Message from the President

Message from the President

Michiya Kadota
President and
Representative Director

A Message to Our Stakeholders

The fiscal year ended March 31, 2017, was a year for the Kurita Group to strengthen its resolve to implement reforms.
During the year, growing economic inequality brought on by globalism and technological advancements not only destabilized political situations around the world but also challenged the workings of modern capitalism. At the same time, industrial structures and people's work environments are being transformed by rapid progress in such technologies as the Internet of Things (IoT) and Artificial Intelligence (AI).
In such a dramatically changing operating environment, we are concerned that Kurita's current business model is at risk of becoming irrelevant. Moreover, we recognize that the Company must change by giving more consideration to the natural environment and society in its business activities.
When I was appointed President and Representative Director in 2016, I declared the Kurita Group's goals of earning the trust of all stakeholders and contributing to the development of society by realizing its corporate philosophy. While staying true to our philosophy, we believe that proactive in-house reforms are necessary for further strengthening the Group's competitive advantages. In the future, we intend to reorganize the Group while carefully enhancing Kurita's identity with the aim of establishing a business structure and value system that fits with today's world.
As we work to reform Kurita, we look forward to the continued understanding and support of the Company's shareholders and other stakeholders.

Interview with the President

Q. What is your assessment of the consolidated results of the first half of the fiscal year ending March 31, 2018?

A. The first half results remained strong. In the Water Treatment Chemicals business, both orders and sales increased as US-based Fremont Industries, LLC, acquired in January 2017, was newly included in consolidated results and there was growth in mainstay products due to recovery in capacity utilization at the plants of most customers in Japan. In the Water Treatment Facilities business, orders for water treatment facilities for the electronics industry increased more than expected as capital investments took off in East Asia, including Japan, against a backdrop of robust semiconductor demand. Sales also increased as progress was made on construction of projects ordered last fiscal year and maintenance orders increased from customers seeking to address aging water treatment facilities and increase production. Operating income increased thanks to the effect of increased sales and improved profitability with thorough process and cost control of construction at water treatment facilities. Net income attributable to owners of parent also increased as a result of sales of shares of other listed companies and a lower effective tax rate.

Q. Please describe the initiatives carried out up to the first half of this final year of the CK-17 (Competitive Kurita 2017) medium-term management plan.

A. The Kurita Group is currently promoting various initiatives, positioning the overseas and service businesses as our growth areas.
Starting with the overseas business, this fiscal year we decided to acquire the Akzo Nobel plant located in a suburb of Bordeaux, France, in order to enhance the production capacity of process treatment chemicals for paper and pulp at Kurita Europe GmbH. The aim was to improve competitiveness and profitability through production of innovative products in Europe. By continuing to work on strengthening our global business foundation, the Group hopes to steadily seize opportunities for growth.
Next, we have launched a new business organization as of April 2017 to strengthen the foundation for delivering solutions in Japan and overseas. Previously divided into the Water Treatment Chemicals business and the Water Treatment Facilities business, the organization overseas was made into one under the sole supervision and responsibility of a single director. In Japan, the water treatment chemicals and maintenance service operations structures were unified as the businesses share many things in common, allowing the provision of solutions that combine expertise from each. By removing the negative effects of a vertical organization, we will pair water treatment chemical and water treatment facility services with maintenance in order to provide comprehensive services at a high quality.

Q. What are the Kurita Group's aims in the medium to long term?

A. In a rapidly changing environment of globalization and technological innovation, I believe that it will be necessary to actively reform the way of doing things up to now along with the corporate culture and develop an organization capable of withstanding changes in the environment in order to ensure sustainable growth of the Group. In terms of the business, we are working on development of a new business model that can serve as a pillar of medium- to long-term profits. As promising areas, we are focusing on business areas such as wastewater reclamation and recycling and water saving solutions utilizing a new tool - a standardized system that brings together the technology and know-how of water treatment chemicals and water treatment facilities.
A sustainable society is a precondition for our Group to strive for long-term growth. Based on this awareness, we will aim for management that recognizes global norms with respect to social and environmental problems. Under the present circumstances where the role to be fulfilled within society by companies is growing, we will increase the corporate value of our Group by addressing CSR issues and reducing risks. At the same time, we hope to contribute to solving challenges for the creation of a sustainable society using our Group's technology.

Q. Please describe the measures for improving capital efficiency and the policy for shareholder return.

A. The Kurita Group hopes to prioritize allocation of the internal reserves entrusted to us by shareholders in investments in promising business areas to achieve sustainable growth. We hope to achieve stable growth of earnings per share by maintaining investment discipline in the aim of improving capital efficiency and also by optimizing our capital structure at the same time.
The interim dividend for this year was increased by one yen compared to the previous year to 26 yen per share in order to meet the expectations of our shareholders. I would like to express my appreciation in advance for your understanding and continued support.

November 2017