LINTEC ANNUAL REPORT 2017
For the iscal year ended March 31, 2017
Moving Forward
With a Focus on
The Future
This report is meant to help shareholders and other investors understand the LINTEC Group and its quest to achieve sustainable growth and contribute to the further development of society as a whole. Based on the International Integrated Reporting Framework released by the International Integrated Reporting Council in December 2013, in addition to performance and inancial information, this report also introduces the technological capabilities, human resources, and other
“intangible assets” accumulated by the LINTEC Group that are of the variety not listed in the inancial statements.
Information that could not be contained within this report is available on the following websites.
IR Website CSR Website
http://www.lintec-global.com/ir/ http://www.lintec-global.com/csr/
Editorial Policy
REPORTING PERIOD
This report covers the period from April 1, 2016 to March 31, 2017. However, some of the information includes content from April 2017 onward.
FORWARD-LOOKING STATEMENTS
This report includes forward-looking statements, such as forecasts of business results, based on information currently held and assumptions that have been judged as reasonable by the Company. The Company cannot guarantee the accuracy of these statements or deinitively assure the realization of future numerical targets and policies. Actual business results, etc., may vary due to various factors and circumstances.
1 To All Our Stakeholders 2 COVER STORY - 2 LINTEC’s History
- 4 LINTEC’s Distinct Features - 6 LINTEC’s Business Model
8 Performance Highlights 10 MANAGEMENT STRATEGY - 10 A Message from the President - 14 A Message from the CFO 16 SPECIAL FEATURE
The LINTEC Global Network 20 CORPORATE VALUE INITIATIVES - 20 LINTEC’s Value Creation - 22 Sales
- 30 Research and Development - 34 Production
- 38 Human Resources
40 THE BASE THAT SUPPORTS GROWTH - 40 Corporate Governance
- 47 A Message from an Outside Director - 48 Corporate Oficers
50 FINANCIAL SECTION
- 51 Management’s Discussion and Analysis - 53 Operating Risks
- 54 Financial Summary - 56 Consolidated Balance Sheet - 58 Consolidated Statement of Income - 58 Consolidated Statement of
Comprehensive Income
- 59 Consolidated Statement of Changes in Net Assets
- 60 Consolidated Statement of Cash Flows - 61 Notes to Consolidated Financial
Statements
- 84 Management’s Report on Internal Control over Financial Reporting - 85 Report of Independent Auditors 87 Investor Information
LINTEC ANNUAL REPORT 2017
To All Our Stakeholders
Company Motto
Mission Statement
The company name LINTEC derives from “linkage” and “technology,” two key components of our business philosophy, which emphasizes the importance of close relations, inside and outside the company, and leading-edge R&D programs. By bringing these together to develop innovative solutions, we have established a reputation in Japan and overseas as a dynamic and reliable company that contributes to the prosperity of our stakeholders, to the growth of our industry, and to a brighter future for society as a whole. And underpinning all of our business activities is an unwavering
emphasis on “Sincerity and Creativity,” the twin values enshrined in our company motto.
For tomorrow we build today
LINTEC has a 90-year history of building on original technologies and human resources to deliver a diverse product lineup ranging from adhesive products for labels for food and daily necessities to products for the semiconductor and optical display industries.
The name LINTEC relects our employees’ commitment to linking together people and technology to open up new business domains and play a part on the global stage. Our motto, “Sincerity and Creativity,” expresses our fundamental values as a manufacturer—openness to all our stakeholders and a spirit of innovation as we take on the chal- lenges of new product development.
We will continue to strive for sustainable growth driven by the social contribution from value that only LINTEC can create.
Hiroyuki Nishio
Representative Director President, CEO and COO
Sincerity and Creativity
FY1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 200
Accumulated Technology Capabilities
Established in 1927 as a manufacturer of gummed tape for packaging, FUJI SHOKAI signiicantly expanded its businesses due to the demand for cardboard boxes, which were rapidly being used as a replacement for wooden boxes. In 1960, we began selling adhesive papers for labels and subsequently entered the adhesive ilm ield, thereby laying the foundations of our current mainstay businesses. In the 1970s, the Company diversiied into products for motorcycles, automobiles, and interior / exterior decoration. After changing its name to FSK CORPORATION, the Company entered the semiconductor ield in 1986 through the development of innovative products. In these ways, the Company’s business domains broadened as times changed. LINTEC Corporation came into being in 1990 through a three-way merger with SHIKOKU PAPER CO., LTD. and SOHKEN KAKO CO., LTD. This led to signiicant extension of the technology domain into upstream areas such as papermaking.
Since our founding in 1927 as FUJI SHOKAI, we have steadily grown through constant development of technolo-
gies and products that anticipate the needs of the times. Since the 1990 merger of three companies to form
LINTEC Corporation, the Group has been stepping up globalization. Today, LINTEC products play important roles
in a wide range of countries.
LINTEC’s History
Net Sales
¥
102,608
millionGummed tape
Time of establishment UV curable dicing tape
2 LINTEC ANNUAL REPORT 2017
1991
Made full-scale entry into LCD- related product ield Feb. 1994
Singapore Ofice opened May 1994
PT. LINTEC INDONESIA established as manufacturing base for adhesive products for labels
Main Highlights
Apr. 1927
FUJI SHOKAI established in Sugamo, Tokyo
Started production and sales of gummed tape for packaging Oct. 1934
The Company reorganized to establish FUJI SHIKO CORPORATION
Mar. 1960
Started production and sales of adhesive papers for labels and later commenced production and sales of adhesive ilms 1970s
Expanded business in industrial ields such as decorative materials for interiors and exteriors, motorcycles, automobiles and others
Oct. 1984
Company name changed to FSK CORPORATION 1986
Developed UV curable dicing tape and made full-scale entry into the semiconductor-related product ield
FSK CORPORATION
+
SHIKOKU PAPER CO., LTD.
+
SOHKEN KAKO CO., LTD.
Apr. 1990
LINTEC Corporation
Formed through the merger of three companies
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (Forecast)
Globalization and Reinforcement of R&D Capabilities Usher in a New Growth Phase
Following the merger, LINTEC entered the ield of optically functional ilms for Liquid Crystal Displays (LCDs) in 1991. It was around this time that the Company became proactive in setting up plants and ofices overseas. A new building for the research center that is cur- rently our core R&D facility was completed in 1995 in Saitama Prefecture.
Globalization has progressed further since the turn of the century with more rapid expansion of manufacturing and sales ofices, principally in China and Southeast Asia. R&D capabilities were strengthened in 2015 with the addition of the Advanced Technology Building, a new research facility. Three acquisitions in the U.S. and Europe in 2016 marked a big stride forward in our expansion and the start of a new growth phase.
¥
250,000
million¥
205,975
millionLINTEC KOREA, INC. Advanced Technology Building MACTAC AMERICAS, LLC
Dec. 1995
New building for Research Center constructed in Saitama Prefecture Apr. 2000
LINTEC INDUSTRIES (MALAYSIA) SDN. BHD. established as manufacturing base for electronics-related products
Jun. 2011
LINTEC (THAILAND) CO., LTD., established as manufacturing base for adhesive products for labels Jan. 2015
LINTEC ASIA PACIFIC REGIONAL HEADQUARTERS PRIVATE LIMITED in Singapore established
May 2015
Advanced Technology Building constructed in Saitama Prefecture Dec. 2016
Acquired MACTAC AMERICAS, LLC in the United States
Jun. 2002
LINTEC (SUZHOU) TECH CORPORATION in China established as manufacturing base for adhesive products for labels
Sep. 2004
LINTEC KOREA, INC., established as manufacturing base for electronics- related products
(Fiscal year ended / ending March 31)
LINTEC’s Distinct Features
4 LINTEC ANNUAL REPORT 2017
We are drawing on the original technological capabilities we have built up over the years to establish a irm position
as a leading company in adhesive products and specialty papers. Based on our philosophy of “customer irst” and
innovative new ideas, we will continue to work on developing high-value-added products we can offer to customers
to meet their diverse range of needs.
Cultivated Technologies Realize
Our Strengths
LINTEC’s Competitive Advantages
— Integrated Production System for Adhesive Products and Provision of Comprehensive Solutions
LINTEC’s expertise extends beyond adhesives development and coating to proprietary technology in the manufacture of base paper for release papers, the development of release materials and related coating processes, and facestock improvement coating. The Group has thus built an integrated production system for adhesive products. The resulting ability to manufacture and procure release papers and ilms for adhesive products in-house gives us advantages in quality, costs, and delivery lead times. Additionally, by combining different processing technologies, we are able to create adhesive products for use in a diverse range of ields. In areas other than adhesive
products, we bring to market large numbers of unique products designed for use with upstream technologies, such as industrial-use release papers and ilms and specialty papers.
We also develop and manufacture equipment that fully leverages the properties of our adhesive materials. This includes labeling machines that automatically apply labels to packaging and equipment used in semiconductor production. Comprehensive solutions incorpo- rating materials and such equipment are another advantage of the LINTEC Group.
Integrated Production System for Adhesive Products
Printing and Industrial
Materials Products
Electronic and Optical
Products
Paper and Converted
Products
Base Paper / Film Papermaking
Base Paper
Base Paper / Film Release Agent Release Agent Development and Coating
Facestock Surface Improvement Surface Improvement Processing
Adhesive Development and Coating, and Bonding
Adhesive
Related Equipment Development
2011 2012 2016 2017 2018 (Forecast) 1992
1991
FY 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 20032004 2005 2006 2007 2008 2009 2010 2013 2014 2015
(Fiscal year ended / ending March 31)
¥
16,595
million¥
4,687
million¥
20,000
million Consumerelectronics
Food
Automobiles
Logistics
Daily necessities
Semiconductors
Printing
Pharmaceuticals
Electronic Components
Advertisement
Stationery
LCDs
Architecture / Interior
Stable Business Structure That Is Not Susceptible to Market Volatility in Any Single Industry
In recent years, the earnings drivers among LINTEC’s diverse range of products have been products for the semiconductor, electronic component, and LCD industries, which have undergone rapid market growth. Meanwhile, sales and proit luctuations have been compara- tively small for mainstay adhesive materials for labels used for food, daily necessities, pharmaceuticals, stationery, and consumer elec- tronics, and these products can be seen as foundation business that provides a irm underpinning for our earnings.
The production of a wide range of products in growth and founda- tion businesses and sales to a broad range of industries without reliance on any particular industry are the distinguishing characteris- tics of our business structure. The resulting steady earnings that are not susceptible to market volatility in any single industry are one of our strengths.
27 consecutive years of operating income
Business Model That Realizes Sustainable Growth
The numerous assets amassed by the LINTEC Group since the time of its founding are vital capital for our business
activities and the driving force in our manufacturing as we respond to wide-ranging social needs. We will continue to
return the resulting proits to our stakeholders and invest with an eye to the future as we seek to create new value.
LINTEC’s Business Model
Cultivated Technologies
P.30-33
Comprehensive Product supply system
in Japan and Overseas P.34-37
Diverse Human Resources and Corporate Culture
P.38-39
Solid Financial Base P.50-83
Relationships of Trust with Stakeholders
Partners
INPUT
Cooperation
Assets Buildup Business Segments
P.22-296 LINTEC ANNUAL REPORT 2017
Printing and Industrial Materials Products
• Printing & Variable Information Products Operations
• Industrial & Material Operations
Electronic and Optical Products
• Advanced Materials Operations
• Optical Products Operations
Paper and Converted Products
• Fine & Specialty Paper Products Operations
• Converted Products Operations
Trinity of Business
Activities with
Sales, R&D and
Production
P.20-21
OUTPUT
Shareholders
Communities Plants / Equipment
Employees
Accumulation & Advancement
Main Products Providing Value
Solves Our
Customers’
Issues with Wide
Variety of Products
Profit
Net Sales
250
200
150
100
50
0
2013 2014 2015 2016 2017
206.0
¥ Billion
25
20
15
10
5
0
15
12
9
6
3
0
16.6 8.1
2013 2014 2015 2016 2017
Operating Income / Operating Proit Margin
¥ Billion %
Operating Income Operating Proit Margin (right)
¥206.0
billion¥16.6
billionOperating Income
8.1
%Operating Proit Margin
Total Assets Net Assets
Total Assets / Net Assets
¥ Billion
0 60 120 180 240 300
2013 2014 2015 2016 2017
178.7 274.2
¥274.2
billionTotal Assets
¥178.7
billionNet Assets
Net Cash Provided by Operating Activities Net Cash Used in Investing Activities Net Cash Provided by (Used in) Financing Activities
–60 –40 –20 0 20 40
2013 2014 2015 2016 2017
5.3 24.4
(48.4) Cash Flows
Net Cash Provided by Operating Activities
¥24.4
billionNet Cash Used in Investing Activities
¥(48.4)
billionNet Cash Provided by Financing Activities
¥5.3
billion¥ Billion Proit Attributable to Owners of Parent
ROE (right)
Net Income per Share Cash Dividends per Share (right) 200
160
120
80
40
0 0
20 40 60 80 100
2013 2014 2015 2016 2017
158.69 66 Net Income per Share / Cash Dividends per Share
¥ ¥
Proit Attributable to Owners of Parent / Return on Equity (ROE)
15
12
9
6
3
0
10
8
6
4
2
0
6.6 11.5
2013 2014 2015 2016 2017
¥ Billion %
¥11.5
billionProit Attributable to Owners of Parent
¥158.69
Net Income per Share
¥66
Cash Dividends per Share
6.6
%ROE
Performance Highlights
LINTEC Corporation and its consolidated subsidiaries Fiscal years ended March 31
8 LINTEC ANNUAL REPORT 2017
P. 54
Financial Summary Please see pages 54–55.
C a p i t a l E x p e n d i t u r e s
15
12
9
6
3
0
10.8
2013 2014 2015 2016 2017
¥ Billion
15
12
9
6
3
0
7.5
2013 2014 2015 2016 2017
D e p r e c i a t i on a n d A m or t i z a t i on
¥ Billion
¥10.8
billion¥7.5
billionToluene Handling Volume Toluene Emission Volume
Toluene Handling Volume / Toluene Emission Volume
Tons 10,000
8,000
6,000
4,000
2,000
0
2013 2014 2015 2016 2017
471 7,730
250
200
150
100
50
0
195
2013 2014 2015 2016 2017
CO2 Emissions
195
thousand tons7,730
tonsToluene Handling Volume
471
tonsToluene Emission Volume Thousand tons
4,760
2013 2014 2015 2016 2017 5,000
4,000
3,000
2,000
1,000
0
Number of Employees R&D Expenses
10
8
6
4
2
0
7.6
2013 2014 2015 2016 2017
¥ Billion
¥7.6
billion4,760
A Message from the President
Hiroyuki Nishio Representative Director President, CEO and COO
Moving Forward
With a Focus on
The Future
10 LINTEC ANNUAL REPORT 2017
MANAGEMENT STRATEGY
R e v i e w of L I P -2016, our previous medium-term business plan
We were able to build a platform for future growth
even though we fell short of numerical targets.
A major achievement of the three years under LIP-2016 was the completion of the Advanced Technology Building, state-of-the-art research facilities in Japan in May 2015. Its large-scale pilot coaters, with their close resemblance to mass-production facilities in our plants, and its cutting- edge analytical equipment have signiicantly increased the speed of the product development process. Overseas, we leshed out our production, sales, and delivery network in Southeast Asia and India, and in January 2015 we estab- lished a company in Singapore, LINTEC ASIA PACIFIC REGIONAL HEADQUARTERS PRIVATE LIMITED, to oversee inclusive overall business strategy planning and imple- mentation in this region. We were also active in strength- ening our business base in Europe and North America with three acquisitions in October–December 2016, buying MACTAC AMERICAS, LLC and VDI, LLC in the U.S. and purchasing stock in LINTEC GRAPHIC FILMS LIMITED in the United Kingdom.However, there were weak performances from some
overseas subsidiaries. Reorganization made little head- way at MADICO, INC. in the U.S., and LINTEC (TIANJIN) INDUSTRY CO., LTD. in China, and PT. LINTEC
INDONESIA suspended operations for a time due to strike action. We were also affected by an economic slowdown in China and other emerging countries in Asia. As a result, we fell far short of the LIP-2016 targets of ¥240 billion in net sales and ¥20 billion in operating income in the iscal year ended March 31, 2017, the plan’s inal year.
Overview of LIP-2019
We are building on the previous medium-term
business plan’s successes and disappointments
as we aim for new goals.
The new plan we have drawn up, LIP-2019, relects our desire to learn from the successes and disappointments of LIP-2016 and move on to our next growth stage. Its basic policy is “Deepening innovation aimed at driving new growth.” The key numerical targets are consolidated net sales of ¥270 billion, operating income of ¥25 billion, and an operating proit margin and ROE of more than 9%. The plan has four key initiatives, as shown on the next page.
Period: From April 2017 to March 2020
Basic Policy: Deepening innovation aimed at driving new growth
Quantitative Targets:
Major numerical targets in the inal year of LIP-2019, the iscal year ending March 31, 2020 (on a consolidated basis)
Net sales
¥
270.0
billionOperating income
¥
25.0
billionOperating proit margin
More than
9
%ROE
More than
9
%The whole company is working as one to achieve the goals of our new medium-term business plan, LINTEC INNOVATION
PLAN 2019 (LIP-2019), which was introduced in April 2017 and continues through the fiscal year ending March 31, 2020.
We will be approaching our tasks in a spirit of innovation and challenge throughout the plan’s three years.
LINTEC INNOVATION PLAN 2019 (LIP-2019)
A Message from the President
Key initiatives
1 Strengthening of regional strategy
Regional strategy is to be strengthened in global markets with a focus on Printing and Industrial Materials Products. In Japan, where some markets have matured, LINTEC will work to expand share and create new demand by offering new products and new applications while aiming for dif- ferentiation on cost and service in established products. In Asia, LINTEC ASIA PACIFIC will be given increased functionality forging stronger links between manufacturing and sales companies and we will seek to expand business through such measures as increasing local raw materials procurement, launching new products tailored to local demand, and undertaking strategic M&A. Further develop- ment of our markets in Thailand, Indonesia, and India will be a particular focus. In Europe and North America, we will utilize the sales channels and technological strengths of our three 2016 acquisitions to the full and realize Group synergies quickly. MACTAC AMERICAS products are already being offered to customers in Asia and we look forward to further developments along these lines.
2 Creation of new value
We want to provide original LINTEC value-added products and services derived from identiication and careful
analysis of the various issues facing our customers and their speciic requirements. To this end, it is important that our sales personnel form a detailed picture of their customers’ requirements from day-to-day contact and share the information with others in the Company so that business operations and the R&D division can study it together. We will also aim to respond more promptly than before to customer expectations by making full use of the Advanced Technology Building’s testing facilities to smooth the transition from materials development to the proposal of manufacturing processes. New materials development centered on electronics, optics, automobiles, the environment, and energy will be another priority as it will play a key role in future growth.
3 Bolstering the corporate structure
In March 2017, we announced the liquidation of LINTEC (TIANJIN) INDUSTRY CO., LTD., which is a label printing machine manufacturer and marketer, and we are also working with some urgency to turn around other overseas Group companies where earnings are weak. In June 2017, under a radical management rationalization for MADICO, INC., we announced full withdrawal from PV backsheets, restructuring of the production system, and downsizing of the workforce. We will be aiming to further strengthen the
LIP–2019 Key Initiatives
1 Strengthening of regional strategy
( 1 ) Increase in the domestic share and development of new markets and new demands ( 2 ) Strategic investment and business expansion in the Asian region
( 3 ) Expansion of the existing ields in Europe and America and the pursuit of synergies with the acquired subsidiaries 2 Creation of new value
( 1 ) Creation of products for differentiation which exceed customer needs ( 2 ) Development of next-generation products anticipating market changes 3 Bolstering the corporate structure
( 1 ) Ensuring soundness of the Group companies and continual increase in earnings ( 2 ) Promotion of cross-sectional operational reforms
( 3 ) Further promotion of cost structure reforms 4 Activities for realizing a sustainable society
( 1 ) Promotion of business activities conducive to solving social concerns
( 2 ) Promotion of work-style reforms, fostering of diverse human resources and encouragement of their active participation in the workplace
12 LINTEC ANNUAL REPORT 2017
MANAGEMENT STRATEGY
Group structure with measures including Group company reorganization in Japan.
At the same time, we want to make effective use of the information system infrastructure we have built and inte- grated into our operations to raise levels of eficiency in our back-ofice operations, in particular, and optimize our allocation of human resources. We will also be paying heed to costs from the stage of product design and devel- opment onward and undertaking cost restructuring initia- tives in procurement, production, and distribution. We expect these measures to produce cost savings of ¥2.1 bil- lion over three years.
4 A c t i v i t i e s f or r e a l i z i n g a s u s t a i n a b l e s oc i e t y
LINTEC has long been an enthusiastic corporate citizen in respect of corporate social responsibility (CSR). We will be looking to further promote business activities with an aware- ness of the issues brought up in the Sustainable Development Goals (SDGs), such as environmental and population-related issues, and we expect this effort to be relected in LINTEC’s growth and social development. At the same time, we believe that a dynamic workplace where a wide variety of people can work together is essential for sustainable growth, and we will strive to enhance the working environment with Group initia- tives in areas such as work-style reform, female participation in business activities, jobs for persons with disabilities, and staff training at Group companies overseas.
A m e s s a g e t o ou r s h a r e h ol d e r s a n d i n v e s t or s Having fallen short of our previous medium-term busi- ness plan’s targets, we are aiming to keep the PDCA cycle* turning as we pursue the LIP-2019 targets, so that we identify areas where we deviate from plan, investigate the causes thoroughly, and respond promptly with correc- tive action. In line with the plan’s basic policy and with the objectives of deepening the innovation LINTEC has built up over the years and generating new growth, we are pro- moting a radical rethink of individual employees’ mind-set and business practices.
Increasing our employees’ level of satisfaction is crucial to enhancing customer satisfaction and hence elevating our earnings. We will therefore strive to create an even more rewarding and happier workplace for all our employees in pursuit of sustained growth.
As we move forward, we would like to ask our share- holders and investors for their continued support.
August 2017 Hiroyuki Nishio Representative Director President, CEO and COO
We are aiming to keep the
PDCA cycle turning as we
pursue the LIP-2019 targets.
*PDCA cycle: Plan-Do-Check-Act cycle for continuous process improvement through repetition of its four phases
A Message from the CFO
Through active dialogue with
shareholders and investors,
we will continue to improve
corporate value.
Review of performance in the iscal year ended March 31, 2017 and performance outlook for the iscal year ending March 31, 2018
Business conditions were severe in the iscal year ended March 31, 2017, with a strong yen and a slowdown in China and other Asian emerging countries. Proits were also squeezed by weak performances at some overseas sub- sidiaries and one-off costs arising from three acquisitions in Europe and North America. As a result, consolidated net sales declined 2.2% year-on-year, to ¥206.0 billion, and operating income declined 6.2%, to ¥16.6 billion. Proit attributable to owners of parent increased 5.1% year-on- year, to ¥11.5 billion, as there were gains on sales of invest- ment securities and a boost from tax effect accounting. The three acquisitions involved goodwill of approxi- mately ¥33.5 billion, which is to be amortized 10 years. Proits will be heavily impacted during this period and we are therefore seeking early realization of synergies in sales channels and technology.
Major negative inluences in the iscal year ended March 31, 2017 should be eliminated in the iscal year ending March 31, 2018. The one-off, three-company acquisition
costs and the losses at the Chinese subsidiary currently undergoing liquidation will not recur, and losses at PT. LINTEC INDONESIA should narrow following the resolu- tion of its labor issues. In addition, the three acquisitions will make a 12-month contribution to consolidated busi- ness results and our business related to semiconductors and electronic components is expected to trend strongly. We therefore project year-on-year growth of 21.4%, to
¥250.0 billion, for net sales; growth of 20.5%, to ¥20.0 bil- lion, for operating income; and growth of 17.9%, to ¥13.5 billion, for proit attributable to owners of parent.
FY 2017 Business Results and FY 2018 Forecasts (year-on-year) FY2017 FY2018 Forecasts Net Sales ¥206.0 billion
(-2.2%)
¥250.0 billion (+21.4%)
Operating Income ¥16.6 billion (-6.2%)
¥20.0 billion (+20.5%)
Proit Attributable to Owners of Parent
¥11.5 billion (+5.1%)
¥13.5 billion (+17.9%) Hitoshi Asai
Director
Vice President Executive Oficer and CFO
(Fiscal year ended / ending March 31)
14 LINTEC ANNUAL REPORT 2017
MANAGEMENT STRATEGY
Foreign exchange impact
Yen appreciation is positive for our procurement of pulp and petrochemical raw materials, but overall it is a disad- vantage because it reduces the yen translation of over- seas subsidiaries’ earnings and has a negative impact on the LINTEC parent’s transactions with overseas subsidiar- ies. In the iscal year ended March 31, 2017, the yen appre- ciation was a negative of approximately ¥6.8 billion for sales and ¥2.3 billion for operating income. The Group’s overseas sales ratio was 37.8% and foreign exchange impact will now increase further following the consolida- tion of the three acquisitions.
To date, operating income sensitivity to ¥1 movement against the U.S. dollar has been around ¥100–¥200 million, but it will increase as a result of the three-company con- solidation. The Group undertakes many transactions in Korean won, Chinese yuan, and Taiwan dollars and this aspect of impact from foreign currency movement also warrants attention.
Growth investments and shareholder returns We intend to continue making proactive use of cash for capital expenditures in growth areas and M&A. Where necessary, we will inance business expansion with loans. I believe there are various views on ROE enhancement and our view is basically that ROE will rise if we increase proits steadily.
Dividends form the basis of our thinking on returns to shareholders, which we regard as one of the most impor- tant management issues. We aim to make stable and con- tinued returns while maintaining a balance with retained earnings to support a healthy balance sheet. In the iscal year ended March 31, 2017, we paid an annual dividend of
¥66, an increase of ¥12 over the previous year. In the iscal year ending March 31, 2018, we plan to pay an annual divi- dend of ¥66 based on our projection of net income per share of ¥187.11.
Dialogue with shareholders and investors
We believe a good understanding of LINTEC is the key prerequisite for constructive dialogue with shareholders and investors. LINTEC is sometimes dificult to under- stand due to the wide diversity of its business, and views differ depending on the observer. It is important for every- one to have a proper understanding of the true situation, including LINTEC’s special characteristics, its strengths, and its weaknesses. To this end, we have to communicate information at appropriate times and in appropriate ways. We will seek to maintain diverse forms of active dialogue with shareholders and investors that will lead to sustained growth for LINTEC, enhancement of corporate value over the medium and long term, and appropriate pricing of our shares.
80
60
40
20
0 2013 2014 2015 2016 2017 2018
(Forecast) (Fiscal years ended / ending March 31)
42 34
48 54
66 66
Cash Dividends per Share
¥
8
6
4
2
0 2013 2014 2015 2016 2017
(Fiscal years ended March 31)
5.6 5.8
7.2
6.4 6.6
ROE
%
O v e r s e a s B u s i n e s s H i s t or y
In its endeavors to establish a label market in Japan, the Company sought to obtain information on advanced adhesive label tech- nologies in Europe and the U.S. from an early stage in its history. “A-100 type” label printing machine the Company developed in 1973 as part of its efforts to expand sales of adhesive products for labels attracted great attention from Europe, the U.S., and Asia. LINTEC’s irst overseas ofice was an ofice in Beijing that opened in 1985. In addition to cultivating label markets in China, the Company commenced development of overseas business in window ilms for automobiles and buildings with the acquisition of MADICO, INC. in the U.S. in 1987.
In 1994, LINTEC opened a sales ofice in Singapore to expand sales of semiconductor-related products. The following year this ofice was incorporated as LINTEC SINGAPORE PRIVATE LIMITED and its business was extended to products such as adhesive products for labels. It subsequently became the strategy center for sales network expansion in Southeast Asia.
On the manufacturing side, the Group’s irst Asian adhesive products plant, PT. LINTEC INDONESIA, was also established in 1994. Thereafter the product supply structure was strengthened by building plants in Malaysia, China, South Korea, and Taiwan based on the concept of local production, which means that we manufacture closer to the customer and thereby provide our cus- tomers with a stable supply of products.
Following the establishment of a production base in Thailand in 2011, sales ofices were set up in quick succession across Southeast Asia and in India, and in January 2015 LINTEC ASIA PACIFIC was established in Singapore to oversee all sales bases in the region.
In 2016, LINTEC secured a foothold for full-scale business development in the European and North American markets with three acquisitions in the U.S. and the U.K.
T h e L I N T E C G l ob a l N e t w or k
LINTEC has been very active in globalizing its business in recent years and currently has plants and offices in
19 countries and regions. “Strengthening of regional strategy” is a key initiative in the medium-term
business plan LIP-2019 as LINTEC strives to build up businesses in Japan and overseas. Below we outline the
history of LINTEC’s overseas business expansion and profile the three companies in Europe and North
America that became subsidiaries in 2016.
16 LINTEC ANNUAL REPORT 2017
Manufacturing subsidiary Sales subsidiary, Ofice
Holding company, Regional headquarters
Plants, Branch ofices, and R&D ofices of subsidiaries
O v e r s e a s S a l e s / O v e r s e a s S a l e s R a t i o
The Group’s overseas sales in the iscal year ended March 31, 2017 were ¥77.8 billion, an increase of approximately ¥36 billion compared with 10 years previously. The overseas sales ratio rose from 21.8% in the iscal year ended March 31, 2007 to 37.8%. It is expected to be close to 50% from the iscal year ending March 31, 2018, as it will include the full-year consolidated contri- bution of the three companies converted to subsidiaries in the iscal year ended March 31, 2017.
Overseas sales have increased approximately ¥36 billion
over the last 10 years with average annual growth of 6.4%.
J a p a n P e r f or m a n c e t r e n d s
FY2007 Net Sales
¥
192.7
billionFiscal year ended March 31
FY2017 Net Sales
¥
206.0
billionFiscal year ended March 31
Overseas
¥
41.9
billionOverseas
¥
77.8
billionApprox.
1.9
timesJapan
21.8%
Ratio of overseas sales to net sales37.8%
M A C T A C AMERICAS, LLC
Adhesive materials manufacturer MACTAC has a solid position in North America, where the market is growing at a steady 2%–3% annually and accounts for an approximately 30% share of the global adhesive label materials market. Working with three manufacturing bases in the U.S. and Mexico, it has good relationships with its more than 1,000 customers and possesses a long supply record and strong brand. In addition to adhesive products for labels, MACTAC handles decorative graphic sheets that can be used as wall hang- ings and a variety of industrial and medical tapes. Its sales total approximately ¥35 billion.
MACTAC complements LINTEC’s strengths in adhesive ilms with a focus on adhesive papers and excels in hot-melt adhesive formulation technology that the LINTEC Group did not possess before. It also brings high-speed coating facilities to the Group for the irst time. The company’s extensive sales network in North America will facilitate the rollout of LINTEC products in this market, and by engaging in product development that combines the two companies’ technologies, LINTEC will seek to grow business in other regions as well.
Focus
We profile the three 2016 acquisitions in the U.S. and the U.K. with comments from company representatives.
Edward LaForge, President
The true strength of MACTAC comprises our employees, technology, and culture. The innovative spirit and strong R&D team at MACTAC have led to unique technology solutions, including our hot- melt adhesive formulation. We believe combining LINTEC and MACTAC technologies will strengthen our market positions, and we are conident that “our products,” including LINTEC’s, will extend their global reach. What’s more, we hope to fuse our respective corporate cultures, technologies, and strategies to generate the beneits of positive synergy early on, and contribute to the Group.
MACtac Americas, LLC
Head ofice: Ohio, U.S.A. Established: 1959 Number of employees: 496 (As of December 31, 2016) Net sales: ¥34.2 billion Operating income: ¥3.6 billion (Year ended December 31, 2016) Acquisition price: Approx. $270 million (Debt assumption is not included) Head ofice
Columbus Plant
18 LINTEC ANNUAL REPORT 2017
VDI, LLC
Based in the U.S. state of Kentucky, VDI is a manufacturer of func- tional ilms. The company uses metallizing technology, which forms thin metal layers on ilm surfaces, to make metal vapor deposition ilms and sputtering* ilms that it markets itself. As it is a supplier to MADICO, LINTEC’s window ilm manufacturing subsidiary in the U.S., there is potential for cost savings in materials procurement. The LINTEC Group has not had metallizing technologies before and will be using them in product development to roll out business in new ields.
* Sputtering: The ejection of particles by bombarding materials such as metals and oxides at high energies in a vacuum and the deposition of the particles on ilms and other surfaces.
David Bryant, President
We believe “Quality, Innovation, and Service” are three keys to our success. Producing quality products generates satisied customers; innovation allows us to serve many markets across the globe; and excellent client service generates future business. We believe VDI and LINTEC have many things in common, as manufacturers. We both are very active in the window ilm market and look for new technologies to broaden opportunity. From now on, we at VDI, as a LINTEC family member, will absorb various things and contribute to the family with better performances.
LINTEC GRAPHIC FILMS LIMITED
LINTEC GRAPHIC FILMS signed a trademark licensing agreement with LINTEC in 2010, thereby adopting the Company’s name, and is the U.K. sales company for adhesive products, with a focus on the Company’s adhesive products for labels, graphic sheets, and window ilms. Its name will be changed to LINTEC EUROPE (UK) LIMITED before the Group exhibits at the world’s largest label event, Labelexpo Europe 2017, in late September in Belgium. LINTEC will be aiming to accelerate new customer acquisition in Europe by making even more effective use than before of the company’s mar- keting strengths and wide-ranging sales network.
Andrew James Voss, Managing Director
LINTEC’s corporate culture is ethical, creative, and positive. The underlying culture of LINTEC GRAPHIC FILMS, LINTEC’s business partner, is very similar to that of the LINTEC Group. Having strengthened our ties with LINTEC EUROPE B.V. through our change of name, we will be aiming to expand sales in Europe. It’s highly rewarding work. We will continue providing our customers better products and services to help LINTEC become recognized in Europe as an innovation leader.
VDI, LLC
Head ofice: Kentucky, U.S.A. Established: 1971 Number of employees: 36 (As of December 31, 2016) Net sales: ¥1,070 million
Operating income: ¥20 million (Year ended December 31, 2016) Acquisition price: $26 million (Debt assumption is not included)
Lintec Graphic Films Limited
Head ofice: Buckinghamshire, U.K. Established: 1993 Number of employees: 18 (As of October 31, 2016) Net sales: ¥850 million
Operating income: ¥130 million (Year ended October 31, 2016) Acquisition price: £7.3 million
LINTEC’s Value Creation
Three Divisions
Working as One
As a manufacturer, LINTEC conducts its business primarily through the Sales
Division, which interfaces with customers on a day-to-day basis; the
Research & Development Division, which creates new technologies and products;
and the Production Division, which is responsible for the stable supply of high-quality
products. The three divisions work in unison within all processes, from development
to sales, enabling LINTEC to create original value and provide products that make
customers happy. Research personnel accompany sales staff to customers to get a
precise picture of customer requirements, while sales and research staff visit
production sites to consult on solutions for particular issues that arise.
20 LINTEC ANNUAL REPORT 2017 20 LINTEC ANNUAL REPORT 2017
Customer
Sales
LINTEC’s six business operations produce a wide diversity of prod- ucts. Materials and equipment are combined to offer compre- hensive solutions to issues faced by customers.
Human Resources
Our employees lie at the heart of our concerted business activities. LINTEC seeks to foster human resources, which it regards as an important asset,
and provide them with a congenial working environment.
Research and Development
Original technologies developed over many years are fused at sophisticated levels in the development of groundbreaking new prod- ucts. Market-dialogue R&D, where research staff communicate directly with the customer, is one of LINTEC’s strengths.
Production
State-of-the-art production facilities, original production technology, and rigorous supply chain management are deployed to supply a steady stream of safe and high-quality products to customers.
Sales
The Business Administration Division, which is responsible for sales, provides customer coverage throughout Japan
from 11 ofices. The Iidabashi ofice is the largest, with approximately 300 staff in Tokyo, and the network also includes
Osaka and Nagoya. The LINTEC Group has more than 50 production and sales ofices in Asia, Europe, and North
America, supplying LINTEC products worldwide.
The Group’s business is divided into six operations, each of which conducts sales activities based on its own strate-
gies. These operations are classiied under three segments—Printing and Industrial Materials Products, Electronic
and Optical Products, and Paper and Converted Products—in accordance with product, technology, and market.
Printing and Industrial Materials Products
Printing & Variable Information Products Operations
Industrial & Material Operations
Advanced Materials Operations
Optical Products Operations
Fine & Specialty Paper Products Operations
Converted Products Operations
Electronic and Optical Products
Paper and Converted Products
22 LINTEC ANNUAL REPORT 2017
S h a r e of Net Sales
Printing and Industrial Materials Products
¥ 85.7 billion
41.6 %
Paper and Converted Products
¥ 37.1 billion
18.0 %
Electronic and Optical Products
¥ 83.2 billion
40.4 %
Share of Operating Income
Printing and Industrial Materials Products
¥ 1.7 billion
10.1 %
Paper and Converted Products
¥ 5.8 billion
34.7 %
Electronic and Optical Products
¥ 9.2 billion
55.2 %
Net Sales
¥ 206.0 billion
Fiscal year ended March 31, 2017
Operating Income
¥ 16.6 billion
Fiscal year ended March 31, 2017
Note: Operating income composition data is based on igures before the elimination of intra-segment transactions.
Makoto Hattori Director, Managing Executive Oficer General Manager, Business Administration Div.
I became General Manager in April 2017 and feel a strong sense of responsibility for achieving the goals of the medium-term business plan LIP-2019. The numerical targets of the plan’s inal year were compiled on a bottom-up basis so that if each opera- tion reaches its targets the Group will too. Having failed to reach the targets of the previous medium-term business plan, I intend to put a structure in place for thorough analysis of the causes if our performance deviates from target and rapid remedial action. “Strengthening of regional strategy” is a key LIP-2019 initia- tive. It requires us to think about Japan, Asia, Europe, and North America, for example, as individual markets. This is not a Japan / overseas divide. Although Japan is said to be a mature market, many of our businesses have a domestic emphasis and most
materials, technology, and services originate from Japan. Japan therefore remains an important market that merits continued effort. In Asia, the subsidiaries that have been put in place in Southeast Asia and India in recent years are not yet functioning at full strength, and we will be reorganizing the network in accor- dance with changes in market conditions. In Europe and North America, we will aim to expand sales in Printing and Industrial Materials Products in conjunction with the three companies that became subsidiaries in 2016. In all markets, the most important thing is to understand the true demands of the markets, and to this end we will take steps to strengthen our communication with customers.
A Message from the
General Manager
Printing and Industrial Materials Products
Printing & Variable Information Products Operations
These operations manufacture and sell the Group’s mainstay adhesive papers and ilms for labels. In particular, they have an approxi- mately 60% share of Japan’s adhesive ilm market. Overseas, a manufacturing and sales network is being expanded in China and Southeast Asia, and in 2016 business expansion also included making U.S. company MACTAC AMERICAS, LLC a LINTEC subsidiary.
Business Strategies
The Japanese market for adhesive papers and ilms for labels is maturing, but we will aim for further growth in share by stepping up sales activities tailored to speciic regions. Overseas, in the iscal year ended March 31, 2017, our business was impacted heavily by the economic slowdown in China and strike action at PT. LINTEC INDONESIA. We plan to review our sales strategies for Southeast Asia, with LINTEC ASIA PACIFIC playing the central role, while also launching new products that use local materials. In Europe, we will be aiming to expand sales by exhibiting at the world’s largest label event, Labelexpo Europe 2017, in autumn in Belgium, and drawing on the marketing strengths of U.K. company LINTEC GRAPHIC FILMS. In the U.S., we will use MACTAC AMERICAS’ sales channels to market LINTEC products while also rolling out MACTAC products in Southeast Asia.
Masaaki Yoshitake Executive Oficer
General Manager, Printing & Variable Information Products Operations, Business Administration Div.
Main Products
• Adhesive papers and ilms for labels
Sales
Results of Fiscal Year 2017
55.1
¥ 95.5 billion
FY2017 FY2020 (Forecast)
Goal for Fiscal Year 2020
¥ 55.1 billion
26.7 %
Net Sales
¥ 206.0 billion
Fiscal year ended March 31, 2017
(Fiscal years ended / ending March 31)
24 LINTEC ANNUAL REPORT 2017
Industrial & Material Operations
These operations provide an extremely wide range of products, from window ilms with various functions such as cutting out heat and ultra-violet light when they are attached to building and automobile windows through to automobile-use adhesive products for vehicle body decoration and protection, industrial-use adhesive tapes for bonding components in mobile and other devices, barcode printers used in production lines and distribution, labeling machines for automated labeling, ilms for outdoor signs and advertising, and interior inishing mounting sheets.
Main Products
• Window ilms
• Automobile-use adhesive products
• Industrial-use adhesive tapes
• Barcode printers
• Labeling machines
• Films for outdoor signs and advertising
• Interior inishing mounting sheets
Sales
Results of Fiscal Year 2017
¥ 30.6 billion
14.9 %
Business Strategies
A major topic for Industrial & Material Operations is strengthening our overseas business foundation centered on window ilms and motorcycle- and automobile-use adhesive products. We have estab- lished a good reputation for product quality overseas, and now we need to collaborate with LINTEC ASIA PACIFIC and the three U.S. and European companies that became subsidiaries in 2016 on lesh- ing out our sales network and raising brand awareness. Training globally oriented staff and developing products adapted to local requirements are pressing tasks in this regard. Fundamental business man- agement rationalization has been announced for MADICO in the U.S., which is still performing weakly, and we will also work with our manufacturing bases in Thailand and Suzhou, China to build an optimum production and sales structure for window ilms and other products.
In Japan we will be focusing on distribution and automotive applications, and we will also step up our sales promotion activities for signs and graphic sheets in anticipation of growth in demand.
Shuji Morikawa
Director, Executive Oficer General Manager, Industrial & Material Operations, Business Administration Div.
Goal for Fiscal Year 2020
30.6
¥ 41.5 billion
FY2017
Net Sales
¥ 206.0 billion
Fiscal year ended March 31, 2017
(Fiscal years ended / ending March 31) FY2020 (Forecast)
Electronic and Optical Products
Advanced Materials Operations
We are building a unique position in the electronics industry with products such as specialized adhesive tapes that are essential in semiconductor chip manufacturing and mounting processes, and we also make equipment that leverages these tapes’ special features fully. In addition, we produce release ilms that are crucial in the production of multilayer ceramic capacitors, which are tiny electronic components. The development of new, next-generation sheet materials is another of our focuses.
Business Strategies
The electronics industry is vibrant but products that are selling well now may not do so in the future. We constantly strives to anticipate needs so that we can supply our customers with products that meet their requirements just when they need them. Demand for quality in our products continues to rise year after year as end products increase in sophistication and capacity while becoming thinner. We will be strengthening our ties with suppliers as we strive for a stable supply of high-quality products. We think that demand for semiconductors and electronic components will rise signiicantly going forward due to the growth of the Internet of Things (IoT) and the introduction of next-generation, high-speed communications. We will aim to meet our targets by developing next-generation products, such as optically clear adhesive sheets for automobile panels, as a fourth pillar of opera- tions to stand alongside our established pillars of semiconductor-related adhesive tapes and equip- ment and multilayer ceramic capacitor-related tapes.
Takeshi Kaiya Executive Oficer
General Manager, Advanced Materials Operations, Business Administration Div.
Main Products
• Semiconductor-related adhesive tapes and equipment
• Multilayer ceramic capacitor-related tapes
Sales
Results of Fiscal Year 2017
FY2017
43.0
¥ 53.0 billion
Goal for Fiscal Year 2020
¥ 43.0 billion
20.9 %
Net Sales
¥ 206.0 billion
Fiscal year ended March 31, 2017
FY2020 (Forecast) (Fiscal years ended / ending March 31)
26 LINTEC ANNUAL REPORT 2017
FY2017
40.2 ¥ 40.0 billion
Optical Products Operations
We deploy our development technologies for special adhesives and surface coating materials and precision coating technology and use cutting-edge production facilities to provide adhesive processing for optically functional ilms such as polarizing ilms and retardation ilms that are used in LCDs. We also undertake surface improvement processing for polarizing ilms, such as antiglare hard coat processing, which protects ilms from scratches and reduces relectivity.
Main Products
• Polarizing ilms and retardation ilms (adhesive processing)
• Polarizing ilms
(surface improvement processing)
Sales
Results of Fiscal Year 2017
Business Strategies
The optical display market is in a period of major change as organic light-emitting diode (OLED) displays become more widespread and Chinese LCD panel makers emerge. To survive this dificult period successfully, we believe it is important to listen to our customers and then think and act. While the market shift from LCDs to OLED displays is gradually progressing, the market size for these displays is still small, meaning that they do not have a signiicant impact on our business at the moment. However, we must pay close attention to the level of quality that will be demanded in the future and to how volume and cost will change. We will continue to strengthen ties with our Group customer, an optical functional ilm manufacturer, as we seek to supply high-quality products utilizing the cutting-edge facilities that started up in 2016 and build an optimal global production structure for market change.
Shinji Ito
General Manager, Optical Products Operations, Business Administration Div.
Goal for Fiscal Year 2020
¥ 40.2 billion
19.5 %
Net Sales
¥ 206.0 billion
Fiscal year ended March 31, 2017
(Fiscal years ended / ending March 31) FY2020 (Forecast)
Paper and Converted Products
FY2017
16.5 ¥ 18.0 billion
Fine & Specialty Paper Products Operations
We have the leading share in the Japanese market for color papers for envelopes and colored construction papers. We also manu- facture and sell specialty papers including oil resistant papers used in food packaging, dust-free papers for use in places such as clean rooms, high-grade printing papers with special textures, and high-grade papers for paper products used in business cards and postcards. Our business is currently centered on Japan but we will be undertaking sales activities with an eye on overseas markets.
Business Strategies
Our market is shrinking as the paperless trend gains traction, and to secure earnings in this environment LINTEC’s medium-term business plan LIP-2019 calls for new product launches to sustain and expand current business in Japan combined with proactive development of new markets, including overseas markets.
The market environment is harsh for our mainstay color papers for envelopes, but sales of prod- ucts that prevent the contents from being seen from the outside are growing steadily. Our new water- repellent products have been well received and we want to continue developing and offering such high-value-added products. We will work to expand sales of special function papers, which represent one of our fortes, in overseas markets, where these papers have yet to fully penetrate.
Toshimi Sugaya Executive Oficer General Manager, Fine & Specialty Paper Products Operations, Business Administration Div.
Main Products
• Color papers for envelopes
• Colored construction papers
• Special function papers
• High-grade printing papers
• High-grade papers for paper products
Sales
Results of Fiscal Year 2017 Goal for Fiscal Year 2020
¥ 16.5 billion
8.0 %
Net Sales
¥ 206.0 billion
Fiscal year ended March 31, 2017
FY2020 (Forecast) (Fiscal years ended / ending March 31)
28 LINTEC ANNUAL REPORT 2017
