Message from the President

In terms of capital investment, we implemented large-scale growth-oriented investment to strengthen R&D capabilities and reduce production costs. The three chemical research centers for chemical discovery, formulation technology, and process chemistry, which were scattered at three separate locations in Shizuoka Prefecture, were integrated into the Chemical Research Institute Shimizu Innovation Park (ShIP), equipped with cutting-edge facilities, began full-scale operation in October 2023. This is designed to enhance R&D efficiency, encourage innovation through integration of research centers in different fields, and facilitate development of new technologies to create new businesses.

Kumiai Group is an R&D-oriented enterprise. Developing new products will be essential for growth. It is important to create compounds, that as yet do not exist in our world, and commercialize them as agricultural chemicals to contribute to agriculture or as fine chemical products to enrich society.

The probability of commercializing a new agricultural chemical from newly synthesized compounds for evaluation is said to be 1 in 160,000. However, we have succeeded in developing new agricultural chemicals at an extremely high probability of 1 in 7,500.

We believe this achievement is attributable to our researchers’ cohesive teamwork in which they combine their comprehensive scientific expertise in pursuit of development, and furthermore, to the extensive purview typical of our researchers that facilitates comprehensive value judgments.

It is my earnest desire that ShIP will bring about further innovation in product development. In the biological field, we constructed a safety assessment research facility at the Life Science Research Institute in 2021 to enhance its functions. In this way, we are strengthening the research environment to meet the safety assessment standards that are becoming more stringent year by year internationally.

We also vigorously implemented M&A to expand business domains and research areas while fostering diversity in sales route. In February 2021, we made Asiatic Agricultural Industries Pte. Ltd. (AAI) in Singapore a consolidated subsidiary. AAI has a strong sales network in Asia and Africa for agricultural chemicals and public health pesticides. The acquisition of AAI has an important bearing on Kumiai’s future growth strategy, as it gives us access to sales channels in Asia and Africa where Kumiai’s sales activities were not so high.

As Kumiai has no direct sales channels in overseas markets, for overseas sales Kumiai concludes agreements with partners that have distribution channels in their respective countries. AAI ships formulated products manufactured at its factory to countries in Asia and Africa. Thus, we have gained a new business scheme for these countries and regions. We intend to establish a business scheme to expand new sales channels from a long-term perspective.

In Japan, we acquired an 80% share in Agricore Corporation (Fukushima Prefecture) in October 2022. Agricore has strength in products and technologies that fully utilize microorganisms and IT.

Changes in cultivation areas because of global warming and the emergence of fungi, pests, and weeds that have resistance to current agricultural chemicals are in prospect. In line with these changes in the future agricultural environment, we believe that the market for biostimulants and biopesticides will grow. Through collaboration with Agricore, we intend to advance toward the shared goals of promoting development of biostimulants and biopesticides while reducing environmental impacts in order to contribute to sustainable agriculture.

Moreover, we acquired a 65% share in GRA INC. (Miyagi Prefecture) in September 2023. GRA is a smart agriculture venture engaged in the cultivation of strawberries. GRA has introduced a greenhouse environment control system that quantitatively manages temperature, humidity, and the amount of sunlight, for which purpose it applies ICT to quantify the experience of strawberry growers, and is encouraging new farmers by standardizing agricultural management. By leveraging GRA’s strength as an agritech company and Kumiai’s knowledge and know-how, we aim to realize synergies for smart agriculture.

Seven Key Policies Identified through Involvement of Everyone at Kumiai

In December 2023, we announced a new Medium-Term Business Plan whose final year is FY2026.

We position the three-year period as one for germinating the seeds sown during the period of the previous Medium-Term Business Plan, for nurturing the new shoots so that they grow, and strengthening and expanding the foundation for future growth, toward realization of the Ultimate Goals as a 100-year-old company.

The vision of the new Medium-Term Business Plan is “Create the Future—Expanding our Possibilities.” Under the new Medium-Term Business Plan, we essentially intend to further expand the initiatives implemented in the previous Medium-Term Business Plan.

For FY2024, the first year under the new Medium-Term Business Plan, we forecast net sales of 167.0 billion yen (up 6.0 billion yen from FY2023) and operating income of 12.0 billion yen (down 2.1 billion yen from FY2023). This combination of an increase in net sales and a decrease in profit is forecast because operating income is expected to deteriorate in FY2024 as a consequence of adjustments in global distribution inventories of agricultural chemicals, implementation of a pricing strategy as a countermeasure for generic products, and rising costs. However, by implementing the growth strategy described below throughout the period of the new Medium-Term Business Plan, we aim to achieve numerical targets of 185.0 billion yen in net sales (up 24.0 billion yen from FY2023) and 16.0 billion yen in operating income (up 1.9 billion yen from FY2023) in FY2026, the final year of the plan.

Under the new Medium-Term Business Plan we have four key policies as business strategies. They are “Contributing to sustainable agricultural industry / Providing a stable supply of high-quality products and services,” “Mitigation of climate change and environmental impact,” “Strengthening R&D capabilities,” and “Expanding business domains and promoting new businesses.” We have another three key policies for the foundation supporting the business strategies. They are “Human capital development / Human capital strategy based on the idea of human capital,” “Improvement of corporate governance,” and “Promotion of digital transformation / Implementation of digitalization.”

The materiality on which these seven key policies are based was revised from the previous materiality and identified through discussion at a workshop whose participants were drawn from various departments/divisions and wide-ranging age groups. In the process, employee interactions were broadened and deepened across departments/divisions, ages, and genders, among which encounters typically tend to be limited in frequency and extent, and this was also a catalyst for Kumiai’s revitalization. The seven key policies correspond to specific issues to be addressed during the three years of the Medium-Term Business Plan, which were extracted from the materiality identified in 2022.

The first key policy, “Contributing to sustainable agricultural industry” is the engine of Kumiai Group’s growth strategy. AXEEV®, our mainstay product, is expected to continue to be our preeminent growth driver. The plan calls for AXEEV® sales of 84.2 billion yen in FY2026 (up 11.1 billion yen from FY2023).

On the other hand, the substance patent for AXEEV® expired in 2022, and generic products are expected to become available. However, by implementing thorough product life cycle management, including systems for protecting data used in registration of agricultural chemicals in certain countries, patents concerning development of mixed formulations, and patents on the manufacturing methods and intermediates obtained by devising manufacturing methods, we will step up countermeasures for generic products. We will do our utmost to ensure that the AXEEV® business continues to flourish despite the expiration of the substance patent.

Although there is a tendency to view chemical pesticides negatively from environmental and safety perspectives, it is also true that agricultural chemicals themselves contribute to sustainable agriculture. Just consider how improvement of the formulation technology for agricultural chemicals is contributing to the reduction of environmental impacts.

Take, for example, herbicides for paddy rice used in Japan. Whereas it was necessary to apply 3 kilograms of herbicide per 10 ares around 20 years ago, nowadays the amount of MAMETSUBU® herbicide is 250 grams applied for the same area, a mere one-twelfth of the previous amount is sufficiently effective. MAMETSUBU® products are also contributing to conservation of the global environment from the perspective of reducing greenhouse gas emissions in logistics. Furthermore, MAMETSUBU® products are used in smart agriculture, such as application by drones.

In Japan, the Strategy for Sustainable Food Systems, MIDORI, announced by the Ministry of Agriculture, Forestry and Fisheries in 2021 targets a 50% reduction in riskweighted use of chemical pesticides by 2050. At first sight, this strategy may appear to presage a negative impact on Kumiai resulting in a 50% shrinkage of the market we address. However, we view the strategy as a new business opportunity, because in the 75 years since our foundation, we have continuously developed novel agricultural chemicals that bring about innovation in agriculture.

Agricultural chemicals help ensure the yield and quality of crops as well as the value of shipments. They are indispensable materials for sustaining stable food production. Whereas global population and demand for food continue to grow, the risks to agricultural production posed by climate change are becoming ever more apparent. Moreover, there are geopolitical risks due to the eruption of conflicts in various regions. The need to increase the yield per unit area and produce safe and secure agricultural products is a pressing issue worldwide. There is no doubt that agricultural chemicals will contribute to resolving these issues.

As a manufacturer, Kumiai is keenly aware of the need to strengthen dissemination of accurate information. For youngsters, we have created a series of brochures explaining the role of agricultural chemicals in the food production process, and have distributed them to elementary schools in various regions in Japan. Our employees visit elementary schools in Shizuoka, Hokkaido, Miyagi, and other prefectures to give classes designed to raise the awareness of children, teachers, and other people of all ages about the role of agricultural chemicals.

An especially noteworthy project involves trial applications for suppression of weed growth, which potentially could lead to conservation of socio-ecological production landscapes (satochi-satoyama) and coexistence with wildlife. Kumiai has owned about 640 hectares of forest in mountainous terrain in the town of Fukushima, Hokkaido for some 50 years. We are conducting a demonstration experiment there in which a herbicide is applied for suppression of weed growth to maintain this beautiful landscape while reducing the need of weed cutting work. Moreover, in regions where there are concerns about bears, application of the herbicide for suppression of weed growth will reduce the undergrowth where bears can hide. We expect that creating a buffer zone between bear habitat and human settlement will help curb the frequency of dangerous encounters with bears. If good verification results are obtained, we can also contribute to the reduction of the anxiety and injury attributable to bears. Furthermore, this initiative is also an attempt to expand the use of agricultural chemicals in maintaining the local countryside through weed management and for implementing environmental measures.

The Fine Chemicals Business is another business field of Kumiai Group. We intend to foster the Fine Chemicals Business as a second pillar alongside the Agricultural Chemicals Business by developing business in growth areas such as semiconductors and electronic materials.

The sales target under the new Medium-Term Business Plan is 28.5 billion yen in FY2026 (actual sales of 22.5 billion yen in FY2023) and 30.0 billion yen or more under the next Medium-Term Business Plan. Although the scale of the Fine Chemicals Business is still relatively modest, the plan calls for increasing the ratio of total net sales of the Fine Chemicals Business to net sales from 14% in FY2023 to 16% or more. Proactive use of M&A and capital alliances are options in the context of our efforts to strengthen the foundation of the Fine Chemicals Business.

The Fine Chemicals Business has a wide range of applications and fine chemicals are ingredients of numerous products supporting everyday life. For example, chloroxylene derivatives of the chlorination business are used for firefighting protective gear, and amine curing agents are used in waterproofing materials and flooring materials for Shinkansen bullet trains. In order to expand the Fine Chemicals Business, we need to increase the added value of our products and expand their applications by addressing not only upstream needs but those further downstream, advancing step by step. I believe that the combination with synthesis and formulation technologies cultivated for agricultural chemicals will lead to creation of fascinating, innovative products.

As part of our initiatives to expand the Fine Chemicals Business, we have established the New Material Research Laboratory within ShIP. Researchers of Group companies also belong to the New Material Research Laboratory and I believe this lab to become a driving force for the creation of new fine chemical materials.

We formulated the vision for the human capital strategy whose essence is expressed by “Dreams and Triangle for Happiness,” which is established as our slogan and a pillar of the new Medium-Term Business Plan. (See page 2.)

The slogan was adopted when I took office as president in November 2021 and is incorporated in the new Medium-Term Business Plan.

“Dreams and Triangle for Happiness” is nourished by the dreams of individual employees, however modest or personal those dreams may be. If you have a dream, it will inspire you to give of your best. If the efforts yield results, it will lead to “happiness for all.” Then, people will have next dreams, make fresh efforts, and achieve fresh results, leading to greater happiness for all. Thus, a virtuous circle will arise. In “happiness for all,” the word “all” is the key. As you expand your horizon from yourself to your family, your coworkers, the Company, the region, the country, the world, and eventually to planet Earth, behavioral ethics in pursuit of happiness for all the denizens of planet Earth will naturally emerge and take wing.

The origin of this concept is the Hawthorne experiment, which is famous in the field of industrial engineering, which I studied at university. The experiment led to the conclusion that “workers’ productivity is influenced not only by the objective working environment but also by human relationships in the workplace and the workers’ awareness of goals, and in some cases, these factors have a far greater influence.” I learned that the individual’s motivation is crucial in enhancing organizational capabilities.

When I became president of a subsidiary about 10 years ago, I had the opportunity to put this knowledge into practice. In view of the sense of stagnation in that company, I was desperate to do something to overcome this situation. I then considered what could motivate employees. After talking with each employee and formulating the concept of “Dreams and Triangle for Happiness,” a modest experience of happiness led to the happiness of the entire company, and performance improved. Through this experience, I recognized the importance of enhancing employee motivation and of harnessing that motivation for the benefit of the company.

I am convinced that realizing the slogan “Dreams and Triangle for Happiness” will lead to a sustainable company and a sustainable society, within a framework that prioritizes the global pursuit of happiness.

This concept is also applied to Kumiai’s human capital strategy. Incidentally, the Japanese term for human capital stresses the high value inherent in people. Specifically, we are cultivating an environment that supports every effort by creating mechanisms for recruitment and training, promoting diversity, and ensuring work-life balance as well as health and productivity management. Then, we create mechanisms that encourage a sense of accomplishment in accordance with achievement by ensuring a reward that matches the level of contribution, establishing a personnel system that evaluates efforts to tackle challenges, and providing support for career development.

Finally, by enhancing the engagement of employees and the Company as a whole, we seek to realize “happiness for all.”

Currently, 1,250 ema plaques on which all our employees have written down their dreams are hung up at the entrance of my office. My dream is to make their dreams come true. Now, a little more than two years since I became president, I feel that this slogan is gradually taking root in Kumiai Group.

Since releasing the first product in the Japanese agricultural chemicals market in 1959, Kumiai has been focusing on the research and development and distribution of safe and effective agricultural chemicals in order to promote sustainable agriculture. In our efforts to support the provision of safe and secure food for people, we are helping reduce the burden on growers, which results in protection and nurturing of harvests based on harmony between humans and nature.

Food insecurity as a result of the increasing global population, global environmental issues related to climate change and biodiversity, and global social issues affecting the agricultural industry are becoming more critical issues. In order to resolve these social issues, as an advanced chemical manufacturer with innovative technologies and a unique position in the market, Kumiai will endeavor to create new value.

It takes a long time, 10 to 20 years, for an agricultural chemical to progress from chemical discovery to actual market launch. Some of the investments in R&D and M&A that Kumiai is currently making in order to expand our business domains, and also in human capital management, will bloom 10 to 20 years down the road.

In these circumstances, the fundamentals of Kumiai Group, such as R&D capabilities, sales capabilities, and the financial base, are undoubtedly strong. There are definitely markets for both agricultural chemicals and fine chemicals. Our industry will undoubtedly survive.

We will continue our unending endeavor of creating new value, leading to the realization of a sustainable society through the utilization of Kumiai Group’s strength, “R&D capabilities,” in order to achieve a “safe, secure, and prosperous society” along with “sustainable development of Kumiai Group.”