Fiscal 2015 Performance Review

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Fiscal 2015 Performance Review
To Our Stockholders and Investors

                           With an
                                   e
                           achieve ye on 2020, To
                                   s u s t a i       r
                           business nable gr ay Group will
                                    e s  i n t      o w
                           while ce o growth y expan ork to
                                                         t h  b        w
                                   aselessl           fi e l d        d i n g
                                               y enhanc ountries its
                                                               s, c
                                                         ing its c , and reg
                                                                    ompetiti ions
                                                                              veness.
Toray Industries, Inc.

14                       Fiscal        2015                      Performance Review
Annual Report 2016

                         Achieved Record High                      implementing growth strategies and       profit gains. Carbon Fiber Composite
                         Net Sales and Profits                     further enhancing its total cost com-    Materials achieved earnings growth
                         Two Years in a Row                        petitiveness under the three-year        by meeting strong demand and
                                                                   medium-term management program           expanding applications. Fibers &
                         I would like to begin this report by      Project AP-G 2016, which extends         Textiles promoted business inte-
                         expressing our profound gratitude to      from fiscal 2014 to fiscal 2016.         grating fibers, textiles, to final prod-
                         our stockholders and investors for            As a result, the Group saw record    ucts while enjoying steady sales for
                         their continuing support.                 high net sales and profits for a sec-    automotive applications and hygiene
                             During fiscal 2015, the econ-         ond consecutive fiscal year, with        products. In addition, Plastics &
                         omy in China gradually slowed and         consolidated net sales increasing by     Chemicals saw increases in ship-
                         economic conditions in many other         4.7% year on year to ¥2,104.4 billion,   ments of products for automotive
                         emerging countries appeared to            operating income rising by 25.1% to      and packaging applications.
                         be weak. On the other hand, eco-          ¥154.5 billion, and net income attrib-      In terms of stockholder returns,
                         nomic conditions in the U.S. con-         utable to owners of parent climbing      we have raised annual cash div-
                         tinued to pick up and the European        by 26.9% to ¥90.1 billion. In addi-      idends per share by ¥2 year on
                         economy also remained on a recov-         tion, we significantly raised profit-    year to ¥13 based on a compre-
                         ery track. In Japan, although produc-     ability and capital efficiency, with     hensive consideration of every fac-
                         tion and exports looked sluggish, the     operating income to net sales ratio      tor including the aforementioned
                         economy saw a gradual underlying          rising 1.2 percentage points to 7.3%     business performance, fiscal 2016
                         recovery amid improving corporate         and ROE increasing 1.6 percentage        forecasts, financial standing and
                         earnings, employment, and wages.          points to 9.3%.                          retention of earnings necessary for
                             Under these operating con-                All segments except for Life         future investment.
                         ditions, Toray Group is steadily          Science saw year-on-year sales and
Fiscal 2015 Performance Review
President
            Akihiro Nikkaku
                              Annual Report 2016        Toray Industries, Inc.
                                                   15
P ro j e c t
                                           AP-G 201
                                                                                  6      Basic S
                                                                                                           t ra t e g i
                                                                                                                          es
Toray Industries, Inc.

16                       Steadily Implementing                    global leader in advanced materials.         promoting the “Asia, Americas,
                         Project AP-G 2016
Annual Report 2016

                                                                      Based on this policy, we have            and Emerging Country Business
                         Initiatives to Achieve                   established eight basic strategies           Expansion (AE-II) Project” in order
                         Our Long-Term                            under Project AP-G 2016. As key ini-         to capture demand in promising
                         Corporate Vision                         tiatives within these strategies, this       growth countries and regions in
                                                                  Group-wide project is promoting              Asia, emerging countries in other
                         Toray Group is working to further        business expansion in growth fields,         regions and the Americas.
                         expand its businesses globally under     countries and regions while bolster-            As for bolstering competitiveness,
                         AP-Growth TORAY 2020, a long-term        ing competitiveness.                         under the “Total Cost Reduction
                         corporate vision formulated with an          Regarding business expansion in          (TC-III) Project,” Toray Group aims to
                         eye on 2020. At the same time, the       growth fields, we are focusing on the        achieve a world-leading level of cost
                         Group will focus on expanding green      development of advanced materials            competitiveness by reducing vari-
                         innovation businesses to become          and the creation of new businesses           able and fixed costs while pursuing
                         a corporate group that “continually      by leveraging the Group’s strong-suit        production process innovation and
                         increases revenues and profits,”         technological prowess and global             total operational cost reduction.
                         “proactively contributes to social       business foundation in two challeng-            While focusing on these proj-
                         development and environmental            ing fields: the “Green Innovation            ects, we will actively step up growth
                         stewardship,” and “offers high val-      Business Expansion (GR) Project,”            investment to a greater extent than
                         ues to all stakeholders.”                which contributes to solving prob-           before while maintaining financial
                            Under the Project AP-G 2016 medi-     lems in the areas of the environment,        soundness using a D/E ratio of 1 or
                         um-term management program, the          resources, and energy, and the “Life         below with the aim of steadily rais-
                         second stage of AP-Growth TORAY          Innovation Business Expansion (LI)           ing the dividend payment in line with
                         2020, we are working to further accel-   Project,” which seeks to improve the         our earnings performance.
                         erate business expansion into fields     quality of healthcare, ease burdens
                         that display Toray Group’s strengths     on medical institutions, and contrib-        Now, I will provide an explanation of
                         while formulating and undertak-          ute to health and longevity.                 the progress of each project within
                         ing strategies and challenges that           Business expansion in growth             Project AP-G 2016.
                         will allow the Group to become the       countries and regions involves
BASIC STRATEGIES AND GROUP-WIDE PROJECTS

               Basic Strategies                                                                     Group-wide Projects

  1      Business expansion in growth business fields                                              Green Innovation
                                                                                                   Business Expansion
  2      Business expansion in growth countries and regions                                        (GR) Project

  3      Bolstering competitiveness                                                                Life Innovation
                                                                                                   Business Expansion
  4      Strengthening sales and marketing                                                         (LI) Project

  5      R&D strategies/Intellectual property strategies                                           Asia, Americas and

                                                                                                                                       Toray Industries, Inc.
                                                                                                   Emerging Country
  6      Capital investment strategies                                                             Business Expansion
                                                                                                   (AE-II) Project
  7      M&A and business alliance strategies
                                                                                                   Total Cost Reduction                17
  8      Human resources strategies                                                                (TC-III) Project

                                                                                                                                       Annual Report 2016
Progress of “Project AP-G 2016”                                                             (Billion of yen)

                                   FY2013          FY2014        FY2015        FY2016           FY2016
                                                                               Target        Initial Target
                                                                                                                   Basic dividend
Net Sales                       1,837.8 2,010.7 2,104.4 2,230.0 2,300.0                                                policy:
                                                                                                                Aim for sustainable
                                                                                                               increase of dividends
Operating Income                  105.3 123.5 154.5 170.0 180.0                                                  linked to earnings
                                                                                                                    performance
Operating Income to
Net Sales Ratio                      5.7   %         6.1   %      7.3   %         7.6   %           7.8   %        Guide line of
                                                                                                                    D/E ratio:
ROA                                  5.5   %         5.5   %      6.7   %           7
                                                                             approx. %                8   %       Below 1
ROE                                  7.5   %         7.7   %      9.3   %   approx.10   %            10   %

ROA=Operating Income/Total Assets
ROE=Net Income Attributable to Owners of Parent/Owner’s Equity
D/E ratio=Interest-bearing Debts/Owner’s Equity
Proje
                                          ct AP
                             G re e n                   -G 20
                                                Innova 1 6

                             (GR) Pr
                                                      tion B
                                                             usi        ness E
                                                                                 xpans

                                    oject                                                ion

                         Successes in Carbon
                         Fiber Composite
                         Materials and Water
                         Treatment Membranes

                         The Green Innovation Business
                         Expansion (GR) Project aims to
Toray Industries, Inc.

                         expand business in fields that con-
                         tribute to resolving environmen-
                         tal, resource, and energy issues,
                         including energy conservation, new               Toray Formally Signs ¥1.3 Trillion-        Toray Receives Large Order
                         energy, biomass derivatives, water               plus Comprehensive Long-Term               for TORAYFIL® Hollow Fiber
18                       treatment, air purification, low envi-           Agreement with The Boeing                  Membrane Ultrafiltration Module
Annual Report 2016

                         ronmental burden, recycling, and                 Company                                    in the Republic of Korea
                         process innovation.                              Toray signed a comprehensive long-         Toray received an order to sup-
                             In fiscal 2015, GR Project net               term agreement with The Boeing             ply TORAYFIL® hollow fiber ultrafil-
                         sales were ¥657.1 billion owing to               Company to supply carbon fiber             tration (UF) membrane module to
                         successes in carbon fiber composite              TORAYCA® prepreg for the produc-           membrane-based water purification
                         materials business and water treat-              tion of the new Boeing 777X large-         facility in Yeosu (scheduled to start
                         ment business, representing steady               sized twin-engine passenger aircraft,      operations in 2017), the largest in
                         progress toward the fiscal 2016 net              for which delivery of the first plane is   the Republic of Korea. This order is
                         sales target of ¥700.0 billion.                  slated for 2020, extending the exist-      the largest of Toray UF membrane
                                                                          ing supply agreement for the Boeing        supply projects, giving the Company
                         Green Innovation Business
                         Expansion Plan      ( ) net sales ratio          787 Dreamliner. The new agree-             a near 50% share (Toray estimate) of
                                                                          ment has extended the comprehen-           the amount of water treated using at
                         (Billion yen)                                    sive agreement that was signed in          water purification membrane facili-
                         1,000
                                                         approx.700.0     November 2005 by more than 10              ties in the country.
                                                         (approx.30%)
                                                                          years effective from 2015. The total           Toray Group is actively expanding
                                                    657.1
                          800                    (approx.31%)             value of prepreg to be supplied by         global business activities that con-
                                            565.5                         Toray Group for both the 787 and           tribute to finding solutions for water
                                         (approx.28%)
                                                                          777X programs during the contract          resource problems. To that end, the
                          600
                                    463.1                                 period is expected to exceed 1.3 tril-     Group will continue working to obtain
                                 (approx.25%)                             lion yen ($11 billion).                    large orders that use UF membrane
                          400                                                                                        TORAYFIL® as a diversified mem-
                                                                                                                     brane manufacturer and steadily
                                                                                                                     accumulate orders for reverse osmo-
                          200
                                                                                                                     sis (RO) membrane ROMEMBRA®,
                                                                                                                     which already boasts a leading global
                            0                                                                                        share, for treatment of sewage and
                            FY       2013   2014   2015   2016   2020
                                    Actual Actual Actual Target Image                                                industrial waste water, in addition to
                                                                                                                     seawater and brine desalination.
G 2 0 16
                                                                                                                 c   t AP-      o n
                                                                                                       Proje            a n s i
                                                                                                                  s Exp

                                                                                                  t
                                                                                                        n e s

                                                                                                c
                                                                                                  u s i
                                                                  Life I n n o va

                                                                                    I) P
                                                                                        t

                                                                                         ro   e
                                                                                            ion B
                                                                                            j
                                                                           (L
Expand Medical Device                        toward the fiscal 2016 net sales tar-             management services.
Business and Make                            get of ¥170.0 billion. In particular,             *hitoe®: A nano-fiber that incorporates a highly
                                                                                                conductive/polymerized compound that is form-
Significant Progress                         we are aggressively expanding our                  fitting and durable.
in New Business                              lineup of Toray advanced materials in
Development                                  the Life Innovation field while accel-             For more information, please see
                                                                                                “Special Feature” on page 24.
                                             erating new business development.
The Life Innovation Business

                                                                                                                                                   Toray Industries, Inc.
Expansion (LI) Project aims to expand
business in our present pharmaceu-
tical and medical businesses and
apply Toray Group’s advanced mate-
rials, core and fundamental technol-
ogies, and business foundation to
                                                                                                                                                   19

                                                                                                                                                   Annual Report 2016
improve the quality of healthcare,
ease the burden at medical institu-
tions, and contribute to health and
longevity. In fiscal 2015, LI Project
net sales were approximately ¥160.0
billion, representing steady progress        Toray Commences Field Testing                     Toray Receives Approval for
                                             of Safety Management Services                     Catheter Ablation System Used
                                             That Use hitoe®                                   in the Treatment of Paroxysmal
                                             In 2014, we began looking into intro-             Atrial Fibrillation
                                             ducing and developing applications for            Toray received manufacturing and
Life Innovation Business
Expansion Plan        ( ) net sales ratio
                                             bio-electrode fabric hitoe®* in a wide            marketing approval from Japan’s
                                             array of industries and occupations.              Ministry of Health, Labour and
(Billion yen)                 approx.170.0   Developed jointly by Toray and Nippon             Welfare for its world’s first catheter
300                            (approx.7%)
                                             Telegraph and Telephone Corporation               ablation system incorporating bal-
                       approx.160.0          (NTT), hitoe® is being used in smart-             loons using high-frequency waves,
250                     (approx.8%)
                                             wear devices that measure with a                  which is used to treat paroxysmal
                  approx.
                   140.0                     high degree of sensitivity biological             atrial fibrillation, and commenced
200             (approx.7%)
                                             data such as heart rate and cardio-               sales of the system in April 2016.
         approx.                             graphic waveforms when it is worn.                While the treatment of atrial fibrilla-
150       120.0                              With hitoe® wearable devices actually             tion includes the use of antiarrhyth-
       (approx.6%)
                                             being used by Obayashi Corporation                mic drugs, catheter ablation, and
100                                          employees at construction sites and               surgery, this system is expected to
                                             Japan Airlines employees at outdoor               make a major contribution in this
 50                                          areas of Naha Airport, Toray and NTT              area as a new choice in catheter
                                             Communications Corporation have                   ablation treatment capable of treat-
  0                                          begun field tests with the aim of com-            ing atrial fibrillation more safely and
  FY      2013   2014   2015   2016   2020
         Actual Actual Actual Target Image   mercializing this fabric for use in heat          over a shorter time span.
         Advanced Materials in LI Business
                                             stroke prevention and other safety
         Pharmaceuticals & Medical
Proje
                                            ct AP
                                 Asia, A - G 2 0 1 6
                                        m e ri c a

                                 (AE-II)
                                                   s and
                                                         Em                         e rg i n g

                                                                           Project
                                                                                                 Countr
                                                                                                          y Busi
                                                                                                                    ness E
                                                                                                                                 xpans
                                                                                                                                         ion

                         Pursuing Aggressive                                           billion, reflecting growth investment       billion in a new business site located
                         Growth Strategy in the                                        and business base expansion. The            in South Carolina, U.S. Production of
                         Republic of Korea and                                         project targets fiscal 2016 net sales       TORAYCA® from yarn is scheduled to
                         the Americas                                                  of ¥1.15 trillion (approximately 50% of     be phased starting from May 2017.
                                                                                       total net sales), which would exceed        Toray’s investment of around ¥100.0
                         The Asia, Americas and Emerging                               the ¥1 trillion mark. Key AE-II Project     billion through 2020 toward the new
                         Country Business Expansion (AE-II)                            topics in fiscal 2015 are as follows.       site is part of its plan to expand the
Toray Industries, Inc.

                         Project encompasses numerous ini-                                                                         carbon fiber composite materials
                         tiatives, including developing prod-                          Battery Separator Film Business             business in the U.S. Looking ahead,
                         ucts and strengthening marketing and                          Expansion in the Republic of Korea          Toray plans to enhance these produc-
                         sales capabilities to meet the specific                       Accompanying hybrid electric and            tion facilities on an ongoing basis.
                         needs of each country, strengthen-                            electric vehicle market growth, Toray
20                       ing existing production infrastructure                        increased its production capacity to        Enhancement of Large Tow
Annual Report 2016

                         and establishing facilities in markets                        a level 2.3 times the pre-expansion         Carbon Fibers Production
                         where we are not yet active, acceler-                         amount in the Republic of Korea             Capacity in Mexico
                         ating business expansion through alli-                        (slated to start production in 2016) to     Toray enhanced the production facil-
                         ances with leading local companies,                           meet growing demand for SETELA™,            ities for large tow* carbon fibers at
                         and expanding the advanced materi-                            a high-performance and high-reliability     Zoltek Companies, Inc. (“Zoltek”),
                         als business to meet demand growth                            battery separator film for lithium-ion      a subsidiary in the U.S., doubling
                         from expanding middle- and upper-in-                          secondary batteries. In addition, Toray     the production capacity of Zoltek’s
                         come demographics                                             acquired battery separator film coat-       Mexican plant to 5,000 tons from
                             In fiscal 2015, AE-II Project net                         ing process facilities in the country       March 2016. Zoltek currently pro-
                         sales were approximately ¥975.9                               from LG Chem Ltd., which manufac-           duces large tow carbon fibers at
                                                                                       tures lithium-ion batteries.                its plants in Hungary and Mexico.
                         Asia, Americas and Emerging                                                                               In addition to the rapidly growing
                         Country Business Expansion Plan                               New Integrated TORAYCA®                     demand for this product in wind
                         (Billion yen)                        ( ) net sales ratio      Prepreg Facility in the United States       power generation applications in
                         1,800
                                                          approx.1,150.0               In conjunction with signing a compre-       recent years, large tow carbon fibers
                                                           (approx.50%)
                                                                                       hensive long-term agreement with            are expected to be increasingly used
                         1,500                           975.9                         U.S.-based The Boeing Company to            in automobile structures. In response
                                                         (46%)
                                                                                       supply carbon fiber TORAYCA® pre-           to the robust demand for large tow
                                                 944.0
                         1,200
                                                 (47%)                                 preg for the production of the Boeing       carbon fibers, Zoltek plans to raise
                                         809.3                                         787 and 777X, Toray has decided to          its production capacity (including that
                          900            (44%)
                                                                                       construct an integrated facility with       of the Hungary plant) of the material
                                                                                       operations that extend from pro-            by 100% by 2020 from the current
                          600
                                                                                       ducing carbon fiber TORAYCA® yarn           13,000 tons per year. Under the plan,
                                                                                       (precursor) to carbonization as well        it will continue to carry out capacity
                          300                                                          as a facility to produce prepreg used       enhancement of the Mexican plant in
                                                                                       in TORAYCA® (carbon fiber sheets            a phased manner.
                            0                                                          impregnated with resin). To this end,       *Large tow: Carbon fiber with a filament count of
                           FY            2013 2014 2015 2016 2020                                                                   40,000 or more
                                         Actual Actual Actual Target Image             Toray has invested approximately ¥50
- G 2 016
                                                                                                                                      c   t AP             n
                                                                                                                              Proje       e d u c tio
                                                                                                                                     st R

                                                                                                                      P ro j e c t
                                                                                                                      oT t a l C o

                                                                             (TC - I I I                            )
Reducing Costs by                                                 In fiscal 2015, Toray Group                        0.97. Moreover, production process
¥200.0 Billion over                                           reduced variable costs by ¥31.4                        innovation and total operational cost
Three Years Achievable                                        billion year on year, with a reduc-                    reduction saved a total of ¥23.4 bil-
                                                              tion rate of 3.7%, and kept fixed                      lion, thus boosting profits.
In addition to aggressively pursuing                          cost under budget by ¥14.0 billion.                        As a result of the above, total
the aforementioned growth strate-                             Regarding fixed costs, the Group                       reductions achieved under TC-III
gies, the Total Cost Reduction (TC-III)                       has introduced a Performance                           Project in fiscal 2015 came to ¥68.7

                                                                                                                                                                  Toray Industries, Inc.
Project aims to cut costs by ¥200.0                           Ratio (P-ratio) to monitor the ratio of                billion, with a two-year total of ¥133.3
billion over three years between fis-                         growth rates for fixed costs and mar-                  billion (achievement rate of 67%). In
cal 2014 and fiscal 2016 by continu-                          ginal profit for each company and                      light of this, we are well on our way
ing and deepening activities to reduce                        business with the aim of maintaining                   to reaching the cumulative target of
existing variable and fixed costs as                          a rise in fixed costs in line with profit              ¥200.0 billion for fiscal 2016.
well as by focusing on production pro-                        growth during business expansion
                                                                                                                                                                  21

                                                                                                                                                                  Annual Report 2016
cess innovation and total operational                         phases. In fiscal 2015, we met our
cost reduction in sales and marketing.                        budget with a Group-wide P-ratio of

                                                                                 Results of FY2015                                    Reduce costs
                        • Continuing activities to reduce variable
                          costs (over 3% each year and over 10% in
                          three years)
                                                                                 Variable costs:

                                                                                 Reduced    31.4      billion yen
                                                                                                                     (Billion yen)
                                                                                                                                      200    billion yen
                                                                                                                                      in three years
  Continuation                                                                                                       200
                        • Controlling fixed costs through P-ratio*               (Reduction ratio 3.7%)
       of                 accounting method
     TC-II                (P-ratio = under 0.96 each fiscal year)                Fixed costs:
                        • Activities involve participation of employees
                          group-wide                                             Reduced    14.0
                                                                                 (P-ratio=0.97)
                                                                                                      billion yen
                                                                                                                     150
                        • Set up innovative production processes to
                          achieve drastic cost reductions based on
  Innovation of           new perspectives and approaches
   Production
                        • Collaborate across organizations, between                                                                                 Reduced
     Process              research, technical, production and engi-              Effects from innovation             100
                          neering departments                                    of production processes
                                                                                 and total operational cost
                                                                                 reduction in sales and
                                                                                                                                                    68.7
                                                                                                                                                    billion yen
                                                                                 marketing                                                          in FY 2015
     Total
 Operational   • Establish a highly competitive supply
Cost Reduction chain, by analyzing and understanding the                         Total:   23.4    billion yen
                                                                                                                      50
                                                                                                                                                    Reduced
 in Sales and
  Marketing
                 operational costs and logistics systems
                                                                                                                                                    64.6
                                                                                                                                                    billion yen
                                                                                                                                                    in FY 2014
                                                                                                                        0
     Marketing
*P(Performance)-ratio=  fixed cost growth rate/marginal profit growth rate. Keep P-ratio below 1.0, or manage
                                                                                                                                     Target   Actual
    in Sales
        costs forand

                                                                                          23.4
  fixed           each division versus budget
                            operational  costs and logistics systems
Cost Reduction chain, by analyzing and understanding the                         Total:           billion yen
 Operational   • Establish a highly competitive supply
     Total
                                                                                 marketing
Fiscal 20
                              Perfor
                                             mance
                                                              Foreca
                                                                               st
                                                                                  16
                         Target Net Profit of                                   global financial markets.                                      Toray Group will constantly seek-
                         over ¥100.0 Billion and                                    Against this backdrop, Toray                            ing to be a global pioneer of techno-
                         Dividend Increases for                                 Group will focus on promoting ongo-                         logical advances and to develop and
                         a Third Straight                                       ing growth strategies and bolstering                        commercialize leading-edge technol-
                         Fiscal Year                                            its earnings foundation in fiscal 2016,                     ogies and new materials under the
                                                                                the final year of Project AP-G 2016.                        firm belief that, as the foundation of
                         In fiscal 2016, we expect a gradual                        We forecast consolidated net                            products, materials have the power
                         recovery in the overall economy led                    sales of ¥2,230.0 billion, operat-                          to bring about fundamental transfor-
                         by the U.S. and other developed coun-                  ing income of ¥170.0 billion, ordi-                         mations in society. In addition, the
                         tries, but urge caution over risk factors              nary income of ¥170.0 billion, and                          Group seeks to realize its corporate
                         including a slowdown in the Chinese                    net income attributable to owners                           philosophy, “contributing to society
Toray Industries, Inc.

                         economy, economic downturns in                         of parent of ¥105.0 billion. This out-                      through the creation of new value
                         emerging countries, and the impact of                  look is based on pursuing growth                            with innovative ideas, technolo-
                         normalization of U.S. monetary policy.                 fields such as green innovation and                         gies and products,” by emphasizing
                         In Japan, a gradual economic recovery                  life innovation as well as business                         on-site capabilities in all corporate
                         is expected as the current slowdown                    expansion in growth countries and                           activities and overcoming problems
22                       fades amid ongoing improvement in                      regions in Asia, emerging countries                         through a thorough grasp and analy-
Annual Report 2016

                         employment and wage conditions.                        in other regions, and the Americas                          sis of current conditions.
                         Nevertheless, there are concerns over                  under Project AP-G 2016. In addition,                          We would like to ask for contin-
                         downward pressure on the economy                       we plan to hike cash dividends for                          ued understanding and support of
                         caused by a downturn in overseas eco-                  the third straight fiscal year (annual                      our stockholders and investors as
                         nomic conditions and fluctuations in                   cash dividend of ¥14).                                      we pursue these initiatives.

                         Consolidated Performance Results                                                Forecast by Segment for Fiscal 2016
                         Forecast for Fiscal 2016                                    (Billions of yen)                                                                      (Billions of yen)
                                                          FY2016 (Forecast)          Changes                                                  Net Sales               Operating Income

                         Net Sales
                                                              2,230.0                   6.0
                                                                                        +      %
                                                                                                         Fibers & Textiles
                                                                                                                                         910.0 (+18.0)                  71.0 (+2.1)
                         Operating Income
                                                                170.0                 +10.0    %
                                                                                                         Plastics &
                                                                                                         Chemicals                       540.0 (+18.8)                  34.0 (+4.6)
                         Net Income Attributable
                         to Owners of Parent                    105.0                 +16.5    %
                                                                                                         IT-related Products
                                                                                                                                         280.0 (+28.9)                  31.0 (+4.9)
                         Our forecasts are predicated on an assumed foreign currency exchange rate       Carbon Fiber
                         of ¥105/US$1.
                         Released May 12, 2016
                                                                                                         Composite
                                                                                                         Materials                       200.0 (+13.8)                  38.0 (+1.9)
                                                                                                         Environment &
                                                                                                         Engineering                     220.0 (+36.7)                  12.0 (+2.4)
                                                                                                         Life Science
                                                                                                                                          64.0 (+8.2)                    5.0 (+1.9)
                                                                                                         Others
                                                                                                                                          16.0 (+1.3)                    2.0 (+0)
                                                                                                         Adjustment
                                                                                                                                          —                            -23.0 (-2.3)
                                                                                                          Consolidated
                                                                                                         Figures
                                                                                                                                       2,230.0 (+125.6)                170.0(+15.5)
                                                                                                                 in parenthesis indicate year-on-year increase/decrease.

                                                                                                          Consolidated
                                                                                                         Figures
                                                                                                                                       2,230.0 (+125.6)                170.0(+15.5)
                                                                                                                 in parentheses indicate year-on-year increase/decrease.

                                                                                                          Adjustment
                                                                                                                                          —                            -23.0 (-2.3)
Engaging in Ongoing Growth                 and investment in R&D of ¥65.0 bil-           growth strategies implemented to
Investment                                 lion (¥183.3 billion) in order to fur-        date and realize sustainable growth
Project AP-G 2016 calls for aggres-        ther boost initiatives for accelerating       going forward.
sive investment in R&D and facilities
aimed at realizing sustainable global          Major Capital Expenditure Projects
growth. For the three years begin-            FY 2015
ning in fiscal 2014, the program
                                              Toray Advanced Materials Korea Inc.          PPS (polyphenylene sulfide) resin
projects spending ¥400.0 billion for                                                       production facilities
capital investment and ¥180.0 billion

                                                                                                                                          Toray Industries, Inc.
                                              Toray Chemical Korea Inc.                    Polyester staple fiber production
for investment in R&D in such areas                                                        facilities
as strengthening core products and            Toray Composites (America), Inc.             Carbon fiber TORAYCA® prepreg
technologies, advancing in new                                                             production facilities
fields, and technologies, and produc-         Zoltek Companies, Inc.                       Large tow carbon fiber production
tion process innovation.                                                                   facilities
    In fiscal 2016, we expect to
                                                                                                                                          23
                                              FY 2016

                                                                                                                                          Annual Report 2016
make solid progress in line with
                                              P.T. Toray Polytech Jakarta                  High-performance polypropylene
our plan given above, undertaking
                                                                                           spunbond production facilities
capital investment of ¥175.0 bil-
                                              Toray Carbon Fibers America, Inc.            Carbon fiber TORAYCA® prepreg
lion (three year total: ¥432.7 billion)                                                    integrated production facilities
                                              Toray Battery Separator Film                 Polyethylene film production
                                              Korea Limited                                facilities

Capital Expenditures                          Depreciation                                      R&D Expenses

(Billion yen)                                 (Billion yen)                                     (Billion yen)
200                                           100                                               70
                                                                                 92.0                                             65.0
                                  175.0
                                                                      86.8                                   59.5
                                                                                                60                     58.8
                                                              77.5
                                               80
150
                        129.2                                                                   50
                128.5
                                               60
                                                                                                40
100
                                                                                                30
                                               40

                                                                                                20
 50
                                               20
                                                                                                10

   0                                             0                                                0
       FY       2014    2015      2016               FY       2014    2015      2016                  FY     2014      2015      2016
                                Forecast                                      Forecast                                         Forecast

            Consolidated subsidiaries                     Consolidated subsidiaries                        Consolidated subsidiaries
            Toray                                         Toray                                            Toray
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