To Our Shareholders

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Kenichi Hirohashi
New Medium-term Management Plan Waku-Waku 21
("waku-waku" means to be excited)
The Carlit Group marked its centennial in 2018.
The Group will continue making concerted efforts to take on new challenges, aiming to establish a business base for the next 100 years. I would like to take this opportunity to thank our shareholders for your ongoing support.
The Group's fiscal year 2018 (April 1, 2018 to March 31, 2019) has come to an end, and so we are reporting here an overview of our financial results and our planned development of operations going forward.

Fiscal 2018 Results

Fiscal 2018 was the year we marked our centennial and also the final year of our four-year medium-term management plan "FOUNDATION 100".

Aiming to establish a new business base for our next 100 years, we set out three goals: strengthen our growth base, strengthen our revenue base, and strengthen our group management base. We then actively carried out a variety of measures, including the development of new products, sales promotion of existing products, and capital investments, in order to achieve our medium-term plan.

During the fiscal year under review, in our Chemical Products Business, sales of signal flares increased, and our material assessment service and ceramic materials performed well.

The fact that our hydraulic power plant was upgraded and restarted also contributed greatly to our business performance. Sales of silicon wafers slowed suddenly starting in the second half of the year, due largely to US-China trade frictions, but increased for the fiscal year as a whole.

As a result, consolidated net sales were ¥54,049 million (up ¥2,263 million, or 4.4%, year on year). Consolidated operating profit was ¥2,328 million (up ¥299 million, or 14.8%), consolidated ordinary profit was ¥2,551 million (up ¥375 million, or 17.2%), and profit attributable to owners of parent was ¥1,579 million (up ¥72 million, or 4.8%).

New Medium-term Management Plan Waku-Waku 21

Review of the Previous Medium-term Management Plan "FOUNDATION 100" (FY2015 – 2018)

We revised the numerical targets for the final year of our "FOUNDATION 100" plan, which began in fiscal 2015, to ¥54,000 million in net sales and ¥2,400 million in operating profit, and worked hard to achieve those goals. The result was that we fell slightly short in terms of operating profit but were nearly on target. However, we did not achieve the goals that we had set out as priority measures, such as creating new businesses and products and expanding overseas business. Accordingly, we will work at solving these issues under our next medium-term management plan.

Providing a stream of waku-waku (exciting) products, from waku-waku (lively) workplaces

This fiscal year we kicked off the three-year medium-term management plan "Waku-Waku 21". The intention behind the "Waku-Waku 21" plan is to delight our customers by providing waku-waku (exciting) products and services and to create waku-waku (lively) workplaces where our employees look forward to working.

We also intend to open up new business domains by creating a stream of products and services with high added value. Accordingly, the core theme of the "Waku-Waku 21" plan is to lay a solid foundation for business and to proactively invest management resources into new initiatives with a view toward ensuring profits.

We will reinforce the base of our existing and related businesses, pursue new R&D, expand more proactively into overseas markets, and work on solving social issues.

Capital Investment and R&D

Under "Waku-Waku 21", we plan on making capital investments amounting to ¥13 billion over three years. The main expenditures will be to construct a new production line for our bottling business, further invest in our solid rocket propellent business, a field where we are focusing efforts, and invest in R&D for semiconductor-related materials, which we expect will grow in the future.

Through efficient capital investments, we will accelerate R&D and expand the operations of our existing business.

With respect to quickly launching new products, learning from our previous medium-term plan, we will improve our ability to gather and analyze market needs. That effort will be led by our new Planning & Development Department. We will also strengthen ties with universities and research institutions in and outside Japan to accelerate open innovation.

"Waku-Waku 21" research topics include: rocket propellent, secondary batteries, clean energy and hydrogen, the environment, healthcare materials, self-driving and IoT materials, and semiconductor materials. While the fruits harvested during the current medium-term plan may be limited, we will strive to ensure they are reflected in our business performance within a few years.

Corporate Governance System and Identification of Material Issues

For a company to achieve sustainable development, it is essential to maintain and strengthen its governance system. Last fiscal year, we established a non-mandatory Governance Committee composed primarily of outside directors, thereby making headway toward impartial and transparent corporate management. Going forward, we will continue to reinforce our corporate governance system through various committee activities.

The Carlit Group promotes "CSR through manufacturing." Aiming to achieve sustainable mutual growth together with society, we have now identified four material issues for our business operations: a safe, secure, and lively work environment; reinforcement of credibility, transparency, and a profitable management base; harmonious coexistence with local communities; and contributions that enrich society. We will reflect these in our CSR activities from here on.

For Confidence and Infinite Challenges

On the occasion of the Carlit Group's centennial, we established the corporate slogan of, "Giving Shape to Infinite Possibilities." Guided by these words, we will proactively take on challenges in new business domains by continuing to create—from lively and vibrant workplaces—products and services that delight our customers.

I ask for your continued support as we move forward.