Fiscal 2015 Performance Review
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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
President
Akihiro Nikkaku
Annual Report 2016 Toray Industries, Inc.
15P 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 involvesBASIC 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 EquityProje
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 & MedicalProje
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
marketingFiscal 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
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