CEO Message for Investors

On behalf of the NSG Group, I sincerely thank you for your continued support. I am pleased to present the interim report for the period ended 30 September 2019.

Summary of the First Half of FY2020 and Outlook for the Second Half

In the first half of FY2020, market conditions grew increasingly challenging with the softened demand in most regions of the world in addition to foreign currency fluctuations. Architectural glass businesses deteriorated substantially in Europe and North America except for the robust solar energy glass business. Meanwhile, Automotive and Technical glass businesses were adversely impacted by the automotive sales decline mainly in Europe and China. Consequently, the Group’s sales revenue decreased by 6 percent year-on-year to ¥288.6 billion, operating profit decreased by 17 percent year-on-year to ¥14.9 billion and profit attributable to the owners of the parent fell by 79 percent year-on-year to ¥19 billion.

We anticipate the major markets will continue to lose momentum against the backdrop of economic uncertainties in the second half of the year. The Group will strive to transform its business structure with further sales increase of VA* products, efficiency improvement and cost saving efforts and so forth. With these measures as a springboard, and also capitalizing on the strategic investment projects for solar glass production and capacity expansion in the emerging market, which are slated to come on stream soon, we are determined to improve our performance in FY2021 and beyond.

* VA stands for Value added

MTP Phase 2 and the medium to long-term initiatives

Under the MTP (Medium Term Plan) Phase 2 covering three years up to FY2020 with “Transformation into the VA glass company” and “establishment of financial sustainability” as two major objectives, the Group has made steady progress in raising VA sales ratio and ROS (Return On Sales) improvement. Financially, we boosted the equity while reducing financial expenses and resuming distribution of dividend on ordinary shares.

In FY2020, which is the final year of MTP Phase 2, although the business environment worsened drastically and thereby, our financial performance was seriously challenged, we proactively moved ahead with cost reduction measures and saw improvement initiatives yielding results in several focus areas. Also, the strategic investment projects are advancing smoothly for an early start of operation. We expect these projects and the growth of orders awarded for our VA products to meet CASE* related needs in the auto industry will drive forward our performance in the next term onwards.

We are also laying the groundwork for growth in the longer term perspective. The Business Innovation Center (BIC) established last year was allocated with more resources this year. BIC successfully launched PicoGene™ last April while a number of new products and businesses are in the pipeline.

* CASE stands for Connected, Autonomous, Shared and Electric.

Enhancing Enterprise Value - Untiring efforts for ESG

As stated in “Our Vision,” the management principles for the NSG Group, our mission is to “change our surroundings and improve our world.” In accordance with this, we are proactively addressing ESG (Environment, Society and Governance) issues with a view to realizing the society for sustainable growth as well as enhancement of enterprise value in the long term.

We consider corporate governance is the foundation for all our business activities. With another Independent External Director joining our Board this year, a majority of the Board now consists of Independent External Directors (5/9). Enhanced disclosure of executive compensation is also the initiatives undertaken this year. In the area of environment, we are pursuing opportunities to make environmental contribution through supplying products aligned with the progress in society leveraging our technological strength, such as smart building, ZEH (Zero Energy House)/ZEB (Zero Energy Building) and EV (Electric Vehicle). At the same time we are also aiming at reducing greenhouse gas emission from our manufacturing processes by 21 percent compared with 2018 by 2030. This target was approved as SBT* initiative in October 2019. Various efforts including process improvement are under way in order to achieve this target.

As an initiative in the social aspect, Inclusion & Diversity is promoted to invigorate the organization with focus on diversity in nationality and gender as well as hiring of persons with disabilities.

* SBT (Science-Based Targets) is greenhouse gas reduction target consistent with scientific data.

Dividend

The Group’s dividend policy is to secure dividend payments based on sustainable business results and we will continue to use sincere efforts to declare dividends in coming years. We plan to distribute dividend of 20 yen per ordinary share at the yearend of FY2020 as we predicted at the outset.

We look forward to your continuing understanding and support to the Group.

November 2019
Shigeki Mori
Representative Executive Officer
President and CEO
Nippon Sheet Glass Co., Ltd.