Basic formulation
has been completed for the Ishin-05 initiative
at Asahi Kasei, a strategic program for dynamic reformation
and development of corporate and group configuration,
management, and operations in fiscal 2003 to 2005. It
incorporates and advances the basic concepts and objectives
of the Ishin2000 program completed in March of
this year. Its implementation will accelerate the transformation
to a high-earnings business portfolio, create business
operations providing new value to the customer, and
complete the transformation of the corporate management
configuration from that of a single division-based corporation
to that of a holding company and constituent corporations
– a selectively diversified multi-member enterprise
of highly independent, high-earning businesses.
Key targets of the Ishin-05 initiative
include a consolidated-base operating profit of ¥110
billion on ¥1,300 billion in net sales, an ROE of
10% or higher, and a D/E ratio of 0.7 or less, for fiscal
2005.
|
| I. Retrospective on Ishin2000
and progress to present |
In the drastically
changing economic and business environment of recent
years, the effort at the Asahi Kasei Group has been
constantly directed to selectivity and focus, and
developing and building the business structure and
the new management configurations and systems that
match the new milieu, while maintaining the strong
and established course for diversification and growth.
From its inception in 1999, the three-year
Ishin2000 initiative has set the strategic
direction for development and growth of operations
in the 21st century, and showed the way
to management and structural reformation for competing
and winning in the emerging milieu of international
rules and standards. In particular, it has been
directed to and has brought (1) restructuring of
corporate operations for development of a growth-oriented
business portfolio and increasing assets efficiency,
and (2) development and implementation of simplified,
high-efficiency structures and systems of corporate
management, and heightened transparency.
In
the third year, it became clear that the Ishin2000
initiative would fall short of accomplishing three
objectives essential for moving into the next three-year
initiative: (1) the transformation to a high-earnings
operational structure, (2) the disposal of negative
legacy holdings, and (3) the transition to a high-speed
management structure and system. Fiscal 2002 has
therefore been designated and become a period for
completing attainment of these objectives and setting
the stage for the launching the new and far-reaching
Ishin-05 initiative. |
|
| |
| II. The Ishin-05
initiative |
| |
| 1. Overview |
| |
| (1) |
The Ishin-05
initiative will advance the transformation to a
high-earnings business portfolio and the heightening
of corporate value, with a strong near- to mid-range
emphasis on cash flow and assets efficiency, and
with accelerated selectivity and focus.
|
| (2) |
In the mid- to long-range
perspective, Ishin-05 will advance the achievement
of high-selectivity diversification, by developing
customer-value creating businesses which provide
new customer services and solutions while expanding
the high-earnings businesses sector.
|
| (3) |
In accord with these
objectives, Ishin-05 sets forth the implementation
of a new corporate and group management configuration,
consisting of a holding company, constituent corporations,
and other group members, with a management reformation
that facilitates fast, flexible response by the
individual business units to changes in operating
environment and clearly delineates authority and
responsibility, thus establishing the Asahi Kasei
Group as a multi-member, self-reforming, and continually
growing enterprise.
|
| (4) |
Key targets have been
established for Ishin-05, as a guide to the
progress in its implementation and as a measure
of the results of this implementation. They include
the following figures for fiscal year 2005, shown
here in comparison with recently revised forecasts
of the results for the present fiscal year. (Abbreviations:
RF, revised forecast; FY, fiscal year; CB, consolidated-base;
ROE, return on shareholders equity; and D/E, ratio
of interest-bearing debt to shareholders equity.)
|
| |
|
FY 2002 (RF) |
FY 2005 targets |
| |
Net sales,
CB |
¥1,200 billion |
¥1,300 billion |
| |
Operating
profit, CB |
¥54 billion |
¥110 billion |
| |
ROE |
– |
10% or higher |
| |
D/E |
– |
0.7 or less |
|
| 2. |
Transformation to a selection-and-focus
based, high-earnings business portfolio |
| |
| (1) |
Realizing the benefits
of the Ishin2000 implementation
In concert with the implementation of the Ishin-05
initiative, the effort will also be directed to
full and effective realization of the potentials
generated by the measures and reformations implemented
in the course of Ishin2000 and fiscal 2002,
including their investments expansion program, business
restructurings, and summary disposition of labor-related
annuity liabilities.
|
| (2) |
Expanding the high-earnings
businesses sector
Development and growth will be accelerated for high-earnings
businesses in the Asahi Kasei Group with a strong
potential for expanding EVA and cashflow, such as
the chemicals-related businesses which have been
freed from the restrictions formerly imposed by
extensive vertically-integrated operations, the
newly created housing-related businesses, and the
expanded pharmaceuticals- and electronics-related
businesses.
|
|
| 3. |
Creating customer value – the prerequisite
matrix for progress to 2010 |
| |
In the Ishin-05
initiative, we will deploy the strategic matrix
for continuing progress and growth to 2010. It is
dedicated anew to the basic Asahi Group credo of
contribution to human life and human livelihood.
We will energize and strengthen operations in high-performance
products, building on a base of core, competitive-superiority
chemical processes and technologies, and utilize
Asahi Kasei Group synergies to create new business
operations. We will achieve higher value-added operations
and products, develop and expand joint and cooperative
efforts with other groups, organizations and institutions,
and nurture and develop new customer-value creating
business operations that provide new services and
solutions to the customer.
|
|
| 4. |
Reforming the corporate management configuration,
for highly autonomous, self-reliant business units |
| |
| (1) |
Transformation to
holding company and constituent corporations
Under the Ishin-05 initiative, after completing
an extensive review of the business operations in
the present configuration of business units in the
form of internal companies, in October 2003 we will
implement a new corporate and group configuration.
As described in the attached outline, the new configuration
will essentially comprise a holding company, seven
constituent corporations, an independent businesses
group, and related subsidiaries and affiliates.
It is a configuration of highly independent, self-reliant,
and self-sustaining business units.
|
| (2) |
Corporate governance
Among the means of ensuring sound and transparent
management of the holding company, we will consider
the inclusion of outside experts in its oversight,
as members of its Board of Directors and as members
of a new Advisory Board for this purpose. The Board
of Directors will be small, to facilitate fast,
timely, informed deliberation and decision-making.
|
|
| |
 |
Transformation to Holding Company Configuration
Purpose, Concept, Operation, and Governance
| |
The Board of Directors of Asahi
Kasei Corporation has formulated, and will submit to its
General Shareholders Meeting for approval, a proposal
for transformation of the existing division-based corporate
and group configuration to that of a holding company together
with constituent corporations and related subsidiaries
and affiliates (collectively, the “HC/CC”
configuration). Subject to this approval, establishment
of the new configuration is scheduled for October 2003.
The HC/CC configuration will be implemented to facilitate
fast, flexible response by the individual business units
to changes in the operating environment and to clearly
delineate authority and responsibility. It succeeds the
development and growth of the internal companies system
of business units established in June 2001 for independence
and accountability of business unit management and for
fast-moving operation through the accompanying devolution
of authority.
As the HC/CC configuration encourages and facilitates
the development by the individual business unit of optimal
structures and operations for its own specific field of
business, position, and environment, it is inherently
advantageous as a management configuration for the Asahi
Kasei Group, which is primarily characterized by the range
and depth of its diversified products and operations.
It is also highly advantageous for the effective and efficient
separation of the functions of execution and oversight,
and for a high degree of clarity and transparency in corporate
and group management.
|
| 1. Objectives of transformation to
HC/CC configuration |
| |
| (1) |
Business unit management
optimization for field, position, and environment
The longstanding practice of the Asahi Kasei Group
has been to apply a uniform, integrated management
structure and system to all of its many businesses.
For success and growth in today’s competitive
milieu, however, it has become essential for the
business operation to develop and adopt the optimal
management systems and structure for its specific
field, position, and environment. The HC/CC configuration
will facilitate this development.
|
| (2) |
Transformation to
management with a strong cashflow awareness
Each constituent corporation, as an independent
entity bearing full financial assets responsibility,
must as a matter of course pursue management that
will increase assets efficiency and productivity.
The business decisions will be made by the constituent
corporation, within the business framework determined
by the midrange plan, annual budgeting, and cashflow
outline approved by its holding company. The holding
company will be responsible for strategic planning,
oversight of the constituent corporations, and optimal
allocation of group resources.
|
| (3) |
Acceleration of business
portfolio transformation
The self-reliance and inherent dynamics of the constituent
corporation will create a strong impetus to increasing
earnings and cashflow, and strengthening its business
base. For the group, priority allocation of group
financial resources to growth-oriented businesses
will accelerate the transformation to a high-earnings
business structure.
|
| (4) |
Pervasive inculcation
of fast-moving, autonomous, self-reliant management
The HC/CC configuration will move decision-making
closer to the market, and thus work to pervasively
foster and instill fast moving, highly mobile, independent,
and self-sustaining management, management that
is more responsive and adapted to the nature and
characteristics of the business. The devolution
of authority for conduct and execution of the business
and responsibility for financial assets will foster
and drive the development and growth of business
management that is truly self-sustaining and complete
in itself.
|
|
| 2. HC/CC configurational outline and
transformation profile |
| |
| (1) |
Configurational regrouping
The regrouping of the businesses will be based on
a review of their interrelationships and affiliations
in the light of the current configuration of internal
company business units. The new Asahi Kasei Group
as currently conceived will consist essentially
of the holding company, seven constituent corporations,
an independent businesses group consisting of subsidiaries
separate from the constituent corporation group,
and related subsidiaries and affiliates. In chemicals
and chemicals-related operations, the four existing
internal companies will be consolidated into one
new constituent corporation, to meet the strong
and pervasive requirement of this sector for an
integrated and coordinated strategic program to
increase added-value operations and achieve cost
reductions.
|
| (2) |
Methodology of transformation
The transformation will essentially consist of establishing
new corporations and transferring segments of the
present corporation to these new corporations, as
a separation of corporate component parts. In two
cases, the procedure will involve the transfer of
existing companies to the new corporations, to meet
specific requirements for smooth and effective transition
to the new configuration in those sectors: Asahi
Construction Materials Co., Ltd. will be merged
into the Construction Materials Corporation, and
Asahi Kasei Homes Co., Ltd. will be merged into
the Housing Corporation.
|
| (3) |
Employee status and
affiliation
Employees (including employees on loan) will be
transferred to the constituent corporations (and
employees currently affiliated with the Head Office
to the holding company) while fully maintaining
their existing status and conditions of employment,
in accordance with the Labor Contracts Succession
Act. To maintain and heighten employee awareness
and identity as members of the Asahi Kasei Group,
systems of employee transfer solicitation and rotational
employee transfer within the Asahi Kasei Group will
be established.
|
| (4) |
Allocation of assets
and liabilities
Among the existing assets and liabilities of Asahi
Kasei, those which are inherent to the operations
of the businesses which are to comprise the constituent
corporations will generally succeed to their respective
constituent corporations. Where advantageous to
the optimization of the Asahi Kasei Group, assets
and liabilities will succeed to the holding company.
|
| (5) |
Schedule of approval
and implementation
Submission of proposal to General Shareholders Meeting:
June 2003
Commencement of transformation to HC/CC configuration:
October 1, 2003
|
|
| 3. Operation |
| |
(1)
|
Holding
company role and functions
The basic role of the holding company lies in the
maximization of overall corporate value of the Asahi
Kasei Group (the “Group”) in its HC/CC
configuration. Its primary functions, directed toward
comprehensive Group optimization, will essentially
comprise the following.
a) Strategic Group proposals formulation, deliberation,
and decisions.
b) Optimum allocation of Group resources (human
resources, financial assets, and technologies).
c) Monitoring of Group management (including compliance
and risk management).
d) Overall Group public relations and investor relations.
e) Group R&D and creation of new businesses.
|
| (2) |
Constituent
corporation role and functions
The basic role of the constituent corporation lies
in the maximization of its corporate value. It holds
decision-making authority for the conduct of its
business operations within the scope of its designated
businesses framework and financial resources, and
is completely responsible for these operations,
including that of cashflow.
|
| (3) |
Group operation
a) The holding company will be organized into strategic
function divisions and integrated Group service
divisions supporting the management of the constituent
corporations. The strategic function divisions will
be formed in accordance with their respective functions,
one of which will be Group R&D, and will defray
their expenses through revenues from the constituent
corporations in such forms as dividends and rents
for leasing of real property. The integrated Group
service divisions will as opportunity and feasibility
arise be developed and operated as autonomous service
companies.
b) Establishment of a Council of Corporate Presidents
will be considered, for exchange of information
and views among the constituent corporations, communication
of strategic Group programs and policies, and consultation
relating to revisions and alterations of Group-wide
systems.
|
|
| 4. Corporate governance |
| |
| (1) |
For the purpose of
ensuring sound and transparent management of the
holding company, the formation of an Advisory Board
having outside experts or authorities among its
members and the inclusion of outside directors in
the Board of Directors will be considered.
|
| (2) |
The Board of Directors
will be small, to facilitate fast, timely, and fully
informed deliberation and decision-making. |
| |
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<Asahi
Kasei Group Configuration as Envisioned in Ishin-05>
|
