a truly global R&D organization. Further, business operations under this consolidated system will be designed for maximum mobility and flexibility. To achieve this objective, we have assigned a Corporate Officer to each division and delegated decision-making authority. This step will ensure effective consolidated management of subsidiary companies that are engaged in similar business areas, while at the same time clarifying and defining management responsibilities for all concerned. These steps should result in improved operational speed and efficiency. One of Hitachi Chemical s key policies is to reorganize or consolidate businesses that post losses for two consecutive years. In line with this principle, Hitachi Chemical reorganized some unprofitable subsidiaries and incorporated their most promising elements into new businesses. As an outcome, the total number of subsidiaries was reduced from 100 (in Fiscal 1998) to 71 as of April We expanded our inter-group financing procedures, which resulted in a reduction of interest-bearing liabilities for the group and contributed to significant improvement in overall efficiency. Our aim is to raise the value of the entire Hitachi Chemical group. This requires the integration of the optimal systems and organizational structures for each business. Fiscal 2001 marks the first year of consolidated management and is also the year in which we will intensify the reorganization of our group, further reduce interest-bearing liabilities, and aggressively restructure subsidiaries that are unprofitable or have losses that have been carried over on their books. We will also push forward with plans to further streamline our consolidated management system consolidated business structure and management infrastructure. In the pursuit of more innovative management, each of our Company s business divisions will take the lead in coordinating, aligning, and consolidating subsidiaries that are operating in the same business field. Our objective is to enable each division to formulate its most efficient TRANSFORMING OUR GROUP INTO ONE IN HARMONY WITH THE ENVIRONMENT Hitachi Chemical s Environmental Protection Action Guidelines were formulated in It states, Recognizing that the growing concern over the global environment has become a common issue for all mankind, harmony with the environment will be given top management priority for the Company. Since this matter is becoming an Hitachi Chemical Annual Report

5 increasingly critical problem for all humankind, it is virtually impossible to achieve sustainable growth without ensuring responsible economic development and environmental protection. Our vision is to create an environment-friendly corporation, and to this end we will strive to maintain consonance between our business goals and responsible stewardship of the environment. This form of environmental management is a top priority for Hitachi Chemical. Hitachi Chemical was quick to introduce an Environmental Management System, and in 1996, acquired ISO certification for all our manufacturing facilities. Subsequently, the Company has pursued certification of our headquarters, sales offices, and all group companies both in Japan and abroad. At present, 31 domestic sites and 51 overseas sites have been certified. Under our Environmental Management System, Hitachi Chemical has striven to set concrete numerical targets aimed at reducing our environmental impact and implemented new programs. These efforts involve energy conservation, reduced volumes of industrial wastes, recycling of materials, air pollution prevention, and water conservation. The Company is also committed to developing an array of green products that facilitate recycling or help minimize emissions from hazardous materials. Products in the latter group include recycled expandable polystyrene beads, halogen-free molding compounds for semiconductor encapsulation, and halogen-free copper clad laminates for multilayer printed wiring boards. In Fiscal 2000, the Company introduced a new environmental accounting system based on Environmental Agency guidelines. We charted our environment-related investments and monitored our improvements and efficiencies with respect to environmental activities. The results of these and other measures have been communicated both inside and outside the Company in our Responsible Care Report. Finally, the Company continues to participate in the World Business Council for Sustainable Development (WBCSD), which is comprised of companies committed to sustainable development and excellence in environmental management. Hitachi Chemical s efforts have been subjected to external evaluation. Last year, the Dow Jones Sustainability Group Index (DJSGI), which was developed through the joint efforts of Dow Jones and SAM Sustainability Group, conducted a comprehensive review of companies throughout the world with regard to sustainability. As a result of this evaluation, we are proud to report that Hitachi Chemical was chosen as one of the top 236 companies worldwide. The Company has set its sights on achieving a goal of zero-emissions and a disposal volume of industrial wastes reduced substantially to zero by Fiscal In addition to efforts aimed at reducing the environmental impact of our operations, we are also engaged in activities to make products more environment-friendly for customers. 6 Hitachi Chemical Annual Report 2001

6 REDUCTIONS IN TOTAL ENERGY USE AND ENERGY INTENSITY INDEX (Hitachi Chemical Co., Ltd. only) ( 91=100) Reduction in total energy use Energy intensity index 90 *Years ended March 31 REDUCTIONS IN THE VOLUME OF INDUSTRIAL WASTE DISPOSED OF (Hitachi Chemical Co., Ltd. only) ( 92=100) the Company is dedicated to achieving a goal of no accidents and no injuries, while actively contributing to the communities in which we operate. As a technologically innovative corporation, Hitachi Chemical provides society and industry with optimal solutions, and by maximizing the value of the entire group, strives to meet the expectations of all stakeholders, including our shareholders, customers, employees, and the communities in which we operate. In this way, Hitachi Chemical will continue to grow as a company contributing to global prosperity. *Years ended March 31 INCREASES IN THE PERCENTAGE OF INDUSTRIAL WASTE RECYCLED (Hitachi Chemical Co., Ltd. only) July *Years ended March Isao Uchigasaki President and Representative Director In keeping with our goal of achieving sustainable growth, the Company will redouble its efforts to ensure that these actions will be maintained throughout the entire Hitachi Chemical group. As a responsible global corporate citizen, Hitachi Chemical conducts its business in accordance with local laws and sound corporate ethics. In Fiscal 2000, the Company introduced the Occupational Health and Safety Management System at all facilities. Under this program, Hitachi Chemical Annual Report