Cover: Sangetsu Kansai Branch Center Office
Sangetsu Corporation
1-4-1 Habashita, Nishi-ku,Nagoya-shi, Aichi 451-8575, Japan TEL: +81-52-564-3314
SANGETSU REPORT 2023
Sangetsu Corporation
SANGETSU REPORT 2023
SANGETSU Integrated Report
https://www.sangetsu.co.jp/english/
SANGETSU REPORT 2023 Editorial Policy
The SANGETSU REPORT is an integrated report that has been published annually to facilitate Sangetsu stakeholders' understanding of the Sangetsu Group's corporate value and medium-tolong-term growth potential. In the 2023 edition, we worked to enhance information on the current status of our business and ESG activities, centering on the strategy of the Sangetsu Group for further growth under the new Medium-term Business Plan [BX 2025] announced in May 2023. In the editing process, we used the International Integrated Reporting Framework published by the International Integrated Reporting Council (IIRC) as a reference. We sincerely hope that this report will help more people understand the Sangetsu Group.
Overview of Corporate Communication and Positioning of the Integrated Report
Financial Information | Non-financial Information | ||||||||
● Financial results briefings | |||||||||
Stake- | ● Meetings with institutional investors | ● Facility tours for institutional investors | |||||||
holder | ● IR events for individual investors | ● Meetings between institutional investors and outside directors | |||||||
Dialogue | ● General meetings of shareholders | ● Company briefings for shareholders | |||||||
● Financial summary reports | ●SANGETSU REPORT | ||||||||
● Quarterly reports | ● Corporate governance report | ||||||||
Integrated report combining | |||||||||
Reports | ● Securities reports | ||||||||
financial and | non-financial | ● Environmental report | |||||||
● Interim reports | |||||||||
information | |||||||||
WEB | Investor Relations website | Sustainability website | |||||||
www.sangetsu.co.jp/english/ir/ | www.sangetsu.co.jp/english/sustainability/ | ||||||||
INDEX | More detailed information is available on our website. | |
When using the PDF version, you can move to the | ||
Web | corresponding web page when you see the blue and | |
white Web box. | ||
Sangetsu Company Information Homepage | ||
https://www.sangetsu.co.jp/english/companyprofile/ |
01 Index, Editorial Policy
Message from CEO
02 Message from CEO
Story of the Sangetsu Group [Growth Strategy]
- Review of the Medium-term Business Plan
- Toward Future Growth
16 Medium-term Business Plan (2023- 2025) [BX 2025] | Web Medium-term Business Plan |
- Financial Strategies
- Value Creation Process
- Story of Value Creation
30 | Business Strategy | Web | Businesses and Services | ||
30 | Domestic Interior Segment | ||||
32 | Domestic Exterior Segment | ||||
34 | Overseas Segment | ||||
Story of the Sangetsu Group [ESG] | |||||
36 | ESG Management | Web | ESG Management |
Gomez IR Site | The 2023 Certified Health & Productivity |
2022 Silver | Management Organization Recognition |
Prize Awards | Program (large enterprise category) |
S&P/JPX Carbon | FTSE Blossom | FTSE Blossom | ||
Efficient Index | Japan Sector | Japan Index | ||
Relative Index | ||||
Morningstar Japan ex-REIT Gender Diversity Tilt Index
THE INCLUSION OF Sangetsu Corporation IN ANY MSCI INDEX, AND THE USE OF MSCI LOGOS, TRADEMARKS, SERVICE MARKS OR INDEX NAMES HEREIN, DO NOT CONSTITUTE A SPONSORSHIP, ENDORSEMENT OR PROMOTION OF San- getsu Corporation BY MSCI OR ANY OF ITS AFFILIATES. THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI INDEX NAMES AND LOGOS ARE TRADEMARKS OR SERVICE MARKS OF MSCI OR ITS AFFILIATES.
Compliance with the Accounting Standard for Revenue Recognition
Sangetsu has followed the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29 Accounting Standard for Revenue Recognition [March 31, 2020]) since the beginning of the fiscal year ended March 31, 2022. Therefore, data provided for the fiscal year ended March 31, 2022 uses figures after adopting this accounting standard.
Cautionary Statement with Respect to Forward-Looking Statements
All statements, including forward-looking statements, other than historical facts in this report are based on forecasts, expectations, assumptions, plans, understanding, evaluation, and other matters and are prepared using the information available to the Sangetsu Group as of August 31, 2023. To calculate quantitative forecasts, a certain set of assumptions essential in forecasting is also used in addition to facts that have been confirmed and accurately understood in the past.
- Scope of Reporting Sangetsu Corporation and its Group companies
- Period Covered April 1, 2022 to March 31, 2023
Note: Includes some activities after the reporting period
■ Month of Publication October 2023
38 | Materiality | Web | Materiality | ||||||
40 | Board of Directors/Execution System | Web | Board of Directors | ||||||
42 | Governance | ||||||||
G | Web | (G) Governance | |||||||
42 A Conversation between Business Advisor Takashi Nawa and President Shosuke Yasuda | |||||||||
46 | Corporate Governance | Web | Corporate Governance | ||||||
51 | Compliance | Web | Compliance | ||||||
52 | Risk Management | Web | Risk Management/BCP | ||||||
54 | Social | ||||||||
S | Web | (S) Social | |||||||
54 Human Rights and Diverse Work Styles | Web | Human Rights and Diverse Work Styles | |||||||
56 | Value Chain Management | Web | Supply Chain Management | ||||||
58 | Community Involvement | Web | Community Involvement | ||||||
60 | Environment | ||||||||
E | Web | (E) Environment | |||||||
60 Safeguarding the Global Environment
Data Section
- 10 Year Consolidated Financial Summary
- Financial Highlights
- Non-financialHighlights (Non-Consolidated)
68 ESG Data (Non-Consolidated) | Web ESG Data |
69 Corporate Profile/Share Information
SANGETSU REPORT 2023
01
Develop a Cycle of Value Creation Through Self-Transformation and a Long-term Vision that Understands the Temporal Dimension
Message from CEO | Story of the Sangetsu Group | Story of the Sangetsu Group | Data Section | ||
[Growth Strategy] | [ESG] | ||||
Shosuke Yasuda
President and CEO
Revisiting the New Organizational Structure Implemented in 2014
It has been nine years since I took the reins as President in 2014. We have completed three Medium-term Business Plans since then, which can be summed up in a nutshell as, "the past nine years have been focused on upfront investment aimed at transforming our business and improving profits." In 2014, the Sangetsu Group was widely recognized as a "specialized interior trading company" and our domestic interior business comprised almost the entirety of our sales. This situation instilled in me a strong sense of urgency due to the quantitative limitations of the Japanese construction market. Since we cannot expect this market to grow, for our Group to grow sustainably and remain relevant to society, we had to discover a new model for growth ourselves, and qualitatively enhance our business. To achieve this, we are improving our business foundation, namely our organizational structure and personnel systems, and strengthening functions and services such as products, logistics, construction, and proposals, as well as expanding our business overseas. While these capital injections increased SG&A expenses from fiscal 2014 to fiscal 2018, we saw moderate growth in gross profit and slower growth in profit margins accompanying the investment phase. Against this backdrop, we began to see earnest expansion in gross profits during the final year of the second Medium-term Business Plan as the effects of previous measures took hold. However, performance slumped again in fiscal 2020 due to the impacts of the COVID-19 pandemic.
In May 2020, we set the goal of becoming a Space Creation Company in our Long-term Vision [Design 2030]. And the purpose of our last Medium-term Business Plan [D.C. 2022], from fiscal 2020 to fiscal 2022, was to take the first steps toward achieving this goal. The future goal of becoming a "Space Creation Company" directs the actions of our entire Group, and serves as the basis for discussion on growth between a wide variety of departments. I am proud to see that the trial-and-error we have engaged in since fiscal 2014 has served to clarify the goal we should strive towards.
Under our previous Medium-term Business Plan [D.C. 2022] we strove to expand earnings through qualitative growth of
our core businesses, while working to expand our overseas business and attain profitability in next-generation businesses based on the resources of our core businesses. Moreover, for fiscal 2022, the final year of this Medium-term Business Plan, a third round of sales price revisions helped to improve earnings and led to results that significantly exceeded, not only the targets we put in place when we formulated the plan, but the quantitative targets set forth in our Long-term Vision. Many people have asked me "why the price hikes were successful," but the price hikes were only one result, and what is more important are the background and factors which brought about these results. We also recognize that these factors are themselves are the result of Sangetsu's improved strength and position as a company, brought about by nine years of continually strengthening our functions and services.
On the other hand, while I am pleased to have achieved this kind of performance, I feel that we will face many challenges to further growth from here out. There are many limitations in the external environment surrounding our company. In addition to stagnant sales volume in the interior market, I have concerns about the worsening labor shortage in construction, logistics problems in 2024, and the continuing rise of various costs. Moreover, while I am convinced that our measures to become a Space Creation Company are the appropriate strategy, we need to focus on further enhancing the functions of procure- ment, product appeal, space design, delivery, construction, and branding for our existing domestic interior business, as well as dramatically strengthening our domestic exterior business and overseas business. I also believe that we have not adequately raised awareness among Group employees, and would like each employee to work to realize social value, and be aware of their leading role as a driver of company growth. On top of these measures, I believe it is necessary for our Group to create an entirely new business model to achieve further long-term growth in the absence of market expansion.
We include this in our New Medium-term Business Plan [BX 2025].
In recognition of these issues, our New Medium-term Business Plan [BX 2025] (BX: Business Transformation) positions the three years from fiscal 2023 to fiscal 2025, as "three years
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Message from CEO
Message from CEO | Story of the Sangetsu Group | Story of the Sangetsu Group | Data Section | |
[Growth Strategy] | [ESG] | |||
to prepare for the next leap forward." As we transition to a Space Creation Company with strong profitability and growth potential by strengthening and expanding solutions that enhance the value of "space creation," we will also consider expanding our business to achieve further long-term growth.
Next, let's look at the five basic measures laid out in our New Medium-term Business Plan.
-
Support Utilization of Human Capital, Expansion, and Enhancement
Out of our five basic measures, we place the great- est emphasis on human capital. Highly capable people are indispensable to achieving the Business Transfor- mation (BX) that we included in the name of our New Medium-term Business Plan. There are two types of "professional capabilities" we need: external expertise such as spatial design, proposal, logistics, IT, and legal capabilities that should be actively incorporated into our organization; and capabilities that our group has built up through long experience concerning our industry, dis- tribution channels, and product expertise. We believe that both are essential to becoming a Space Creation
Company. We want to develop new capabilities and corporate culture within the company by supporting the advancement and utilization of existing and external human capital, in order to drastically change our business.
-
Accumulation, analysis, and utilization of digital capital
Our Group handles an enormous number of products from wall coverings to flooring material, and our value chain is extremely long. Up until now, the vast amount of product data held by each player in the value chain was not always centrally managed. We will strive to make transactions and logistics more efficient, by digitizing the wide variety of information related to our business, and understanding which products are being used at which properties. We will also provide higher added value by using digital technology to support product selection by end users. - Enhancing our Ability to Provide Solutions
We will enhance our ability to provide necessary solutions as a Space Creation Company. Specifically, we will
increase the value we provide to the market by further developing and intensifying the enhancement measures we have pursued to date. This includes: increasing our spatial design and spatial proposal capabilities by hiring more expert personnel; expanding, optimizing, and strengthening the branding for the products we handle; maintaining and enhancing our procurement systems; expanding logistics systems for inventory, delivery, and distribution; and improving our installation resources- which include interior construction capabilities, overall construction capabilities, and construction management capabilities.
4) Exterior Business and Overseas Business
Our exterior business is an important function for building the business model for our Space Creation Division, and the ability to make proposals that include both interior and exterior spaces is one of the unique strengths of our company. Going forward, in addition to such unified proposals, we will expand our exterior business out of the Chubu region of Japan, and attempt to enhance our product appeal through efforts that include the development of original products. Meanwhile, our overseas business has continued to be in the red, and while we were busy resolving the issues facing our overseas local subsidiaries in each region, the impacts of the COVID-19 pandemic cast a further shadow on performance. Now that we are emerging from the effects of the pandemic, in addition to the recovery brought about through normalization of the market, we will take concrete measures to achieve further growth in each market as a Space Creation Company.
5) Improve social value
On the environmental front, we are working to help bring about a decarbonized society, and have set long term targets of achieving carbon neutrality for Sangetsu Corporation alone by fiscal 2029, and reducing greenhouse gas (GHG) emissions on a consolidated basis by 55% (compared to fiscal 2021). By fiscal 2025, the final year of the New Medium-term Business Plan, we aim to reduce GHG emissions for Sangetsu Corporation alone by 60% (compared to fiscal 2018) and 28% on a consolidated basis (compared to fiscal 2021). We will also
set specific KPIs for tackling social issues, and focus on achieving value for society.
Capital Policy and Improving Capital Efficiency
Regarding shareholder returns, we intend to aim for a stable increase in dividends. In the past, we carried out large-scale stock buybacks, but since many individual shareholders have expressed the desire to have dividends returned to sharehold- ers, we intend to proceed in accordance with this policy at this time. Specifically, we have set a minimum annual dividend of 130 yen per share during the period of our New Medium-term Business Plan, and aim to steadily increase dividends. Howev- er, we will take a flexible approach to share buybacks based on consideration of market conditions and the situation concerning our share price.
Our owned capital came to 95.7 billion yen in fiscal 2022, but we have set a target between 95 and 105 billion yen by the end of fiscal 2025. To improve capital efficiency, we aim to achieve a cash conversion cycle of 65 days with a ROE of 14.0% and ROIC or 14.0% in fiscal 2025. Basically, we want to continue being a company with a high capital efficiency ratio, without significantly increasing our own capital. We plan to make growth investments of 20 to 25 billion yen during our New Medium -term Business Plan, but expect our largest investment in growth during this period to be in human resources, and anticipate aggressive expenditures with an eye to increasing our future corporate value.
A Sound Governance Structure that Incorporates External Perspectives
We are working to reinforce our corporate governance through transparent, speedy, and efficient management. Four of the seven members of the Board of Directors who are also Audit and Supervisory Committee Members (a majority), are outside directors who use their respective expertise to help improve the effectiveness of the Board of Directors. Our external directors not only share information openly at board meetings, but conduct on-site audits of work sites inside and outside of Japan to get a better idea of the state of operations, and offer their candid opinions. Furthermore, starting from April 2023, we have invited Kyoto University of Advanced Science (KUAS)
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Message from CEO | Story of the Sangetsu Group | Story of the Sangetsu Group | Data Section |
[Growth Strategy] | [ESG] | ||
Message from CEO
Business School professor Mr. Takashi Nawa to act as a management advisor. He has already provided a great deal of objective and broad-ranging advice concerning the management of our Group, and we have asked him to attend meetings of the Board of Directors with a thorough understanding of our Group's business and operations.
In this way, we hope to maintain a sound system of governance that keeps us from falling into complacency, by developing and strengthening systems for incorporating a variety of external perspectives.
Clarifying our Vision for Becoming a Space Creation Company and Beyond
As I have already mentioned, I am convinced that our plan to transition to a Space Creation Business is extremely appropriate for the long-term growth of the Sangetsu Group. In response to a questionnaire targeting Sangetsu Group managerial personnel, almost 100% of respondents said that the space creation business model was effective in carrying out their work. However, I believe that it is necessary to further accelerate our efforts related to various products, fields, and regions if we want to generate further results.
With this in mind, in May 2023, we re-clarified the idea of a Space Creation Company that we envisioned three years back as part of our [DESIGN 2030]. Specifically, we see it as "a company that delivers high value in relation to space creation worldwide through its ability to provide solutions that organically integrate 'four key functions' using design and creativity based on human and digital capital." Our growth strategy for attaining this corporate vision incorporates five elements: "Maintaining and improving earnings from primary products and businesses with large, stable market share," "strength- ening mid-size products with room to expand market share," "developing new products," "strengthening our exterior seg- ment," and "expanding earnings from our overseas business." In addition, we reviewed the economic and social values that the Sangetsu Group hopes to provide through achieving our long-term vision, and set upward-revised quantitative targets for economic value of 250 billion yen in net sales and 27 billion yen in operating income in fiscal 2029.
The "Space Creation Company" that the Sangetsu Group aims to become, is one that strengthens its ability to deliver various solutions for providing better spaces. In a sense, this is
a policy rooted in the "spatial dimension." However, to create spaces that are truly valuable, we need to make proposals that consider not just the physical space itself, but take the "tempo- ral dimension" into account by thinking about how the people who use it will spend time there and what kind of value they will gain from their time there. We believe that thinking about the people who spend time in the spaces we create will lead us to provide more meaningful value over the long term. Our hope is that considerations and proposals that take this kind of temporal dimension into account will serve as the foundation for future business beyond space creation. Space creation proposals are not simply about offering well-designed spaces. They require thinking about how people will use and spend time in the completed space, and make a proposal that allows them to relax, enjoy, and optimally utilize the space once completed.
Therefore, we see the operation and utilization of spaces as major issues, and believe that the diverse and wide-ranging ideas gained there, the possibilities explored, and the adaptability this know-how provides, will form a firm foundation for our space operation business. Our Group defines "space op- eration" as the operation of a space from a long-term point of view, and aims to explore the possibilities of a space subscription business model.
To All Our Stakeholders
During the nine years I have been involved in the management of the Sangetsu Group, I have always striven to be open and honest in my speech and conduct both inside and outside the company. And going forward, I plan to disclose the issues facing our Group, and my own opinions about them, as openly and honestly as possible. As a business manager, I always try to consider various opportunities and risks to the business with an appreciation for the temporal dimension. I'm always thinking about how we should see our balance sheets three to ten years from now, how we should view our business in terms of time, how we should manage our business from a long- term point of view, and how our company should behave as a member of society. I believe that taking the temporal dimension into account, rather than just handling the present moment, will make our measures more sustainable.
I also believe that it is important to our shareholders and other stakeholders, that we manage the company with the goal of attaining long-term growth. In such uncertain times, a
company cannot expect to automatically grow without taking any steps to achieve growth. It is impossible for a company to achieve long-term sustainable growth in a stagnant market, unless the company itself changes the stage on which it operates and continues to take on new challenges.
Moreover, before we can become a company that creates social value, we need to be a company that generates solid earnings and creates economic value. Thankfully, the enhancements to our business that we have enacted over the past nine years are making us into a company that can generate stable cash flows. As we aim for further growth, we again need to make upfront investments that will help us to become a Space
Creation Company, and then a Space Operation Company after that. We will generate economic value as a dynamic company that can achieve long-term growth, and become a company that can deliver greater social value. If through this we can increase the value of the Sangetsu Group in the eyes of society, it will draw employees, customers, and others to our company, and be a motive force making further growth possible. Mean- while, our Group will provide greater social value and become a company which plays an important role in society.
I hope you will look forward to seeing the Sangetsu Group strive to set up a cycle of value creation grounded in a long- term perspective.
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Message from CEO | Story of the Sangetsu Group | Story of the Sangetsu Group | Data Section |
[Growth Strategy] | [ESG] | ||
Story of the Sangetsu Group [Growth Strategy]
Review of Medium-term Business Plan
In the nine years since our Group adopted the new organizational structure in 2014, we have worked to transform our business in line with three medium-term business plans. Two of these medium-term business plans, "Next Stage Plan G" from 2014 through 2016, and "PLG 2019" from 2017 through 2019, laid the foundation for our business and strengthened its functions. Then [D.C. 2022], covering the three years from 2020 through 2022, improved profitability based on the results generated through previous measures. As a result, consolidated operating income increased significantly, growing from 8.03 billion yen in fiscal 2014 to 20.28 billion yen in fiscal 2022.
Investment Phase
Next Stage Plan G (2014-2016) | PLG 2019 | (2017-2019) | ||||||
Basic initiatives | Results | Basic initiatives | Results | |||||
Results generation
[D.C. 2022] (2020-2022)
Basic initiatives | Results | |
- Establish a sound corporate structure that allows employees to actively participate in management
- Organizational review
- Reforms to personnel system
- Review and clarification of organizational management rules
- Restructuring of IT systems and improvement of management accounting systems
- Restructure our business strategy
- Expansion of existing business
- Promotion of growth strategy
- Strengthen stakeholder value
Operating | Passing on our corporate | |
4 | ||
Income | ||
(billions of | philosophy, principles, and vision | |
yen) |
100 since our founding
5 Quantitative achievements
50
Introduced product division system; established logistics centers, offices, showrooms, and other facilities; revised and enhanced organizational systems and rules
Considered restructuring mission-critical systems (implemented Oct. 2018)
Introduced new personnel compensation system
Strengthened product development, alliance with suppliers, organizational structure, construction work, branding, and other areas Established a subsidiary
in China and acquired U.S. company Koroseal
Enhanced shareholder return strategy
Social contribution activities based on employee initiative
Formulated brand concept, "Joy of Design"
Opened Interior Design Archive
Achieved record high profits one year ahead of schedule in fiscal 2015
CCC improvements
1 Business strategy for growth
- Strengthen the Value Chain Function and Expand the fields of Business
- Expansion of geographical development in overseas markets, expansion of products, enhancement of functions
- Global operations between local locations
- Strengthen consolidated management system
- Restructure business
- Enhance Human Resources
- Cultivate professionals
- Fully commit to merit-based approach
- Promote diversity
- Reform working styles
- Promote health management
- Bolster profit management system
- ESG and CSR policies
- Quantitative achievements
Strengthening relationship with domestic and overseas designers, architects, and suppliers
Maintaining market domains, products, and region-specific sales organization
Improving efficiency in order-taking operations, integrating order-taking and sales organizations
Strengthening logistics facilities and delivery structure
Strengthening and expanding construction capabilities (Acquired Fairtone Co., Ltd.)
Establishment of Space Creation Business Unit
Start of operation of new enterprise system Acquisition of Goodrich Global Holdings Pte., Ltd., and implementation of measures to improve the management of Koroseal Interior Products Holdings, Inc.
Enhancing training and education, planned job rotations, enhancing meritocracy
Introducing logistics position program and an interior advisor program Implementing work style reform / remote work / super-flex time, and establishment of health insurance society
Intensifying management of operating income targets and CCC targets Sale of all stock of Yamada Shomei Lighting Co., Ltd.; reorganization of group management structure
Hiring of persons with disabilities (stand-alone)
Target 3% → 3.13% Achieved Full compliance with "Corporate
Governance Code"
Achieved record high profits from fiscal 2019 net sales
Improved ROIC by improving CCC
- Expand earnings through qualitative growth of core business
- Enhancement of design capabilities and strategic purchasing
- Expansion and Upgrading of our Service functions
- Deepening collaboration with distributors and strengthening sales structure
- Qualitative and regional expansion in exterior business
- Growth of profitability in next-generation business based on resources of core business
- Build a solid management foundation in the market in each country
- Pursuit of the optimal business model and full commitment to localization
- Strengthening branding and product portfolio
- Spread of Space creation business by expanding professional ability
- Strengthen management and business foundations
- Strengthening business execution capabilities and efficiency
- The establishment of a system for the advanced utilization of data
- Realize social value
- Quantitative achievements
Strengthening the product portfolio through the launch of products with low environmental burdens and the increase of low-priced products
Acquired CREANATE Inc. and decided to build new plant
Strengthening the community-based sales system and increasing the capability of striking a business deal by maintaining a nationwide customer follow-up system.
Established flagship logistics center, developed local/ satellite centers, began to establish nationwide delivery network
Expansion of sale of curtains to the consumer market
Enhancement of space design and construction management capabilities in both interior and exterior segment
Expansion of construction capacity, through the acquisition of HEKISOU Co., Ltd., Reorganization of our overseas business structure in Southeast Asia, China, and Hong Kong
Adopted a job-based pay system (job-based personnel system) for managerial positions. Established DX Promotion Division to promote company-wide digitalization campaign
Achieved Scope 1 & 2 GHG emissions Reduction target (stand-alone) 30% → 30.1%
Established sample book recycling center Achieved targets for renovation of children's homes 30 → 55/year
Improvement of profitability through three price revisions
In fiscal 2022 we achieved record highs in net sales, operating income, ordinary income, and current net income
Three-year total shareholder return ratio 88.8% Total shareholder return ¥16.92 billion
Operating
Income (billions of yen)
200
150
100
50
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Story of the Sangetsu Group [Growth Strategy]
Toward Future Growth
As a result of promoting various measures during the three Medium-term Business Plan periods since fiscal 2014, we significantly increased earnings in fiscal 2022. However, we recognize the various external and internal issues listed below.
Recognition of Issues after the Previous Medium-term Business Plan [D.C. 2022]
• Stagnation of sales volume of existing leading products, such as wallcoverings, which have | |
External | a high market share in the Japanese market |
• Aging of installers and the apparent lack of construction skills | |
Issues | |
• Realization of the logistics problem in small-lot and heavy-goods deliveries in 2024 | |
- * Logistics problem in 2024: Concerns about lack of transportation capacity in Japan due to regulations that limits overtime work for truck drivers to 960 hours from April 2024.
- Continuous rise in costs for materials, logistics, and labor
- Demand for recycled and more cost effective environmentally friendly products
- Limited product lineup
Internal | • Lack of unique product design capabilities and brand development skills for supporting business |
• Inadequacy of system for integrated management of products, logistics, construction, sales, | |
Issues | |
and management | |
- Lack of expertise in space design, construction management, quotation, procurement, and proposal submission
- Exterior business is limited by geography and in terms of scale
- Lack of capabilities of proposing space design, delivering products in a short period of time, supporting construction, and designing products of overseas subsidiaries; lack of a strong business model
- Increase in selling, general, and administrative expenses as a result of business transformation
- Changes in employees' awareness, engagement, and compliance, and the increase of ratio of part-timers
- Low investment in human capital, including education and training
Message from CEO | Story of the Sangetsu Group | Story of the Sangetsu Group | Data Section | |
[Growth Strategy] | [ESG] | |||
The Space Creation Company That Our Ideal Image of a Space Creation Company
We will utilize design capabilities and creativity based on human and digital capital to organically integrate four functions, which are
- A function to propose attractive space designs based on concepts that are optimal for each market.
- A space material supply function that has advanced planning, development, and procurement capabili- ties, and proposes a wide range of products.
- A function for inventory, delivery, and logistics that enables immediate delivery to a wide area without running out of stock.
- A construction function with scale, comprehensiveness, and agility, achieved through a variety of busi- nesses, personal relationships, and corporate partnerships
The Sangetsu Group aims to be a space creation company that provides high value in space creation on a global scale through its ability to organically integrate these solutions.
Market/Customer
Compensation
and/or
Product | Space Construction | ||
Delivery | |||
and/or | and/or | and/or | and/or |
Through the implementation of various measures since the start of the new structure in fiscal 2014 until the end of the previous Medium-term Business Plan [D.C. 2022], we recognized the quantitative limitations of the Japanese market and the need to strengthen the space creation business model for future growth, develop strategies for further products, fields, and regions, and create new growth scenarios.
In 2020, the Sangetsu Group formulated the Long-term Vision [DESIGN 2030], aiming to transform itself into a Space Creation Company. Based on the recognition of these issues, we have clarified the image of the Space Creation Company that the Sangetsu Group aims to become.
FY2014
Recognition of the situation at the start of the new structure
Quantitative limit of the
Japanese market
(mere expansion in terms of quantity is unrealistic)
FY2014 to FY2022
Strengthening business foundations, functional services, and overseas operations
The long-term Vision announced in 2020
"Toward Becoming a Space
Creation Company"
FY2022
Achieving a significant improvement
in earnings, focusing on major products through price revisions
Review of the Long-term
Vision
Quantitative limitations of
the Japanese market
Strengthening of the space creation business model
Need to develop growth
strategies in more products, fields, and regions overseas
New growth scenario
A function to propose attractive space
1 designs based on concepts that are optimal for each market
A function for
inventory, delivery, and
3 logistics that enables immediate delivery to a wide area without running out of stock
A space material | ||||||||||||
supply function that | ||||||||||||
has advanced planning, | ||||||||||||
Provision of Solutions for Space Creation | 2 | development, and | ||||||||||
procurement capabilities, | ||||||||||||
and proposes a wide | ||||||||||||
range of products | ||||||||||||
3 | 1 | 4 | ||||||||||
Inventory | Space Design | Construction | ||||||||||
A construction | ||||||||||||
and Delivery | ||||||||||||
function with scale, | ||||||||||||
Materials & Merchandise | comprehensiveness, and | |||||||||||
2 | 4 | |||||||||||
agility, achieved through | ||||||||||||
Human capital and digital capital | various businesses, | |||||||||||
human relationships, and | ||||||||||||
corporate collaborations | ||||||||||||
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Story of the Sangetsu Group [Growth Strategy]
Four Functions That Collectively Serve as the Driving Force of the Sangetsu Group
The Sangetsu Group will further strengthen the functions necessary to become a Space Creation Company while leveraging the unique strengths it has cultivated so far to evolve its business by integrating these functions in a complex, multi-layered, and comprehensive manner, leading to the creation of new value.
1 A function to propose attractive space designs based on concepts that are optimal for each market
Message from CEO | Story of the Sangetsu Group | Story of the Sangetsu Group | Data Section | |
[Growth Strategy] | [ESG] | |||
2 A space material supply function that has advanced planning, development, and procure- ment capabilities, and proposes a wide range of products
Needs for designs that can create spaces are growing every year due to social changes such as diversified lifestyles and flexible work styles, as well as the growing interest in people's feelings and experiences such as security, safety, pleasure, and emotions. The Sangetsu Group is utilizing in its business its ability to propose comprehensive space proposals that can solve the problems of the people who work there, as well as to propose scenes that integrate with exteriors and include furniture, lighting, and various other products that decorate the space, based on the coordination proposal capabilities it has developed in the Interior Business. In order to provide accurate and high-quality solutions that meet the needs of each customer,
we are expanding our spatial design human resources by hiring outside personnel and actively strengthening our spatial design capabilities by developing the capabilities of our in-house human resources. We have design talent in a wide range of fields, including residential and nonresidential, new construction/ren- ovation, and interior and exterior fields.
Space design proposals are the source of added value as people pursue more comfortable lifestyles. The needs for these types of proposals are growing. In the future, we will expand and strengthen the design capabilities throughout the entire Group.
As the final stage in the construction process, the Interior and Exterior Businesses provide high designs as products that bring color to spaces while pursuing a rapid and reliable supply that ensure items are always in stock. The Sangetsu Group must not only develop products tailored to the needs of customers in the market but also supply new products not bound by convention. While expanding its product design personnel and working with outside and overseas designers, the Group maintains a standing inventory of approximately 12,000 products and supplies the market with approximately 1.5 million sample books each year. In order to provide a stable supply of such a wide variety of products, it is essential to maintain relationships with about 270 companies in the interior business and about 150 companies in the exterior business, and we
On the other hand, with regard to wallcoverings, which is our main product type, CREANATE Inc. (former Wavelock Interior Co., Ltd.), which boasts the largest wallcoverings production volume in Japan, became a Group company in March 2021. We are striving to strengthen and improve the efficiency of our business through a consistent manufacturing and sales distri- bution. We are also strengthening alliances and collaborating with other suppliers, and are implementing measures to build a sustainable and stable supply system.
In addition, Sangetsu's merchandise development depart- ments, overseas Group companies, and CREANATE, which is responsible for manufacturing, are collaborating in product de- velopment, and other Group-wide collaborative design development efforts are also underway. We will continue developing and
Business Foundations That Support Functions (FY2022)
● Space design professionals | Approx. 80 |
● Domestic interior Segment | 40 offices |
● Domestic exterior Segment | 16 offices |
● Overseas staff | Located in 7 countries |
Increasing the number of specialists (Sangetsu only)
■ Space designing (space design and planning) | 120 | ■ Engineers (estimates, procurement, and construction | ||||
management) | ||||||
86 | ||||||
37 | 25 | |||||
0 | 5 | |||||
FY2019 | FY2023 (forecast) | FY2025 (target) | FY2019 | FY2023 (forecast) | FY2025 (target) |
are engaged in the development and manufacture of a wide variety of products with a wide variety of business partners.
Business Foundations That Support Functions (FY2022)
● Product design professionals | Approximately 70 |
● Suppliers | |
Domestic interior segment | Approx. 270 companies |
Domestic exterior segment | Approx. 150 companies |
- Largest wallcovering manufacturing facility in Japan (CREANATE)
- State-of-the-artwallcovering manufacturing equipment (Koroseal)
New Product Brand "MORRIS CHRONICLES"
This is the first attempt of William Morris licensed products for product development of wallcoverings, flooring material, and fabrics with a unified theme.
Joint Development of Sample Book "goodwall SEED" with overseas Goodrich Global Holdings
This sample book features a wallcoverings collection available for export that was developed and manufactured by CREANATE, a Group company, to meet the quality requirements of overseas countries.
offering products across the Group that respond to market demand while leveraging the strengths of each individual company.
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SANGETSU REPORT 2023 | SANGETSU REPORT 2023 |
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Story of the Sangetsu Group [Growth Strategy]
3 A function for inventory, delivery, and logistics that enables immediate delivery to a wide area without running out of stock
Message from CEO | Story of the Sangetsu Group | Story of the Sangetsu Group | Data Section | |
[Growth Strategy] | [ESG] | |||
4 A construction function with scale, comprehensiveness, and agility, achieved through var- ious businesses, human relationships, and corporate collaborations.
The Interior Business ships 60,000 products and 40,000 samples per day. This definitive shipping and distribution system throughout Japan not only greatly contribute to a flexible response when interior construction schedules change but also trouble-free reviews of interior designs and specifications. In regard to logistics hubs, we have established two flagship logistics centers (hereinafter referred to as "LC") that provide inventory backup functions for each region with their huge spac- es, and six regional LC that serve as inventory hubs for each area. In addition, we are establishing satellite centers to build a more comprehensive delivery network. The new integrated Kansai Logistics Center established in January 2021 achieves full automation and labor savings to address the recent issues of an insufficient and aging workforce as well as the need to
Business Foundations That Support
Functions (FY2022)
-
Specialist staff and contractors responsible for warehouse operations
800 people combined
create a workplace environment that is easy for women to work in. We are planning to expand these efforts nationwide to include other LC in the future.
In addition, in order to realize Last One Mile delivery, we are building an in-house delivery system that includes not only delivery to each construction site but also transport of products to the locations where they are to be installed. We are planning to expand our service crew, who provide a variety of delivery-related services, from 13 workers to a larger number nationwide to maintain and improve the quality of deliveries.
Moving forward, we will continue to strengthen our logistics capabilities by further improving service levels and build a sustainable system.
Installation is a vital function that brings designs into reality. However, a major problem throughout the construction industry right now is a labor shortage. Installations A prime general contractor as well as prime subcontractors and secondary subcontractors. Sangetsu typically handles installations as a secondary contractor (construction support of interior installation tradesmen). We clearly indicated that we will strengthen construction capabilities as a priority measure in the Medium -term Business Plan "Next Stage Plan G" announced in 2014 and positioned it as an important function in later Medium -term Business Plans. We are working to maximize the construction functions of the entire Group while utilizing the functions of Fairtone Co., Ltd. (became a group company in 2017), which is responsible for construction functions, and HEKISOU Co., Ltd. (became a group company in 2021).
In July 2023, the new organization will expand not only the interior construction capabilities that Sangetsu had been primarily
Business Foundations That Support
Functions (FY2022)
involved in but also the comprehensive construction capabilities that embody the entire space from a position close to the business owner, creating a system that can allow us to serve in A prime general contractor, prime subcontractors, secondary subcontractors. Furthermore, Fairtone has established a Quality Control Department to improve the quality of construction, and is working to improve the quality of all functions, including supervision quality, process control, and cost control.
In addition to increasing our interior construction capabilities (number of construction technicians), we will continue to strengthen our functions through Group-wide cooperation by hiring qualified construction management technicians and expanding our nationwide network of construction companies that are capable of handling comprehensive construction projects in order to expand our construction management capabilities and comprehensive construction capabilities, which are important for serving as a prime contractor or sub contractor.
- Flagship and regional LC
8 hubs 224,000 m2
- Domestic delivery trucks
Approx. 500 trucks in use each day | Exterior view of Kansai LC | "CarriRo" Automated Guided Vehicle (AGV) |
● Service crew | 13 workers | |
■ Establishment of Logistics Hubs and Expansion of Service Crew System
Okinawa | Sapporo | ||||||||||||||||||||
Hokkaido LC | |||||||||||||||||||||
February 2019 | |||||||||||||||||||||
January 2019 | |||||||||||||||||||||
Construction | |||||||||||||||||||||
Construction and | |||||||||||||||||||||
Kansai LC | |||||||||||||||||||||
integration | |||||||||||||||||||||
January 2021 | |||||||||||||||||||||
Construction | |||||||||||||||||||||
and integratio | |||||||||||||||||||||
Chugoku/ | Miyagi | ||||||||||||||||||||
Tohoku LC | |||||||||||||||||||||
Logistics Hubs | Kyushu LC | Shikoku LC | Fukushima | ||||||||||||||||||
Kurosukikaku | |||||||||||||||||||||
■ Flagship LC | Tokyo | ||||||||||||||||||||
Corporation | |||||||||||||||||||||
23-ward | Kita Kanto LC | ||||||||||||||||||||
■ Regional LC | (became a group | ||||||||||||||||||||
Area | Tokyo LC | August 2016 | |||||||||||||||||||
■ Satellite center | company in 2022) | Nagoya | |||||||||||||||||||
Construction and | |||||||||||||||||||||
January 2018 | |||||||||||||||||||||
Shikoku | Chubu I/II | relocation | |||||||||||||||||||
Construction | |||||||||||||||||||||
Service Crew System | |||||||||||||||||||||
LC | and integration | ||||||||||||||||||||
Completed | Shikokuchuo | May 2017 | |||||||||||||||||||
Satellite Center | Construction | ||||||||||||||||||||
Scheduled to start in FY2023 | |||||||||||||||||||||
August 2021 | and integration | ||||||||||||||||||||
FY2025 Nationwide expansion | Construction | LC: Logistics Center | |||||||||||||||||||
- First-classand second-class certified
architects
- Building operation and management
engineers
■ Nationwide Construction System Made Possible through
the Cooperation of Sangetsu, Fairtone, and HEKISOU
•Fairtone Hokkaido Sales Office
- Fairtone Kansai Sales Office
- Sangetsu Kansai Branch Construction Section
•HEKISOU Co., Ltd
•Fairtone Kyushu Sales Office
•Fairtone Tokyo Construction Operation Department
•HEKISOU Tokyo branch
•Sangetsu Tokyo Branch
Construction Section
•Fairtone Chubu Sales Office | |
● Fairtone | •Sangetsu Chubu Branch |
■ HEKISOU | Construction Section |
◆ Sangetsu |
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SANGETSU REPORT 2023 | SANGETSU REPORT 2023 |
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Story of the Sangetsu Group [Growth Strategy]
Medium-term Business Plan (2023-2025)
[BX 2025]*
Three years to prepare for the next leap forward
* BX=Business Transformation
As a result of implementing various measures during the period of the previous Medium-term Business Plan [D.C. 2022], we achieved significant earnings growth in fiscal 2022, the final year of the plan. On the other hand, this achievement reaffirmed that we need to envision a bigger future for the Group that goes beyond the space creation business in order
Message from CEO | Story of the Sangetsu Group | Story of the Sangetsu Group | Data Section | |
[Growth Strategy] | [ESG] | |||
1. Supporting expansion, advancement, and active utilization of human capital
In the Medium-term Business Plan, since strengthening human resources is our greatest challenge, we recognize that the implementation of these measures is the most important pillar. Therefore, allocating human resources personnel for each organization will allow us to closely monitor each employee. The number of mid-career hires has been increasing year by year. We plan to hire a total of 60 to 80 people for various positions during the period of the Medium-term Business Plan. In contrast, with regard to the improvement of compensation for current employees, we expect a 14.6% increase in salaries and bonuses in FY2023 compared to the previous fiscal year due to base salary and basic bonus increases made during the previous Medium-term Business Plan period and an increase in performance-linked bonuses.
In addition, we believe that it is essential that employees understand and empathize with the Company regarding the direction it is headed and be highly engaged in their work in order to achieve corporate growth. We conduct the Survey on Employees' Opinions targeting all employees, analyze the results, and reflect them in organizational, system, and corporate culture reforms. In particular, we pay particular attention to indicators related to employee engagement as priority items in management. We will continue to consider and implement measures to improve employee engagement.
for us to grow further. Recognizing this, we have positioned the three-year period of the Medium-term Business Plan (2023-2025) [BX 2025] as a period to continue initiatives from the previous Medium-term Business Plan, solidify our earnings base, prepare for the next leap forward, and have formulated policies and measures.
Basic Policy
To strengthen and expand our ability to provide solutions that enhance the value of space creation, we are transforming our company into a space creation company with strong earnings power and growth potential, expanding our business in key products and markets, as well as expanding our product line- up, exterior business, and overseas business.
In addition, we will consider the possibility of a space operation business in order to develop a business that will enable further long-term growth.
Measures of the Medium-Term Business Plan (2023-2025) [BX 2025]
Number of mid-career hires (Sangetsu only)
Plan: | ||
60-80hires | (Total for 3 years) | 40 |
• Spatial designers (forecast) | (forecast) | |||||
• Construction engineers | ||||||
• Information system related | ||||||
• Logistics | ||||||
• Corporate department, etc. | ||||||
13 | 15 | |||||
9 | ||||||
5 | 2 | |||||
2018 | 2019 | 2020 | 2021 | 2022 | 2023 | (FY) |
Improvement of working conditions Wage increase outlook (Sangetsu only)
FY2022 | FY2023 | ||
+14.6% UP | |||
68.5 | ■ FY2022 | ||
■ FY2023 (forecast) | |||
65.4 (100 million yen) | |||
16.8 | 16.8 | ||
15.8 (100 million yen) | (100 million yen) | ||
8.0 |
Salary | Basic bonus | Performance-linked bonus |
Basic pay increase + about 5% | Almost doubled from the previous year |
1. Supporting expansion, advancement, and active utilization of human capital | |
(1) | Allocating HR personnel for each organization |
(2) | Significantly increasing diverse mid-career hires and recruitment of new graduates |
(3) | Improving education and training to strengthen expertise and business-building capabilities |
(4) | Improving working conditions and environment |
(5) | Improving the ratio of part-timers and promoting diversity |
2. Accumulation, analysis, and utilization of digital capital | |
(1) | Renovating core systems for business model transformation |
(2) | Promoting the utilization of information and data for value chain transformation, including spatial design proposals |
(3) | Improving efficiency and stability of sales and logistics through the utilization of commercial and logistics data in collab- |
2. Accumulation, analysis, and utilization of digital capital
In the Medium-term Business Plan, we consider digital capital as an important form of capital along with human capital. In 2020, we established the DX Promotion Office and are promoting the digitalization of our internal operations. During the period of the new Medium-term Business Plan, we will combine existing data with data that can be newly collected and utilize digital capital in our business activities.
In the conventional system, as information and data are divided in the long value chain and there is no linkage between the received order's data and logistics data, we have no choice but to work with only the information in front of us. Based on this recognition, we will reform our business methods so that we can obtain information on the entire value chain, and promote the creation of a system that makes it possible to reconcile and analyze information to ensure transactions and streamline logistics. In addition, we will advance the sophistication of digital product selection support for clients, and in addition to collecting information, we will also provide further added value.
oration with distributors | |
(4) | Improving operations and promoting digitization of on-site operations |
3. Strengthening the ability to provide solutions | |
(1) | Strengthening space design and space proposing capabilities specialized for each market |
(2) | Expanding and improving the product lineup and strengthening brand development |
(3) | Developing and strengthening the product procurement system |
(4) | Geographically and functionally expanding and strengthening the logistics system |
(5) | Developing large-scale, swift interior installation resources and a construction management system |
4. Exterior and Overseas Businesses | |
(1) | Expanding the scale and target area of the exterior business and advancing it |
(2) | Strengthening product and space design capabilities, developing a quick-delivery system, strengthening construction |
Received Logistics order datadata
Supplier
Sangetsu
1
2
Dealership
DX
Data
reconciliation
Contractors
3
Housing manufacturers | Individual facility owner | |||
support capabilities, and establishing a sales system tuned to market needs in order to transform the overseas business |
into a space creation business |
5. Enhancing social value |
Ideal Form
- Ensuring transactions and
- Streamlining logistics by incorporating data that integrates the supply chain
- Providing added value by digitally supporting product selection for consumers
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SANGETSU Co. Ltd. published this content on 17 November 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 November 2023 08:19:06 UTC.