My Determination as President

When I was appointed as president in 2019, we were facing difficulties to manage the development of our overseas offices and businesses, which had expanded rapidly under the previous 14th and 15th Medium-term Management Plans, and as a result, the profitability of our overseas businesses had not stopped declining. It’s not just us; it’s a phenomenon observed in the wider world as well. When everything is going well, everything seems great, but once problems start to surface, both big and small issues arise. We found ourselves in a situation where our governance deteriorated in line with the growth slowdown in emerging countries, and any misstep could potentially lead to a major crisis. Upon assuming the position of president and viewing the Company from this top position, I felt the weight of my responsibility and was deeply concerned. At that time, I had two sincere determinations. First was that “I must safeguard Kansai Paint’s esteemed 100-year legacy.” And second was that “I must be the last person to assume the position of president under such circumstances, so I will transform Kansai Paint into a company that consistently embraces challenges with a positive mindset,” rather than getting preoccupied with strategies and approaches.

From that point onward, I firmly resolved to take full responsibility as the president and be the final authority where all accountability lies. With this mindset, I proactively addressed issues that we had not been good at dealing with, addressing them one by one. This included divesting from certain businesses and implementing personnel changes to clarify responsibilities. Thus, the 16th Medium-term Management Plan (16th MTP) was formulated and implemented, beginning from a challenging position, with the primary objective of steering the Company back toward a positive trajectory.

Financial Structural Reforms

The focal point of our discussions on the 16th MTP lies in implementing financial structural reforms. I firmly believe that robust finances and the efficient utilization of assets are fundamental prerequisites for all our endeavors. Fortunately, we have a robust business model that enables us to generate steady cash flow with relatively low fixed costs.
Nevertheless, we haven’t always fully leveraged these attributes. Our return on invested capital (ROIC), a key indicator of our earning potential, stands at just over 6%. However, we used to hold onto several low-profit businesses, real estate, and shareholdings that fall below this level. It is essential to divest from these underperforming assets and proactively allocate the substantial funds obtained, along with the cash generated from our businesses, toward investments that will drive future growth. Upon assuming the role of president, I immediately began taking action to establish such a cycle, prioritizing our focus on the balance sheet and cash flow, and then reviewing our funding sources and enhancing management efficiency, which I believed it to be the source of all activities.

Improved Governance

The revitalization of our overseas business was also one of the initiatives that I put priority on right after I took office. In order to enhance business performance, it is crucial to improve the effectiveness of our strategies and approaches. However, achieving this requires fostering constructive discussions within the Company and establishing a robust mechanism for implementing improvements; otherwise, these ideas will remain mere aspirations. While it may appear challenging to grasp within the broader concept of governance, viewing it as “a mechanism for successful management,” we realize it is related to our daily operations. We organized awareness of daily issues from the perspective of governance and implemented initiatives to improve the Company’s structure and bring about new activities as a top priority, as we did with our financial structural reforms.

In our quest to revitalize the Company’s fortunes and address various governance issues, we simultaneously focused on three key perspectives to gain a comprehensive understanding of Kansai Paint’s true challenges. The first perspective is our employees. After announcing the 16th MTP, we made efforts to understand the thoughts and actions of our employees through various channels. In my second year as president, I established the Performance Improvement Committee, which received approximately 7,000 feedback cases from employees. Through the analysis of this feedback, we were able to identify the root causes of the issues facing the Company. The second perspective involves dialogue with investors. We received many views and ideas for improvement at the strategy briefings and in individual meetings. The deeper our engagement in dialogue, the more we realize that investors and companies are partners with the same goal of achieving long-term, sustainable growth for the Company. The third perspective involves external experts. We engaged external experts, who work together with us to solve various problems, to analyze the Company’s origins, regulations, and rules. They also conducted interviews with employees without any preconceptions, aiming to understand our behavioral characteristics and culture. Through the first measure, we gained insight into the potential weaknesses of the Company by understanding the reasons behind individual problems from the perspective of our employees’ mindset. The second measure is highly significant as it helps determine the major direction and essential areas for improvement as we progress towards our intended goals. And the third measure serves as a compass, guiding us on when, what, and how to implement specific measures effectively.

These initial activities have become my new starting point. Through these experiences, I have gained a profound understanding of the significance behind the phrase “profit and fairness,” which embodies Kansai Paint’s founding aspiration. With a sense of pride in this Company, founded by the illustrious IWAI Katsujiro, I firmly believe that it is our duty to confront the various challenges directly, ensuring that we remain a company essential to society’s needs. To achieve this goal, there are many tasks ahead of us, but I firmly believe that the essence of our aim is quite simple: all our employees practice the principle that “what is right is right, and what must not be done must not be done.” Based on these very ideas, we have formulated the growth strategy “Good to Great” and 17th Medium-term Management Plan (17th MTP), which integrates this concept into concrete strategies and implementation measures. As with the 16th MTP, we will continue to accomplish exactly what we set out to do.

Completing the First Year of the 17th MTP

Despite the challenging and unpredictable external environment, the 17th MTP was launched as a turning point for the Company to create a cycle of sustainable growth, and we achieved a new record for ordinary income. This is the result of our collective efforts to raise prices and reduce costs globally, including in Japan. We also resumed our M&A strategy, which had been put on hold during the 16th MTP, and successfully completed three overseas M&A deals. We also launched Kansai Paint Burano Co., Ltd. tailored toward the online market in Japan, and although still small in scale, it has begun to grow rapidly. With these accomplishments, I believe we have made an excellent start, both in terms of content and results.
As a result of addressing the internal issues mentioned earlier, I believe we have gradually developed the ability to adapt to changes in the external environment. Personally, I could have never foreseen the COVID-19 pandemic, the semiconductor shortage, supply chain disruptions, soaring raw material prices, or Russia’s invasion of Ukraine. Despite these unforeseen challenges, we have confronted them all and achieved positive results.
As the saying goes, “inscrutable are the ways of heaven.” When I became president and the Company faced numerous challenges, the path ahead seemed bleak. However, with a bright and positive attitude, we tackled these issues head-on, not only resolving our internal problems but also developing the ability to respond to drastic changes in the external environment. It has been a true testament to the saying “heaven helps those who help themselves.

The Importance of Developing Human Resources and How People Grow

I would like to delve into the aspect of “heaven helps those who help themselves.” Our employees have successfully tackled internal and external issues, leading to remarkable growth in many of our human resources. I refer to this as a disastrous experience, but the truth is that every workplace and job has its own set of problems and challenges. Meaningful improvement and resolution cannot be achieved without overcoming disastrous situations to overcome them. As a born and bred president, I’ve had the opportunity to get to know many employees. Time and again, I have witnessed how those who confront difficulties without backing down undergo remarkable growth through their experiences.
In the past, I used to believe that personal growth was merely a matter of chance, but through my own journey in the past few years, my perspective has completely changed. I now wholeheartedly realize that we are beings who grow by confronting difficulties and challenges, and that remaining in stable, comfortable situations for prolonged periods leads to stagnation. With this realization, I firmly believe that our people will be the driving force behind Kansai Paint’s sustainable growth, making the development of our human resources he utmost priority and mission for the Company. Our human resources strive to make a meaningful contribution to the world and achieve tangible results, making the Company indispensable to society. Sustainable growth entails generating substantial funds through our achievements and proactively investing those resources to expand our impact even further. To ensure an everlasting cycle, we must nurture our human resources, empowering them with four key strengths built upon specialized knowledge and experience in paints.

The first strength is in the determination that each individual is the driving force behind our Company’s true globalization and sustainable growth.
The second strength lies in our ability to think outside the box, transcending common practices and precedents within the Company while staying mindful of external trends. This approach allows us to continuously create new value on the front line.
The third strength is our capacity to be flexible, receptive to diverse opinions, and skilled in fostering constructive dialogues that lead to positive changes while holding on to our own beliefs.
And finally, the fourth strength lies in our inclusive attitude, involving everyone regardless of their department or position in the Company, supporting those who take on challenges, and encouraging everyone to succeed.
I have illustrated the type of human resources we are looking for based on my own experience in the Company so far. I am proud that what I have talked about not only benefits the Company but also adds meaning and substance to each person’s life. As a result, we are transforming into an organization where the Company and individual employees share the same goals and work together to take on challenges.

The Future of Kansai Paint

In FY2023, the second year of the 17th MTP, we have ambitious plans to set new record highs for sales and profit at every level. In the 17th MTP, we will foster business growth by fully embodying our corporate culture of embracing challenges, perseverance, and trust. This will be achieved by capitalizing on the strengths developed during the 16th MTP, focusing on our business portfolio and strategic areas. At the same time, we will focus on strengthening our management infrastructure to support and further accelerate this growing business. This business and management infrastructure are akin to two wheels of the same car. And it is our employees who drive these two wheels, which is why their development is our top priority.
In addition, building upon Materiality defined last year, we have taken a step further by unveiling key performance indicators (KPIs) for 2030 in this year’s integrated report. Paint has long been an industry that promotes sustainability by extending the life of painted objects, and now we are determined to transform into an even more appealing company that actively contributes to the overall sustainability of the earth.
FY2023, the middle year of our new growth stage in the three-year 17th MTP, is considered a crucial turning point for Kansai Paint’s transformation. We have a lot of work ahead of us to achieve this, but I firmly believe that our employees have the potential to make it happen. We are committed to demonstrating strong growth as a truly global company in the future. I am eagerly looking forward to your unwavering support as we embark on this journey together.