NIPPON YAKIN KOGYO CO., LTD

MichibayashiWhen I was first appointed as an outside director in 2016, the Corporate Governance Code had just been established the previous year. In the six years since, our governance has been steadily improving, and I think the level it reached by the time of our latest effectiveness evaluation is almost completely satisfactory. A remaining issue is the process for appointing senior management. Sufficient discussion is needed about the current state of this process and how to solve the issues.

TaniThere’s an active exchange of opinions at Board of Directors meetings, and there are sometimes blunt comments from the outside directors. I think we can be very pleased with the way the management always accepts that feedback in good faith and takes the appropriate measures. There are also other venues for free discussion besides Board of Directors meetings, such as meetings with the directors in charge or with Audit & Supervisory Board members, and I think that both the quality and the quantity of information being input is excellent.

SugaIn my case, when there’s something I want to know or something I’m concerned about, I ask not only directors but those on the ground as well, and everyone always gives me the information I need, despite how busy they are. From a governance perspective, the Board of Directors sufficiently performs all the necessary functions, and is managing the company effectively.

EtoI was appointed in June 2022, and in the around two months since, I have meticulously toured the company, including production sites. It was clear to me that there is plenty of transparency in the company’s workplaces and everyone has a positive attitude. In terms of the effectiveness evaluation, like Mr. Tani, I can see that the directors are keen to thoroughly take in outside directors’ feedback and actively improve the company.

MichibayashiThe foundation for Nippon Yakin Kogyo’s growth was completed in ‘Medium-Term Management Plan 2018’. The confidence gained then was reflected in ‘Medium-Term Management Plan 2021’, which led to solid results. In the ‘Medium-Term Management Plan 2024’, which was based on those results, the company is carrying out capital investment and research and development for the next stage of growth, and is working to strengthen and broaden the foundation of our business. I think it’s an excellent plan that everyone in the company will be able to work on together with confidence.

TaniI think there was a high degree of transparency in the process for establishing the plan. First, the company announced the policy that would be followed in the establishment of the plan, a series of discussions were held with each department and interim reports were made to the Board of Directors each time. A considerable number of the quantitative targets in Medium-Term Management Plan 2021 were achieved early, but instead of becoming complacent, the company kept deliberating about what was needed from a qualitative perspective. Issues that remained are being properly addressed in the next plan. I think this in itself is deserving of high praise.

SugaThe six issues of materiality disclosed in the Sustainability Report are linked to company-wide policies to facilitate specific actions by each department. The whole organization is working together to resolve these issues and I think the mechanisms for carrying out PDCA cycles are effective.

EtoMy personal impression is that, based on the results up to the previous fiscal year, I felt that the company could have aimed a little higher in the new medium-term management plan, but I understand that the targets set in this plan reflect the company’s resolve to generate profits regardless of market conditions. In future, to strengthen the Group’s management and facilitate personnel training, I think the company needs to not only focus on numerical results but also strengthen the elements that are foundational to the company’s management and follow up on that work.

MichibayashiThe company’s vision for 2030 was presented after a series of discussions, including discussions about quantitative targets. In terms of what specific measures will involve, I think this will be a matter for the next plan onwards, but I think it is important that this medium-term management plan indicated the waypoints that the company will aim for in the medium to long term, including critical management indexes such as the scale of net assets.

EtoI asked for a medium-term management plan that would be clear to people outside the company too. When it comes to the need to reach a PBR of 1.0 in the prime market, it is important to explain our policies and initiatives for improvement in a way people outside the company can understand and give them a story they can understand. A concern I have is that we have only one base for producing stainless steels and high-performance alloys. This could become an issue when we consider future growth.

SugaImproving productivity will be essential in order for the company to survive and develop. This might be an issue that needs to be worked on throughout the company, both head office and our plants, including utilizing tools like AI and digital technology. My other concern is about expansion. Collaborations with other companies could be another way to expand our business. In order to do that, it will also be important to secure and train personnel who will be able to take on challenges in new areas. I think the company needs to approach this with a combination of management strategies and human resources strategies: for example, it should establish a benefits and evaluation system and assign clear missions in the company’s operations.

TaniWith regards to the framework mentioned in the medium-term management plan, in which high-performance alloys will be expanded while stainless steels continue to provide an income base, establishing a specific framework encompassing both production and sales will also be an issue. Additionally, the company is currently working on a carbonless nickel smelting project. This is an extremely critical project as it is related to CO2 reduction. I would like to see that completed ahead of schedule if possible. Another issue is the adoption of DX. I feel that the company is quite behind in this area. How will the company implement company-wide DX strategies that include production sites and management departments? Now that strategic investment in hard element has tailed off, I want to see strategic investment in soft elements. I plan to monitor and follow up on these points with an outside perspective.

MichibayashiIn terms of enhancing human capital, the company needs to make their personnel into human assets in the true sense of the word. I think this is important for a smaller steel producer manufacturer like Nippon Yakin Kogyo. The company has already focused on using self-improvement activities to develop personnel who think and act autonomously instead of just doing the work they are told to do. The company needs to incorporate those employees’ opinions into their management more. In order to do this, I think it is important to get all of the company’s employees to read our Sustainability Report and Integrated Report and be conscious of the fact that they are building the company’s future.