This fiscal year—four years into SHIFT2030, our Medium- to Long-Term Business Plan—marks a milestone as the final year of Phase 1 of the plan. The first three years of the plan were turbulent, with the COVID-19 pandemic, Russia’s invasion of Ukraine, turmoil in the Middle East, and the rapid depreciation of the yen among the many headwinds, and the situation remains challenging.

The word “Shift” expresses our determination to continue moving forward without hesitation in these times of great change. To achieve the major goals we have set for 2030, we must be prepared to face these changes and continue to be innovators who create change in turn. Otherwise, we cannot achieve our goals or sustainable growth for the future.

Consistent with the Nitta Group Philosophy, the products we create help move the world and provide the vision for a more advanced society and a more harmonious way of life. This is a representation of the desire behind our style of manufacturing, the spirit that has remained unchanged since the Company’s founding. In Nitta’s early days, the world was in a state of upheaval, just as it is today. Our founder, Chojiro Nitta, constantly rose to the challenge of creating useful products to meet the evolving needs of society during times of great change. Pursuit of new inventions and innovations to make products better has led to even more new technologies that we have expanded into diverse products and businesses. We would not be where we are today without putting our core values of invention, innovation, and harmony into practice. Those of us now responsible for taking the Nitta Group into the future have inherited these values and drive to transform change into strength.

Next year, the Nitta Group will celebrate the 140th anniversary of its founding. Looking toward the future, the Nitta Group will continue to tackle challenges so that it will endure until its 150th and 200th anniversaries and beyond. We will continue to work toward fully implementing SHIFT2030 and, together with our stakeholders, achieve a prosperous future and an ideal world. We appreciate your continued understanding and support.

In the fiscal year ended March 31, 2024, the economy continued to rally overall despite the risk of a downturn due to factors such as global monetary tightening, concerns over the Chinese economy, Russia’s prolonged invasion of Ukraine, and turmoil in the Middle East. The Japanese economy saw employment and incomes improve, in spite of continued rises in prices, resulting in a moderate recovery trend.

Among the industries that are the main source of demand for the Group’s products, sales to the automotive industry have been recovering, and Group net sales for the fiscal year ended March 31, 2024, increased slightly from the previous fiscal year, reaching a record high for the third consecutive year. In terms of profit and loss, although we made some progress in passing on soaring raw material costs through sales prices, operating income decreased due to weak sales of products for semiconductor manufacturing equipment and other high value-added products. Ordinary income also decreased due to the decrease in operating income and a decrease in foreign exchange gains. We expect earnings to improve in the current fiscal year on the strength of a second-half recovery of products for the semiconductor industry, the main source of the decline in earnings in the previous fiscal year.

SHIFT2030, our Medium- to Long-Term Business Plan, is a 10-year plan set to end in 2030, and is divided into three phases. Phase 1 is the four-year period from April 1, 2021 through March 31, 2025, making this fiscal year a milestone as the final year of this phase. According to our assessment, Phase 1 has progressed favorably in terms of net sales, operating income ratio, new product sales ratio, overseas sales growth rate, and other metrics. Although SHIFT2030 was formulated in the midst of the extremely challenging environment of the COVID-19 pandemic, we are determined to achieve the goals of Phase 1. The key to the final year of this phase will be products for the semiconductor industry, a factor in the decline in sales in the previous fiscal year. The trend has already shifted toward recovery, and we anticipate a substantial comeback in the second half of this year that will allow us to close Phase 1 on target at the end of March 2025.

This year also marks the beginning of preparations for Phase 2 starting next fiscal year. The net sales target for Phase 2 is 100 billion yen. This is an important goal for the Group to achieve. The former president used to say, “The landscape changes when net sales exceed 100 billion yen.” The idea is that the stakes—including governance and corporate culture—are raised in a way that befits a company with net sales on that level. Personally, I feel exactly the same way as the former president, and am firmly committed to achieving the net sales target of 100 billion yen for Phase 2. To reach that level, we must expand our business in larger fields, and I believe that further promoting our global business is an important measure.

The Nitta Group has continued to grow through business diversification. We have expanded overseas in the belt and rubber, hose and tube, and various other businesses, and a review of our portfolio reveals many areas with potential for further growth in our global markets. We will further strengthen our overseas business, focusing our efforts on the Global Promotion Office established in April 2024. In the belt and rubber business, we were quick to make progress in overseas operations and now operate in 13 countries and regions. Our other businesses are still lagging behind, so there is clear room for growth. We are focusing on India as the region with the most potential to be strengthened. India is seeing rapid Infrastructure and economic development. We had been anticipating growth for some time, but it was not coming to fruition. Last year, on my first visit to India in five years, I became convinced that great business opportunities were on the way. With an increase in expressways, cars, high-rise buildings, and quality infrastructure, sweeping changes are afoot. Real estate prices are also undergoing noticeable increases month to month. Our analysis shows that ICE automobiles still far outnumber EVs, and we see promise in this market for the expansion of both our belt and rubber business and hose and tube business.

Looking at past results, our business expansion in China has been somewhat slow. If we had invested a little earlier, the Group’s business could have expanded more in line with China’s growth. We are determined not to make the same mistake in India. Strengthening overseas operations is not adventurous or speculative investment. Learning from our experience in China, we will proceed steadily, one step at a time. We have already begun preparations toward that end. Of course, we are not thinking only of India and China. We are also considering the USA and Asia, taking a broad view of the entire world and all our operations. This global expansion should serve as a stepping stone to achieving the goal of 100 billion yen in Phase 2.

Beyond achieving 100 billion yen in net sales in Phase 2, the final goal of the Medium- to Long-Term Business Plan is the Phase 3 target of 115 billion yen-plus in sales by 2030. The “plus” after the target refers to new business growth. Namd™ is currently at the forefront of our new business development, Nitta’s proprietary new technology for compositing carbon nanotubes (CNTs) with carbon fibers. The technology is highly regarded in industry, winning the Product and Technology Award from SAMPE Japan in fiscal 2020 as an original new product based on a new process. It has already been adopted and commercialized in the sporting goods industry, but we are looking to expand applications to general industrial business, with our sights set on the global market as well. Having developed patented technology, we are aiming to acquire AS9100 certification (a management system standard for ensuring product quality in the aerospace industry supply chain, developed by a working group comprising the USA, the UK, Japan, and five other countries) by the end of fiscal 2025 to further enhance trust in this technology. Expanding the CFRP business will take time, but we hope to achieve results by our final target of 2030.

Regenerative medicine is another of our new businesses. It is an area the Group has been engaged in through technological and business development for many years. The Clean Engineering Division is in the process of developing products in the related field of decontamination. We are now at the stage of planting and steadily nurturing the seeds for new technological development and relationship building through efforts including the Group’s active participation in joint industry-academia activities in the field of regenerative medicine led by Osaka University.

We also aim to create new businesses by accelerating the development of new products adapted to changes in the market and entering into new markets and business areas with growth potential. Our New Business Exploration Team—the driving force behind this effort—is playing an increasingly active role. Although this team was formed just three years ago, a related initiative called the Nitta Innovation Crew was already working to start new businesses for roughly a decade. As someone who came up through our technical departments, I know firsthand how difficult it is to develop new technologies and products. Even the efforts of the New Business Exploration Team will not lead to results immediately. However, we are moving forward with several interesting initiatives that are still in their early stages. One such initiative is a new business that utilizes the Group’s forest resources. Though it is still in the development stage, we are monitoring its progress closely. The forests of Hokkaido are extremely valuable for nature conservation and social contributions, but we are also trying to determine if we can develop and commercialize products. I expect the New Business Exploration Team to make that happen.

The Group owns an expansive forest covering about 6,700 hectares in Hokkaido. We first arrived there in search of Japanese emperor oak trees from which to extract tannin for tanning leather in the course of developing Japan’s first leather belts for transmission. After cutting down the oak trees, our founder planted Japanese larch trees to restore the area. He then diversified, for example by developing a veneer business using the lumber. Hokkaido’s forests are etched with our history of founding and growth. This is why the Nitta Group intends to continue protecting and nurturing them, having positioned our Hokkaido forestry business as a symbolic business.

Through systematic thinning and afforestation, the amount of CO₂ absorbed is increasing year by year, leading to a significant contribution to ESG and achieving the SDGs. Although our degree of contribution to society through forestry business may change amid constantly shifting guidelines and rules regarding environmental protection, we remain resolute in our stance and approach to these efforts. Our persistence in protecting forests has been recognized as contributing to biodiversity conservation, resulting in social recognition and enhancement of our corporate value. For example, a Company-owned forest was recognized by the Japanese Ministry of the Environment as an Other Effective area-based Conservation Measure (OECM) (a 30by30 site).

In addition to forest management, we are implementing various initiatives to reduce environmental impact in each process of production technology and plant management. We are continuing our efforts to achieve a 46% reduction of CO₂ emissions from the fiscal 2013 level. We have seen noticeable effects through reduction activities in the context of daily business and by introducing and utilizing renewable energy and promoting environmental investment in new capital investment projects. We also believe that contributing to the environment on a global level by participating in the UN Global Compact and endorsing the TCFD makes it clear that we are a company that takes responsibility for the future.

The key strategy for achieving sustainable growth over the medium and long term is to improve profitability, in addition to increasing our top line (i.e. sales), and to apply the resulting resources to growth areas and new businesses.

As a company listed on the Prime Market of the Tokyo Stock Exchange, we are acutely aware that we should have a P/B ratio greater than 1.0x. To enhance our corporate value and achieve sustainable growth, and to fulfill our responsibilities as a listed company, we are implementing various initiatives with a focus on the cost of capital. We are devoting particular attention to promoting management to achieve ROIC that exceeds the cost of capital and reallocating resources by optimizing business and product portfolios. Our quarterly strategy meetings focus on businesses and products with stalled growth or low profit margins, and discuss ways to improve them. This process is a form of selection and concentration for sustainable growth, and our options even include downsizing and withdrawing products. One example of this is our Clean Engineering Division, which was thoroughly discussed and analyzed at strategy meetings to improve profitability, and for which we implemented various improvement measures. As a result, the business has gradually improved to generate stable profits, and over the last fiscal year, it has grown into a business that contributes significantly to the Nitta Group’s profits. Optimization of business and product portfolios is also important in terms of how to continue businesses with current profitability issues that still have future potential or that are related to other products. If each department presents a reasonable plan and explanation that management can believe in, we decide to continue the business.

Additionally, as part of our financial plan that emphasizes cost of capital-conscious management, we will reduce our cross-shareholdings and continue to formulate and systematically implement capital investment plans that account for industry trends, economic forecasts, investment efficiency, and other factors. We believe that, as a manufacturer, an important measure to improve profitability is to steadily implement measures to deal with the soaring cost of raw materials, distribution, and other expenses. In parallel with the steady and swift establishment of a data utilization system in anticipation of digital transformation, we will analyze our operational procedures and promote the improvement and enhancement of operational efficiency, for example by exploring innovative AI-based work procedures.

For the Nitta Group to continue to grow sustainably, we absolutely must optimize our portfolio and know what to invest in and what to grow. We still believe that companies should invest more in people and human resources in addition to businesses and equipment. Accordingly, we have been implementing our Overseas Trainee Program for roughly a decade. The six-month curriculum includes language acquisition and training at plants of the Group’s overseas locations. After returning to their home countries, the trainees give presentations in English, sharing how they grew, what they learned, and what impressed them, among other things. Everyone came back looking so transformed and excited that it was easy to see how they had grown from the experience. Clearly, the Group’s overseas locations and diversified businesses can be used as learning opportunities. We intend to invest more aggressively in the Overseas Trainee Program and other activities for developing human resources capable of tackling the challenges of new businesses and overseas operations.

We also launched a new personnel system in April 2024. The goal is to create environments where employees can work at full energy by making the most of their abilities and characteristics. Examples include ensuring performance-based treatment determined by work standards, promoting younger employees early on, encouraging pioneering and principled behavior, and accommodating diverse ways of working tailored to different lifestyles. What I expect most from employees is that they will constantly think of new ways of doing things without being bound by convention, and take swift action.

From our founding to the present, the Group has continued to grow through diversification and global expansion. For the Nitta Group to achieve sustainable growth into the future, we need people with imagination, a willingness to take on challenges, and strong determination, the defining characteristics of the Group since its founding. We will remake our personnel system and work environments to be more flexible and promote the development of a system and environments where diverse human resources—people with different values and careers—can flourish.

To continue to grow in our 140th year in business and beyond, we must aim for ever grander fields, namely the global market and unexplored business domains. SHIFT2030 is a milestone along the road, not the goal itself. Simply setting a single goal and being satisfied with achieving it leads to decline. Our true goal is to continue to grow beyond 150 or 200 years in business. And the growth we envision is not that of the Nitta Group alone. In these increasingly complex circumstances and times of sweeping change, sustainable growth can only be achieved by staunchly aligning with all stakeholders and marshaling their visions and strength. We are convinced that continuing to grow with all people and with society will create a world in harmony, one of our core values.

We will continue to place even greater importance on dialogue with our business partners and customers. Toward this end, we believe it is important to share information and stay in close communication with all stakeholders, and this Integrated Report is a key part of that strategy. We will continue our efforts to convey the strengths of the Nitta Group, as well as our visions and values.