In fiscal 2024, the Nitto Group reported new record highs in operating profit and the operating profit to revenue ratio. In addition, our revenue exceeded the 1 trillion yen mark for the first time. This accomplishment is especially commendable, as we achieved revenue growth while maintaining a high operating margin—a key priority for us—in a rapidly changing and uncertain global market.
One of the reasons behind this impressive operating profit growth is that our Niche Top products drove performance in the two segments of Industrial Tape and Optronics by capturing three key changes in the electronics market and beyond.
The first change is the expansion of the market. Optical film sales grew due to the increase in the size of automotive displays and the number of installations. Additionally, the rapid spread of generative AI stimulated storage demand for data centers, which in turn boosted sales of precision circuit substrates for high-capacity HDDs. The demand for high-precision circuits also rose due to the increased production of high-end smartphones. The second change is the increase in the number of models using our products. For high-end smartphones, in addition to assembly materials, sales of battery bonding electrical release tapes grew supported by the movement among EU member states to legislate the “right to repair” as part of efforts to build a resource-circulating society. The third change is the recovery of final demand. Demand for optical films used in high-end notebook computers and tablets, as well as process materials for semiconductor memories and ceramic capacitors, returned to a recovery track, though still below peak levels.
For the Human Life segment, on the other hand, we reported an operating loss for the second consecutive year in fiscal 2024. The mainstay of the oligonucleotide contract manufacturing business faced challenges due to the slower-than-expected growth of the oligonucleotide therapeutics market. However, sales are expected to increase in fiscal 2025, driven by the anticipated receipt of commercial drug-related orders. With the oligonucleotide contract manufacturing market projected to grow by 20% annually through 2030, the Nitto Group is making up-front investments in anticipation of continued market expansion. By capturing rising demand as the number of clinical cases increases and sales of commercial drugs for major diseases expand, we aim to further grow the business and improve its profitability. We are also working to increase profitability of membranes (high-polymer separation membrane) and personal care materials. For example, while our membrane products have traditionally focused on seawater desalination, we are currently promoting products that help eliminate wastewater and effluents, which offer even higher added value. The tightening of wastewater regulations outside of Japan is expected to drive demand further. Looking ahead, we are envisioning a circular process in which CO2, hydrogen, and other gases are separated, collected, stored, and converted into valuable resources. For the Nitto Group to build a better-balanced business portfolio, we believe it is critical to strengthen the Human Life business. The products and services offered in this segment typically have longer life cycles than other segments and it takes time to bring each business onto a stable growth trajectory. Nonetheless, we will continue making steady efforts from a mid- to long-term perspective.
In fiscal 2025, although the market environment surrounding the Nitto Group is expected to be even more uncertain, we will unite the Group’s collective strength to fulfill all financial and future-financial targets outlined in the mid-term management plan.
The Nitto Group aims to become an “essential top ESG company that continually brings amazement and inspiration as a Niche Top creator” by 2030. Backcasted from this future vision, the current mid-term management plan, Nitto for Everyone 2025, takes a dual approach by implementing the Niche Top Strategy and Nitto-Style ESG Strategy in an integrated manner.
With the Niche Top Strategy, we pursue “essential” value in each product category to secure a leading market share, while the ESG Strategy places ESG at the core of our management, driving business activities aimed at addressing challenges related to the global environment and human society. To put these strategies into practice, we have narrowed our new R&D subjects to those that meet the standards of the PlanetFlags/HumanFlags scheme, which certifies products that make exceptionally high contributions to the environment and/or human life, with no exceptions to this policy. By advancing these two strategies, we hope to see more Nitto offerings recognized as PlanetFlags/HumanFlags and Global Niche Top™ or Area Niche Top™ products (double recognized products), enabling us to simultaneously solve social issues and create economic value.
Under the mid-term management plan, we are leveraging the strong cash-generating capacity of our Niche Top products to proactively invest resources in transforming our business portfolio for future growth. We plan to spend a total of 300.0 billion yen for capital investments, including decarbonization investments, over the three years from fiscal 2023 to fiscal 2025, as originally planned. This is approximately double the amount spent during the previous three-year period from fiscal 2020 to fiscal 2022. With this, we aim to proactively invest in “things that will grow,” such as semiconductors, automobiles, displays, HDDs, oligonucleotide therapeutics, membranes, and hygiene materials, all areas expected to undergo market expansion and other changes, with the aim of creating the next wave of “essential” value.
At the same time, we are streamlining products whose growth has slowed or profitability has declined due to changes in the business environment, as well as those that contain substances subject to environmental regulations or have a high environmental impact. Many of our existing products remain not very profitable because they still follow outdated approaches. I believe the worst course of action is procrastination, so I make bold decisions without delay, such as whether to transfer a business or discontinue production. Meanwhile, we will carry forward the unique experience and knowledge cultivated in such businesses into new fields.
As described above, we will continue making proactive investments in growth areas and streamline products based on their growth potential, profitability, and eco-friendliness. In doing so, we will steadily advance our business portfolio transformation to generate high profits and build a robust business foundation that enables us to make greater contributions to society.
The Nitto-Style Innovation Model likens the process from idea generation to commercialization to a series of transitions—“0→1,” “1→10,” and “10→100”—each representing a critical phase of development and scaling. In each transitional phase, we have programs in place to facilitate innovation. For instance, in the first phase between “0 (Idea)” and “1 (Theme),” we hold the Nitto Innovation Challenge (NIC), an annual convention that invites all employees to submit ideas for new businesses. In the “1 to “10 (Product)” phase, we enhance the quality and speed of project development by promoting internal convergence through Group-wide initiatives and other means. Finally, during the transition from “10” to “100 (Business),” the most outstanding cases of Sanshin Activities are recognized at the annual Global Sanshin Competition, a great opportunity for sales personnel to learn from one another’s approaches. In fiscal 2024, over 100 persons gathered from across the Group to participate.
Among these programs, the NIC is considered to be particularly unique. Kicking off in 2020, NIC received over 1,000 innovative ideas for new businesses and products from around the world in its first year. Although the number of entries declined year-on-year in its second and third years, it began to grow again in the fourth and fifth years, reaching over 1,500 in 2024.
In the selection process, meaningful ideas deemed worthy of continued examination are narrowed down to around six entries. To prepare for the final screening, an internal expert familiar with each idea is assigned as a buddy to help refine it. Members of our management team, including myself, serve on the final screening panel, which often leads to lively discussions. At the screening venue, panel members are given blue and yellow sticks for voting after judging: blue indicates interest in pursuing the subject, while yellow suggests the subject needs further development before advancing to the next stage. If a blue stick is raised, the business division that raised it takes responsibility for developing the project. If a yellow stick is raised, the idea is developed by the divisions related to its theme. Even if no stick is raised, the proposer may continue refining the idea and submit it to NIC again in the following year.
Each of the ideas submitted to NIC receives feedback, allowing applicants to learn from it and try again the following year. NIC plays a major role in Nitto’s innovation, serving as a mechanism to support the formation of ideas into projects and to enhance employee motivation and engagement.
In driving innovation, we utilize the Nitto Group’s six kinds of capital: a strong customer base, diverse employees, eight core technologies, a healthy financial base, safe and quality manufacturing, and the sustainable use of resources. Among these six, the one that supports every stage, from project formation to productization and commercialization, is our strong customer base.
If we look back on the history of our business, we see that the trust built with customers has evolved into critical value. Whenever a customer with a leading position in their industry embarks on a new innovation, Nitto is always their first call. This allows us to work with customers early in their product life cycles and to shape their needs into tangible solutions. It is also a valuable opportunity for us to introduce the latest technologies and functions that Nitto has refined, often in ways no other company can replicate, with close collaboration among our sales, marketing, and engineering teams, allowing us to precisely comprehend our customers’ intentions.
Let me use our smartphone-related products as an example. We began by supplying polarizing films and sensor films, followed by printed circuit boards. Then, in 2024, we began selling battery bonding electrical release tape. As each of these businesses connects to form the total solutions we offer, we continue to build customer trust.
With the expansion of “right to repair,” this electrical release tape has great potential to become the next Global Niche Top™ product, as further needs are anticipated. It has been about ten years since electrical release technology first caught my attention. Back then, it was still a “hidden gem” among customers, but I volunteered to pitch what I believed was an innovative technology, saying, “There will come a time when this technology will be in great demand. Wouldn’t you join me?” Needless to say, not every fledgling business follows the path we hope it will. Yet somewhere, at some point, change is always underway. I make it a daily principle to go bold in allocating management resources when I sense that the time is right, and I see it as my role to lead in making those important decisions.
Believing that human resources are the single most important asset for the Nitto Group to sustain its growth, we are making continuous efforts to build an organization that empowers diverse individuals and fosters lasting satisfaction. What we value most is cultivating a corporate culture where employees “enjoy taking on challenges,” and we consistently tell them, “It is perfectly fine to fail, as failure is the badge of having challenged yourself.” It is far more valuable to have experienced failure than never to have tried, and I place greater value on “those who challenged themselves but failed” than on “those who achieved results without taking risks.” For example, if you play ten games, ideally you should have seven wins and three losses. Knowing how to “lose” in different ways and overcome those challenges helps build the kind of business insight needed to become a future leader.
To foster this culture of “enjoying taking on challenges” and enhance the value of the Nitto brand, the Nitto Group sponsors professional sports events. Since 2017, Nitto has been the title partner of the Nitto ATP Finals, the season-ending championship for men’s tennis players, especially popular in Europe and China. We believe that the spirit of striving for the top in our business aligns with the passion of world-class athletes competing at the highest level. At the Nitto ATP Finals, we also carry out social programs to support children in their efforts to shape their future. We invite children battling illness to watch the matches and support global organizations that help children through fundraising by Nitto Group employees.
In 2023, Nitto launched the Nitto ATP Finals Torino Green Project with the aim of reducing CO2 emissions in Turin, the host city of the tournament. The project raises funds through charity auctions and donations to support afforestation initiatives in the city, such as planting trees in a park near Inalpi Arena, the venue of the Nitto ATP Finals.
In 2018, as we celebrated the 100th anniversary of our founding, the Nitto Group resolved to become a company that contributes to the global environment and human life for the next century. This commitment led to the adoption of our new policy of “placing ESG at the core of management” in fiscal 2021. We are also allocating our resources toward environmental initiatives, which resulted in our obtaining the international initiative Science Based Targets (SBT) certification in August 2024. In addition to our Scope 1+2 GHG (CO2) emission reduction target of 46.3% by 2030 from 2020 levels, we have also set a Scope 3 reduction target of 25% from 2022. Our ultimate goal is to reduce environmental impact to zero across the supply chain, as well as within the Group. We are ready to take the lead in pursuing this ambitious goal and will accelerate efforts designed to realize a decarbonized society in collaboration with customers and suppliers.
At the 29th United Nations Climate Change Conference (COP29) held in Azerbaijan in November 2024, Nitto was selected as an exhibitor at the Japan Pavilion organized by the Ministry of the Environment, Japan. There, we showcased our unique technologies related to CO2 separation, capture, fixed conversion, and utilization. I am delighted to share that many visitors stopped by our booth every day and showed strong interest in these technologies. We will remain focused on achieving negative emissions through two main approaches: reducing CO2 emissions by capturing CO2 emitted from factories using membrane products for storage, fixation, or conversion into valuable resources, and developing technologies to capture CO2 directly from the atmosphere.
The Nitto Group supplies Niche Top products that hold a leading share in global markets, which places on us the responsibility to ensure both uninterrupted and stable delivery. To strengthen our supply chains, we are proactively addressing potential risks, including geopolitical risks, chemical substance regulations, and climate change. Also, to ensure our customers receive only the highest-quality products, we conduct quality awareness surveys and Kuruma-za related to product quality for all employees. We also include quality compliance in the agenda for the Global Conference, which brings together senior executives from Group companies around the world, thereby reinforcing quality compliance. In parallel, we are pursuing business reform and business model transformation by implementing initiatives that leverage AI and other digital technologies, prioritizing them based on return on investment.
Our top priority has always been, and will continue to be, employee safety. Guided by the policy of “placing safety before everything else,” we are working toward our ultimate goal of reducing all occupational accidents and injuries to zero. I am pleased to say that this safety-first mindset is deeply ingrained in our employees. We will remain committed to eliminating “critical accidents,” which may result in death or permanent disability, and “serious accidents,” which could lead to critical outcomes. Our goal is to create a workplace environment where employees can carry out their duties safely and with peace of mind.
Through the continued implementation of these initiatives, we will build a robust management infrastructure that supports sustainable business growth.
The primary duty of top executive is to increase our company’s corporate value in a sustainable manner. For this to happen, I believe it is crucial that all Nitto products proudly stand high as PlanetFlags/HumanFlags within their respective categories and evolve into Global Niche Top™ or Area Niche Top™ products. In other words, we aim to continue generating high profits by simultaneously solving social issues and creating economic value. In fiscal 2025, while putting the finishing touches on the current mid-term management plan, Nitto for Everyone 2025, we will also begin formulating the next mid-term management plan with the 2030 ideal state in view.
The Nitto Group will continue taking on new challenges to sustainably enhance its corporate value and remain a company that brings happiness to its stakeholders. We sincerely appreciate the continued support and understanding of all our stakeholders.
