Message from the President
Message from the President
From Integrated Report 2021
In June 2021, I had the honor of assuming the position of president of Kanematsu.
To achieve the goals of the latter half of future 135, our medium-term vision for the six years ending fiscal 2024, I will return to the founding purpose espoused by Group founder Fusajiro Kanematsu as I strive to increase enterprise value.
1．Striving to Meet the Expectations and Trust Placed in Management
To begin, on behalf of the Kanematsu Group, I would like to extend my condolences to all those affected by the COVID-19 pandemic and to thank all those who have supported our communities through their tireless efforts in this difficult time.
With the end of the COVID-19 pandemic still out of sight and waves of change--from efforts to transition to a decarbonized society spurred by climate change to digital transformation (DX)--bearing down on us, it is clear that tectonic shifts are beginning around the world. I was selected to become president at this time of dramatic change in society partly, I think, because of my many years of experience in sales in and outside Japan. I therefore understand the mission entrusted to me as being to advance management while always remembering the key ideas of interpersonal connection, action, and taking on ambitious challenges.
2．Our Social Mission is Defined by Our Founding Purpose
Since its founding, the Kanematsu Group has maintained and practiced an entrepreneurial spirit of developing new markets and businesses and its founding purpose of providing socially valuable goods and services, which relates to today's Sustainable Development Goals (SDGs). I believe that these are universally applicable values that we must continue to pass down, and that by making management decisions that are rooted always in our founding purpose, we will build a strong, clear Group identity.
At the same time, as times change, our role as a trading company is changing. Until now, trading companies offered functions in such areas as information, logistics, finance, and risk management. However, as manufacturers and other companies in other industries increasingly provide these functions, we must step back and deeply examine our purpose and the value that we can provide.
3．Changes in the Environment and the Future Potential of Trading Companiess
Unafraid of Failure and up for a Challenge
Going forward, while remaining rooted in trading, trading companies will need to make their presence felt as highly specialized business partners deeply embedded in supply chains and sales networks, going beyond just investing to create new value. Building a new business from scratch is quite a fun experience. There are many failures along the way, but when you achieve success and the team reaches its goals, you taste a satisfaction that is difficult to put into words. I want to enable as many of our employees as possible to have this kind of experience early in their careers. To this end, we must develop a culture that encourages aggressively taking on new challenges. To help such a culture take root throughout the Group as we aim for corporate growth, we will need to continue efforts to improve work environments and systems.
Leadership that Unites Teams in Pursuit of Their Goals
My experience in the Electronics and Devices and Motor Vehicles & Aerospace divisions, including that in the United States, is for me an irreplaceable asset. In a trading company, above all, just taking action is crucial. Among the steps of the PDCA cycle, D ("do") is the most important. You have to listen to what people are saying and use your instincts to develop new businesses that are ahead of the curve, building relationships and involving many of those around you. Think of it as building a team that encompasses suppliers and customers, people in and outside the Company.
Kanematsu has supported the motorcycle racing team of one of our suppliers for 30 years. As a private team, it has always been hard for them to compete with the works teams run directly by motorcycle manufacturers, which have an advantage in funding. Nevertheless, they were determined to beat the works teams. In 2006, this team became the top-ranked team in Japan in the Suzuka 8 Hours Endurance Race, and in 2018, it became the first Japanese team to win the FIM Endurance World Championship. Over the years, I have seen how the hard work and determination of this team as they strived toward victory has attracted many supporters. In particular, I have been moved by the leadership of the team manager, encouraging and uniting the team, and have used this example as a guidepost for thinking about what makes a leader.
A Rare Opportunity for Trading Companies
Until this June, I was Chief Officer of the Motor Vehicles & Aerospace Division. In the current environment, this truly felt like trying to navigate a turbulent sea without a compass. However, a trading company must create businesses, and to that end, not go on the offensive, but blaze a new path of innovation in society. I see the moment we now find ourselves in as a rare opportunity to greatly increase our enterprise value, which I am determined to seize by implementing nimble management.
Given these circumstances, we must advance Groupwide DX with the utmost urgency and scope. The ICT solutions business, a core part of the Group, is a digital business that plays an essential role in the changes currently taking place in society. Leveraging this strength, we will bring transformation to every part of the Group.
Breaking Down Barriers Between Divisions to Create New Value
Today, DX is an urgent task across every industry. In some cases, like Amazon and Uber, DX is disrupting existing industries with new technologies and business models outside the established industry order and business practices. For example, automobiles today are loaded with semiconductors, and major IT companies are moving into the automotive industry. In this way, the conventional delineations between industries are disappearing.
Trading companies are seeking to leverage their wide-ranging business domains to skillfully combine elements of existing operations and create new businesses that realize higher added value. To do this, we need to think not just at the level of individual divisions or the Company alone but more broadly, encompassing all parts of businesses, and coordinate with Group companies to unite the entire Kanematsu Group in accelerating new business creation.
In particular, DX is an opportunity for the Kanematsu Group to make a major leap forward. Even after the COVID-19 pandemic, changes in the ways people move and meet--touched off by remote work--are sure to remain. Interpersonal relationships are the foundation of a trading company's business. When it became clear that we could do more remotely, we considered the possibility of slimming down our overseas locations for efficiency. However, further study of the issue led us to a renewed awareness that such locations, in providing up-to-the-minute information from other countries, are an essential part of the business of a trading company, and we should instead focus on making even more use of these locations and their human resources and intel. To do this, we will have to implement reforms at Kanematsu in step with DX. Over the past three years, we have made considerable progress in building internal IT infrastructure, and we will now work to expand this to Group companies. Furthermore, I think it will be important to evolve our existing business models through DX and technological innovation so as to offer even greater added value and competitiveness. I feel that this is an area in which we fell somewhat short during the first year of the COVID-19 pandemic.
4．Overview of the First Three Years of future 135
Under future 135, our medium-term vision for the six years ending fiscal 2024, we are proactively promoting the expansion of scale, acquisition of added value, and improvement of quality, aiming for a future trajectory of even greater growth. We have done so in line with a basic policy of seeking to contribute to sustainable global economic growth and the resolution of social issues by evolving our existing businesses and creating new businesses. In the first year of future 135, our plans advanced smoothly, with financial results exceeding forecasts. However, from the second year onward, progress was impacted by the COVID-19 pandemic. In fiscal 2021, the third year, we recorded year-on-year decreases in revenue and profit, primarily due to the impact of the pandemic. However, in the latter half of the year, operating profit returned to the pre-pandemic level, demonstrating the underlying strength of our earnings base, particularly in the Electronics & Devices and Foods, Meat & Grain segments.
Looking at the important management issues of human resource strategy and DX, I think that our efforts so far have served to lay the groundwork for the future. In terms of business investment and M&A, which are key to building new businesses, we invested approximately ¥23 billion over the vision's first three years, but much of this consisted of investments made by individual businesses, divisions, or Group companies. Investing more effectively in ways that maximize synergies across the Group is a challenge we face in the remaining three years of future 135.
Of particular note in the last three years were efforts to identify growth opportunities. We formed a Technologies and Business Collaboration team, creating mechanisms for sharing information and networks not only within segments, but across the Group. The team's members come mainly from the Corporate Planning Department, with participation from the IT Planning Department, the business segments, and, more recently, Group companies Kanematsu Electronics Ltd. and Kanematsu Communications Ltd. The impetus for the creation of this team was the involvement of Group company Kanematsu Ventures Inc. in fostering new businesses. This company, based in Silicon Valley in the United States, is deepening ties with startups to create new businesses. Although modest in scale, Kanematsu Ventures' projects go beyond the mere investment of capital; in order to nurture new companies; the company supplements the functions of startups by drawing on the networks and know-how of Kanematsu as a trading company. We are also advancing efforts to launch new businesses in partnership with a venture capital fund in Silicon Valley. Currently, we are expanding such projects to multiple divisions, and we have established the conditions to promote coordination between divisions and Group companies. We are creating opportunities to come into contact with such cutting-edge technologies and new businesses across the Group while nurturing the seeds of future growth, driven by robust relationships in and outside the Group, including those based on open innovation.
5．Key Issues for the Final Three Years of future 135
Helping Achieve the SDGs and Proactively Advancing DX
In May 2021, following the conclusion of fiscal 2021, we announced revisions for the second half of future 135. Despite changes in the market environment since the plan was originally formulated, our basic policy remains largely intact, with the addition of addressing the SDGs and promoting DX to the vision's priority initiatives. We also revised the vision's qualitative targets in light of the temporary slowdown in business investment and revenue growth caused by the COVID-19 pandemic. The special feature on this pages covers these changes in more detail.
Over the course of the remaining three years, I think that we must focus on promoting Groupwide DX and unified Group management that generates synergies across divisions in order to expand added value and business creation. In particular, we will further advance digitization to increase operational efficiency while integrating digital technologies into existing businesses to create new value generators and increase their contribution to revenue.
In addition, to help realize a sustainable society, we will advance investment in business areas related to the environment, society, and safety where we can contribute to the achievement of the SDGs. To clarify the connections between our businesses and the SDGs and our sense of purpose regarding their achievement, we now require investment proposals to include information about which SDGs the project relates to and how. Through such efforts, we are increasing awareness of the SDGs and TCFD recommendations across the Group.
The Future of Innovation Investment
Investment in innovation is at the core of the growth envisioned under future 135. In this area, we are working to create business in step with innovation in society by leveraging such cutting-edge technologies as AI and IoT and advancing cross-division coordination. Over the past three years, we have built a service framework for developing and operating a data exchange market, aiming to commercialize data exchange and utilization. We also acquired a company that possesses technologies for using vehicle operation data and AI to reduce carbon emissions and, in the long term, will play a role in the development of the in-vehicle telematics market. Going forward, we plan to make cross-segment use of our broad-ranging customer base to advance data exchange and utilization businesses on a Groupwide basis. Furthermore, in April 2021, we entered new logistics fields, including a business partnership in infrastructure development for flying vehicles* and the drone delivery market.
※The Ministry of Economy, Trade and Industry and Ministry of Land, Infrastructure, Transport and Tourism are leading public-private efforts to develop and implement a roadmap for air mobility in Japan with the aim of beginning service in 2023.
Human Resource Development That Contributes to Professional Fulfillment
Human resource strategy is one of the most important elements of a trading company's management. In 2019, as the core of our human resource development, we launched Kanematsu University, a training system for employees in their first ten years with Kanematsu. Open to all Group employees, Kanematsu University provides opportunities to build character as a member of a trading company, study international cultural and language skills, and acquire the operational and investment knowledge necessary for creating business plans. The program thus enables participants to acquire a wide range of knowledge, from the basics to practical application, and employees have been ambitiously engaging with the program.
In addition, we have enhanced other training systems for employees at every level, including training in business plan formulation and executive management training. Developing human resources with the skills to excel globally, however, is difficult to accomplish through formal instruction alone. It is important to get our young employees onto the front lines of business so that they can gain hands-on experience. To this end, we have established a six-month overseas training system for employees in their first five years with the Company. We have high expectations that these development programs will soon begin to yield tangible results. Going forward, we cannot afford to discount the new business potential of individuals' ideas. I believe that we must proactively take in ambitious employees' proposals and break down the barriers separating them from management.
Our human resource strategy is not aimed simply at providing learning opportunities. Rather, it is part of efforts to change our employees' mindsets and help them realize professional fulfillment.
Increasing the Effectiveness of Corporate Governance
Looking at corporate governance, in the first three years of future 135, we made the Board of Directors more nimble and efficient and advanced the separation of management oversight and business execution. We welcomed new outside directors with experience and knowledge useful to enhancing the Kanematsu Group's enterprise value and benefitted from their valuable expertise in Board of Directors' meetings. We have evaluated and analyzed the effectiveness of the Board of Directors with input from an external institution, enabling efforts to further enhance the Board's functions and invigorate discussion. Going forward, we will expand the breadth and depth of the Board's agenda, including considerations of medium- and long-term management strategy, and enhance its functionality and diversity as part of efforts to further enhance its effectiveness.
6．To Our Stakeholders
While uncertainty caused by the COVID-19 pandemic remains, economic activity is expected to normalize as vaccination progresses. Based on this assumption, in fiscal 2022 we are planning for consolidated revenue of ¥700.0 billion, up 7.8% year on year, operating profit of ¥28.0 billion, up 18.5%, and profit for the year attributable to owners of the Parent of ¥15.0 billion, up 12.7%.
The Kanematsu Group considers providing returns to shareholders to be one of its most important tasks. We will continue to pay stable dividends backed by a stable risk asset ratio and revenue structure. For fiscal 2022, we plan to keep the annual dividend per share at ¥60 (for a payout ratio of 33.4%).
Kanematsu's founding purpose aligns with the SDGs and the principle of creating shared value. In this "new normal" time of heightened uncertainty, I feel, more than ever, that our founding purpose must be our compass. Going forward, we will continue to return to this universally applicable way of thinking to sustainably increase our enterprise value and contribute to society.