LIXIL ANNUAL
REPORT 2018
About LIXIL:
Business Platforms
to People
Features:
Design-Led Thinking to
Sustainable Growth
Results:
Financial to
Operational
Commitments:
CR to
Governance
2
16
50
70
Annual Report 2018 1
Annual Report 2018 1
Contents
About LIXIL
Regional Platforms
Brand Portfolio
Value Creation Process
Conversation with the CEO: Kinya Seto
Executive Officers and
Global Business Board
Features
LIXIL's People: Purpose-Driven and
Entrepreneurial
Design-Led Innovation
Everything for the Consumer
Pursuing Global Competitiveness
Beyond the Medium-Term Plan
Results
Financial Highlights
CFO Message
Review and Analysis of Operating Results
and Financial Position
Review of Operations
2
4
6
8
12
16
24
30
38
44
50
52
54
60
Commitments
70
Corporate Responsibility
80
Corporate Governance
Internal Control Systems and Compliance
94
Measures against Risks that May Influence 97
Management Strategy
Consolidated 10-Year Summary
98
Reporting Items
Business Risks
Principal Group Companies
Investor Relations
External Recognition
LIXIL's History
Shareholder Information
Corporate Data
100
104
106
106
107
108
109
Every person on the planet dreams of a better home.
LIXIL makes that possible with pioneering water and
housing products.
A better home is made up of surprisingly simple things:
baths to escape in after a long day, kitchens that unleash
creativity, toilets that provide cleanliness and comfort,
doors and windows that connect you with the world
outside, showers and faucets to experience water in new
ways, and interiors and exteriors that bring spaces to life.
LIXIL makes better homes a reality for everyone,
everywhere. It makes things that matter to all sorts of
different people, to the many communities it is part of,
and to sustainably support the world around it. LIXIL is
proud that its products touch the lives of more than a
billion people every day, but believes it has the potential
to still do so much more.
2
2
LIXIL Group Corporation
LIXIL Group Corporation
Annual Report 2018 3
Annual Report 2018 3
Regional Platforms
LIXIL is globally organized into regional platforms.
With all key business functions present in each of its regions,
LIXIL has the agility to best serve individual markets, while
enabling it to work collaboratively worldwide.
• Singapore
(APAC Headquarters)
Japan
• Tokyo
(Global Headquarters)
Asia Pacific
Japan is LIXIL's largest market, where it draws
on over 100 years of experience and techno-
logical development to help make the better
home a reality. From bathrooms to kitchens,
interiors to exteriors, and from a nationwide
retail network to housing services, LIXIL
provides consumers in Japan with the entire
spectrum of housing products and services.
But Japan is also the most advanced of the
world's aging populations, where demand for
new and high-quality solutions is especially
high. This is bringing unprecedented change
in market dynamics, making Japan a focus for
LIXIL's technological innovation and a base
from where technology is transferred to LIXIL's
global brands.
Across LIXIL's global operations, the Asia
Pacific region embodies the true spirit of
LIXIL – global, multi-brand, multi-portfolio, and
multi-cultural. From water and housing prod-
ucts through to the presence of all of LIXIL's
global brands, nowhere is the range of LIXIL's
product lines, brands, and business models
more diverse and present outside of Japan.
Active in 23 of the world's fastest growing mar-
kets, including in China, Vietnam, Thailand,
Indonesia, and India, LIXIL is today leveraging
its broad portfolio to truly tailor its approaches
– from brick and mortar to digital – to target
each consumer group, making the home solu-
tions experience easy, enjoyable, and of true
value to the consumer.
• Piscataway, NJ
(Americas Headquarters)
• Düsseldorf
(EMENA Headquarters)
Americas
EMEA
• Johannesburg
(Sub-Saharan Africa Headquarters)
Generations of families across the US have
grown up with the American Standard brand
at the heart of their homes. LIXIL Americas
has grown since then, now also encompassing
iconic and premium water technology brands
GROHE and DXV across its operations in the
US, Canada, and Mexico. Having strength-
ened its manufacturing and supply network,
LIXIL Americas is today focused on becoming
a consumer-centric organization in the world's
largest consumer market, investing further in
developing first-class insights and analytics,
new and innovative digital content, and de-
livering premium solutions through its three
brands.
LIXIL is active in every country in Europe and
is growing its presence in the Middle East and
North Africa through a single, focused, and
powerful point of entry: GROHE, the world's
leading brand in sanitary fittings. Known for
its design ethos, GROHE is today innovating
the "digitalization of water," while leveraging
technological synergies to roll out new product
lines, from shower toilets to ceramic basins,
providing consumers with the full suite of bath-
room products. In Sub-Saharan Africa, LIXIL
Africa is today expanding its lineup of products
through global brands such as GROHE and
homegrown brands like COBRA.
Revenue: ¥1,296.9 billion
Number of Factories: 43
CO2 Emissions (Scope 1+2): 464,051 t-CO2
Number of Employees: 35,452
Revenue: ¥115.9 billion
Number of Factories: 31
CO2 Emissions (Scope 1+2): 349,140 t-CO2
Number of Employees: 19,373
Revenue: ¥143.1 billion
Number of Factories: 11
CO2 Emissions (Scope 1+2): 323,831 t-CO2
Number of Employees: 6,308
Revenue: ¥145.6 billion
Number of Factories: 8
CO2 Emissions (Scope 1+2): 64,249 t-CO2
Number of Employees: 5,741
* Overseas revenues are shown before the elimination of transactions within and among segments.
4
LIXIL Group Corporation
Annual Report 2018 5
Annual Report 2018 5
Brand Portfolio
Global
LIXIL is made up
of many individual
product brands,
each helping to
make better homes
a reality for everyone,
everywhere.
Global Specialty
INAX provides products combining
Japanese thoughtfulness with tech-
nology developed over the years as a
pioneering manufacturer of bathroom
and sanitary fixtures, tiles, and build-
ing materials.
GROHE provides innovative water
products for every aspect of the
bathroom and the kitchen, offering
exceptional customer experiences,
all from a single, reliable source.
American Standard innovates and
creates products that improve
everyday living and raise the standard
of health, safety, and beauty in and
around the bathroom and the kitchen.
TOSTEM delivers doors and windows
with thoroughly polished designs and
technologies, adding a new level of
comfort and satisfaction to the home.
LIXIL provides a spectrum of
products, from bathrooms and
kitchens to exteriors, for all homes.
LIXIL brings together some
of the most trusted brands
in the industry.
KAWASHIMA SELKON provides textile
products and services that inspire
and delight customers around the
world, all while constantly reimagining
cultures to enrich society.
COBRA, a homegrown brand that has
become part of life in South Africa,
offers water products that leave a
lasting impression.
DXV elevates the everyday by offering
meticulously crafted kitchen and
bathroom collections that reimagine
the most influential design movements
of the past 150 years.
JAXSON offers exquisitely designed
and high-quality bathtubs, providing
the satisfaction and joy of the ultimate
comfortable bathing experience.
SATO brings innovative, simple,
desirable yet affordable sanitation
solutions to consumers in areas
without access to water and sewerage
infrastructure.
Japan
RICHELLE is a kitchen brand offering
technologies that make things easier
for the consumer, all while providing
attractive and coordinated design that
makes cooking ever more enjoyable.
SPAGE offers refined, stylish
bathrooms that provide the "ultimate
indulgence," utilizing technological
expertise in mastering the shape and
flow of water.
INTERIO offers the joy of finding
and coordinating interiors that
match personal changing tastes and
preferences, for those who want to
always be true to their inner self.
EXSIOR provides products that
extend the living room experience into
garden spaces, where people can
be themselves and enjoy a delightful
time surrounded by nature.
SUPER WALL provides healthy,
comfortable, and safe living through a
construction method for homes which
uses high thermal insulation panels.
ASAHI TOSTEM coordinates a large
range of exteriors to match a person's
tastes and personality, enhancing
their lifestyle in their homes.
LIXIL SUZUKI keeps cities and
buildings beautiful through its
fireproof and smoke-proof shutters
for buildings, as well as lightweight
shutters for storefronts and garages.
6
6
LIXIL Group Corporation
LIXIL Group Corporation
Annual Report 2018 7
Annual Report 2018 7
Value Creation Process
LIXIL's Capital
How LIXIL Creates Value
The Value LIXIL Creates
Underpinned by
strong corporate
governance,
LIXIL's business
model will drive
it toward long-
term sustainable
growth and
value creation
for all of its
stakeholders.
Employees
65,000+ people
working around the world
Brands
Portfolio of 17 industry-leading
product brands and six retail and
housing services brands
Intellectual Property
¥27.6 billion invested in R&D
Financial Capital
¥616.9 billion in capital and
¥687.9 billion in interest-bearing debt
Natural Capital
22.5 million GJ of energy and
18.1 million m3 of water used
Manufacturing Assets
Capital investment of
¥68.4 billion
Social Engagement
Over ¥680 million in
social investments and
community contributions
Corporate Philosophy
The Group's superior products and
services contribute to improving
people's comfort and lifestyles
Medium-Term Plan
–
Establish a purpose-driven,
entrepreneurial company for
sustainable growth
Develop attractive and
differentiated products
Achieve competitive costing
Strategic marketing to drive
growth
–
–
–
LIXIL Behaviors
– Do the Right Thing
– Work with Respect
– Experiment and Learn
Corporate Responsibility (CR)
Strategy
Global Sanitation & Hygiene
Promote and enable access to safe
and hygienic sanitation
Water Conservation & Environmental
Sustainability
Conserve water, energy, and other
natural resources utilized by LIXIL
products and services
Diversity & Inclusion
Embrace the diversity of people
in society and within LIXIL
Employees
55% "strongly agree" or "agree"
that they are proud to be part of LIXIL; the top
two responses out of six in an employee survey
Brands
LIXIL products are used by more than a
billion people every day
Intellectual Property
Almost 1,000 utility and design patent
applications generated and filed worldwide
Financial Capital
Core earnings ratio of 4.5% and ROE of
9.4% in FYE2018
Natural Capital
Emitted 0.72 t-CO2 per ¥1 million of
revenue, an increase of 0.16% from
the previous fiscal year
Manufacturing Assets
93 factories globally
Social Engagement
Over 52 projects related to the three
strategic pillars of the Company's CR strategy
8
8
LIXIL Group Corporation
Annual Report 2018 9
Conversation with the CEO:
Kinya Seto
Director
Representative Executive Officer
President and Chief Executive Officer
In the fiscal year ended March 31, 2018 (FYE2018), LIXIL
positioned itself to start the new Medium-Term Plan (MTP),
which aims to put it on a path of sustainable growth.
President and CEO Kinya Seto discusses performance
during the year, the background of his new three-year
strategy, and the challenges ahead.
Q: How would you assess LIXIL's performance in FYE2018?
A: We made solid progress last year, positioning LIXIL to
start the new MTP. Our water technology business (LWT)
is now on a strong footing for success, expanding in Japan
and overseas markets. We also continued to streamline our
organization, optimize our business portfolio, and strength-
en our balance sheet. We ended the year with revenue of
¥1,664.8 billion, up 1.9% year on year, and with record
high net profit for LIXIL, reflecting a company that is leaner,
faster, and more manageable.
Our progress, however, was not reflected in our core
earnings, which on a continuing operations basis was down
16.1% year on year at ¥75.3 billion. We faced challenges in
our housing technology business (LHT) in Japan, includ-
ing higher raw material costs and a decrease in new hous-
ing starts. We have to be able to respond more effectively
to such challenges, and have subsequently implemented
short-term countermeasures and a long-term roadmap to
turn around the business. This will be a key priority as we
start the new MTP, which will enable us to achieve long-
term, sustainable growth.
Q: You have made some significant changes to the organi-
zation and portfolio. Could you describe some of these
developments, and how they have positioned LIXIL to start
the MTP?
A: To get into shape, we have been simplifying the orga-
nization and improving our balance sheet. This included
delayering our organizational structure to accelerate
decision-making and enhance efficiency, divesting certain
subsidiaries and affiliates to enhance control and gover-
nance, and selling unused assets.
Our net debt position has improved as a result, and we
raised our dividend for the first time in three years. Mean-
while, LWT's strategic fundamentals are on track, we are
well positioned to become a full bathroom solutions provider
worldwide, and we have been investing in areas including
design, marketing, and digital to drive product differentia-
tion and future growth.
Our success in these areas has set us up to achieve the
focus of the MTP – strengthening profitability.
Q: You've concentrated on developing LWT, especially over-
seas with your GROHE, American Standard, and INAX
brands. How have you set them up to grow?
A: While we are taking a long-term view, LWT is a highly
profitable business because of the immediate synergies
we can realize across our brands and its potential to
become a full bathroom solutions provider worldwide.
Having multiple powerful, culturally rooted brands also
allows us to leverage good ideas across the LWT business
in all regions. As a result, we achieved higher revenue and
improved our core earnings margin in each of our regions
in the previous fiscal year.
Q: Does this approach explain why we are seeing more
differentiated LIXIL products from your LWT brands?
A: We are today differentiating ourselves through design,
technology, quality, and brands. As part of this, one of my
goals has been to transform LIXIL into a more design-
oriented company by integrating design-led thinking into all
the processes of the product lifecycle to address consum-
er challenges and enhance the consumer's experience.
We are beginning to see the benefits of this approach. For
instance, last year LWT received an industry-leading 66 de-
sign awards, which has heightened the market's perception
of LIXIL as a design company.
In addition, INAX, GROHE, and American Standard have
different brand equity and profiles, which we have devel-
oped with our Chief Design Officer, Paul Flowers. These
brands, along with our strengths in quality and technology,
clearly differentiate us from our competitors.
"We are
differentiating
ourselves
through
design,
technology,
quality, and
brands."
10
LIXIL Group Corporation
11
Q: What were some of LWT's successes over the last year,
and what are your priorities?
A: Launching new products and expanding into new busi-
nesses drove our growth overseas. We have also been in-
novative in our marketing activities and are becoming more
consumer focused. Examples include the success of our
"I Love Spalet" campaign in Asia and our GROHE promo-
tions in airports worldwide, as well as impressive results
from our direct-to-consumer approach with the American
Standard Walk-in Tub in the US.
We've also made significant progress in improving sup-
ply capacity so we can better meet demand. We have made
several strategic moves to boost manufacturing capacity in
key markets. For example, we recently purchased ceram-
ics manufacturers Sentini Sanitarywares in India and ASB
Ceramica Dominicana in the Dominican Republic. We have
also bought out minority partners at Grome Marketing in
Cyprus and GROHE DAWN WaterTech Holdings in South
Africa, enhancing our control in all regions. Ensuring proper
governance is a key challenge, as applying different stan-
dards of governance across countries is not an option. Full
ownership simplifies this process.
We are now focused on expanding our lineup of products
to meet consumer demand. We will also strengthen regional
management and invest in an Asian R&D center and more
showrooms, such as our newly opened flagship GROHE
space in Singapore, and LIXIL showrooms in Vietnam
and China.
Q: Looking at LHT, what have been the main challenges,
and how are you setting it up for growth?
A: LHT's business is susceptible to fluctuations in raw
material prices and new housing starts. During the previous
fiscal year, rapid changes to the business environment
negatively affected revenue and core earnings, especially in
the fourth quarter. This impact was partly due to our delays
in changing the sales mix. Over the next two to three years,
we will concentrate on driving product differentiation in
Japan, which we will then roll out into other markets. In par-
ticular, we anticipate further growth in other parts of Asia.
Q: I understand that Paul Flowers has been a key part of
driving success at LWT. How do you envision his newly ex-
panded role as Chief Design Officer of LIXIL?
A: Paul was key to GROHE's transformation into a consum-
er brand, winning accolades on the level of Apple, Porsche,
and Adidas. As design head of LWT, Paul has been the driv-
ing force behind design-led innovation at LIXIL, specifically
in developing platforms, design methodologies, and brand
profiles. We believe we can apply the same approach to
LHT. In Paul's new role as Chief Design Officer for the entire
Company, he will begin transforming LHT's design strategy
as well.
Q: Getting closer to the consumer and data-driven
marketing is another key strategy for you. How has this
been going?
A: We are changing our way of thinking, making a big shift
from mass marketing to data-driven, targeted marketing.
Our investment in mass marketing raised our brand recog-
nition significantly; we will now focus on data-driven target-
ed communication. Some examples that we explain in more
detail later in this report include introducing power brands,
launching direct-to-consumer business models in Japan
and the US, and rolling out digital technologies such as
GROHE Sense Guard.
Q: As part of creating a more competitive organization, you
have introduced three LIXIL Behaviors. What are these be-
haviors, and why are they important?
A: We are focusing on three key behaviors as the source of
future competitiveness. The first of these behaviors is to "do
the right thing," or going beyond a mere understanding of
the rules and ethics to demonstrate a strong sense of own-
ership. It also refers to making decisions, taking action with
integrity, and operating with self-belief.
The second, "work with respect," calls for us to under-
stand others in order to respect them. Understanding others
requires us to exchange opinions and ideas openly, and the
mutual understanding that results creates a sense of unity
and alignment.
In Japan, we are also streamlining LHT's operations. For
example, we consolidated aluminum extrusion factories
and are improving production efficiency through a plat-
form approach. On top of this, we are accelerating develop-
ment and launch cycles to respond more quickly to market
trends. We expect these changes to have a positive impact
on our core earnings from FYE2020.
The third key behavior is to "experiment and learn." We
aim to encourage employees to experiment in small ways,
because we believe that lessons learned from experiment-
ing – even failures – are an important investment in future
innovation. This behavior is particularly important for me
and, I believe, for the Company. For LIXIL to achieve future
success, we need to be agile and entrepreneurial.
In addition, we are encouraging a more bottom-up ap-
proach across the Company. For example, we have recently
launched Workplace by Facebook as an internal commu-
nication and work platform, which allows us to accelerate
"We are
changing
our way of
thinking,
from mass
marketing
to data-driven,
targeted com-
munication."
communication and decision-making across teams and
the sharing of ideas. The response has been very positive;
in one of my recent posts about ideas for cost reduction,
I received more than 420 comments in less than four days.
Q: With LIXIL now positioned to start the new MTP, how
does the future look?
A: I believe the future is bright for companies that can re-
spond to new opportunities. I think our industry is well
positioned to respond to megatrends in demography and
technology. In the automotive industry, for example, techno-
logical advances can cause traditional markets to shrink. By
contrast, technological change provides more opportunities
for growth and connectivity between different parts of our
business. The important point now is how we will differenti-
ate ourselves.
12
12
LIXIL Group Corporation
LIXIL Group Corporation
Executive Officers of LIXIL Group Corporation
As of July 1, 2018
Global Business Board
As of July 1, 2018
Annual Report 2018 13
Annual Report 2018 13
KINYA SETO
Director, Representative Executive
Officer, President and Chief Executive
Officer (CEO)
SACHIO MATSUMOTO
Representative Executive Officer,
Executive Vice President, and Chief
Financial Officer (CFO)
YANG CHIN CHEN
Chief Integration Officer, LIXIL Group
Corporation
PAUL FLOWERS
Chief Design Officer, LIXIL Group
Corporation
NIK BAFANA
Chief of Staff, LIXIL Group Corporation
Executive
Officers and
Global
Business
Board
KAZUHIKO OOTSUBO
Executive Officer, Vice President
JIN SONG MONTESANO
Executive Officer, Senior Managing
Director, Chief Public Affairs Officer
(CPAO)
HARUMI MATSUMURA
Executive Officer, Senior Managing
Director, Chief Human Resources
Officer (CHRO)
SATOSHI YOSHIDA
Director, Senior Managing Director,
and Chief Executive Officer of LIXIL
Housing Technology Japan, LIXIL
Corporation
HIROYUKI OONISHI
Director, Senior Managing Director,
and Chief Executive Officer of LIXIL
Water Technology Japan, LIXIL
Corporation
STEVEN DELARGE
Chief Executive Officer, LIXIL Water
Technology Americas, LIXIL Group
Corporation
RYO NIHEI
Executive Officer, Senior Managing
Director, Chief Technology Officer
(CTO)
YUGO KANAZAWA
Executive Officer, Senior Managing
Director, Chief Digital Officer (CDO)
YUTAKA NAKAMURA
Executive Officer, Senior Managing
Director, Chief Legal Officer (CLO)
MICHAEL RAUTERKUS
Chief Executive Officer, LIXIL Water
Technology EMENA, LIXIL Group
Corporation
BIJOY MOHAN
Chief Executive Officer, LIXIL Water Technology Asia
and LIXIL Housing Technology Asia, LIXIL Group
Corporation
LIXIL Group Corporation
14
14
LIXIL Group Corporation
14 EXECUTIVE OFFICERS
As of June 22, 2018
Executive Officers of LIXIL Group Corporation
As of July 1, 2018
KINYA SETO
Director, Representative Executive
Officer, President and Chief Executive
Officer (CEO), LIXIL Group Corporation
KAZUHIKO OOTSUBO
Executive Officer and Vice President,
Sales and Domestic Subsidiaries,
LIXIL Group Corporation
HARUMI MATSUMURA
Executive Officer and Senior Managing
Director, Human Resources & General
Affairs, Chief Human Resources Officer
(CHRO), LIXIL Group Corporation
YUGO KANAZAWA
Executive Officer and Senior Managing
Director, Marketing, Digital, and IT,
and Chief Digital Officer (CDO), LIXIL
Group Corporation
Kazuhiko Ootsubo has served as
Executive Officer and Vice President at
LIXIL Group Corporation, responsible
for Domestic Sales since June 2017
and Sales and Domestic Subsidiaries
since June 2018. He also serves as
Representative Director, Executive
Vice President of LIXIL Corporation,
and Chief Executive Officer of LIXIL
Japan Company.
Ootsubo joined Tostem Corporation
(now LIXIL Corporation) in April 1981
and has held a number of senior
sales positions in his career.
He holds 2,318 shares of the
Company.
JIN SONG MONTESANO
Executive Officer and Senior
Managing Director, Public Affairs,
Investor Relations, External Affairs,
and Corporate Responsibility,
Chief Public Affairs Officer (CPAO),
LIXIL Group Corporation
Jin Song Montesano has served as
Executive Officer and Senior Managing
Director of LIXIL Group Corporation
since November 2014, leading a
diverse global team now responsible
for corporate communications,
corporate responsibility, investor
relations, external affairs, and LIXIL's
Tokyo 2020 Olympic and Paralympic
Games sponsorship activities. She
also serves as CPAO of LIXIL Group
Corporation and LIXIL Water
Technology, as well as Director, Senior
Managing Director, and CPAO at LIXIL
Corporation.
Prior to joining the Group, Montesano
built and led global and regional leader-
ship roles in strategic communications,
policy, and government affairs for
GlaxoSmithKline, General Electric,
and Kraft Foods.
She holds 1,500 shares of the
Company.
Kinya Seto assumed the role of
Director, Representative Executive
Officer, President and CEO of LIXIL
Group Corporation in June 2016.
He also serves as CEO of LIXIL Water
Technology, CEO of LIXIL Housing
Technology, and President and CEO
of LIXIL Corporation.
Seto began his career with Sumitomo
Corporation, a major Japanese trading
company, in 1983. After holding
various key posts at Sumitomo
Corporation, he established more
than 10 companies in Japan and
overseas, including MonotaRO Co., Ltd.,
a direct marketer of maintenance,
repair, and operating (MRO) supplies.
Seto served as President and Director
of MonotaRO Co., Ltd., from 2006 and
then became Chairman and Director
in 2012. He also previously served as
Non-Executive Director of Zoro Tools,
Inc. (now Zoro Inc.) and President of
K-engine Corp.
Seto's other global leadership roles
include having led Asia Pacific opera-
tions for W.W. Grainger, Inc., a leading
global MRO supplier, and heading its
global online business operations
based out of London.
He holds 103,100 shares of the
Company.
SACHIO MATSUMOTO
Representative Executive Officer and
Executive Vice President, Finance,
Treasury, and M&A, and Chief
Financial Officer (CFO), LIXIL Group
Corporation
Sachio Matsumoto serves as Represen-
tative Executive Officer and Executive
Vice President of LIXIL Group
Corporation, responsible for finance,
treasury, and M&A. He has also
served as CFO of the Company
since June 2013. Matsumoto is also
Director, Executive Vice President,
and CFO of LIXIL Corporation.
Prior to joining the Group, he was a
Corporate Vice President and Head
of Finance and Treasury at Fuji
Xerox Co., Ltd.
He holds 45,000 shares of the
Company.
Harumi Matsumura serves as Executive
Officer and Senior Managing Director
of LIXIL Group Corporation, taking
responsibility for human resources
and general affairs. She also serves
as Director, Senior Managing Director,
and CHRO at LIXIL Corporation. She
previously served as President and
Representative Director at LIXIL Living
Solution Corporation.
Prior to joining the Group, Matsumura
was President and Representative
Director of Henri Charpentier Co., Ltd.
(now SUZETTE Co. Ltd.) from 2004 to
2011. She also served as a manager at
major retailer Seibu Department Stores,
Ltd. (now Sogo & Seibu Co., Ltd.),
which she originally joined in 1976.
She holds 24,043 shares of the
Company.
RYO NIHEI
Executive Officer and Senior Managing
Director, Technology, Chief Technology
Officer (CTO), LIXIL Group Corporation
Ryo Nihei serves as Executive Officer
and Senior Managing Director of LIXIL
Group Corporation, taking responsibility
for technology research. He is also
CTO of LIXIL Group Corporation and
Director, Senior Managing Director,
and Head of Technology Research at
LIXIL Corporation.
Prior to joining the Group in 2010,
Nihei served as Director for FUNUC
Corporation.
Yugo Kanazawa has served as
Executive Officer and Senior Managing
Director at LIXIL Group Corporation,
where he has been responsible for
marketing and digital functions since
2016 and the IT function since July
2018. He also serves as Director,
Senior Manager, CDO, and Chief
Information Officer at LIXIL Group
Corporation, as well as Head of the
Marketing Division and Head of the
Information Systems Division for LIXIL
Corporation.
Prior to joining to the Group,
Kanazawa developed his career at
Sumitomo Corporation, one of the
largest Japanese trading companies.
He also served as Executive Officer at
MonotaRO Co., Ltd., taking responsi-
bility for its overseas business, and
was also appointed as Vice President
at W.W. Grainger, Inc.
He holds 600 shares of the Company.
YUTAKA NAKAMURA
Executive Officer and Senior
Managing Director, Legal, Chief
Legal Officer (CLO), LIXIL Group
Corporation
Yutaka Nakamura has served as
Executive Officer and Senior
Managing Director of LIXIL Group
Corporation since June 2018,
responsible for the Company's legal
affairs. He also serves as CLO of LIXIL
Group Corporation and LIXIL Water
Technology, as well as Director, Senior
Managing Director, and CLO of LIXIL
Corporation.
Prior to joining the Group, he served
as Legal Director and General Counsel
of NTT DoCoMo Inc., responsible for
global compliance, corporate
governance, crisis management,
transactions, and intellectual
property matters.
Note: Number of shares of the Company owned by the executive officers is as of June 22, 2018
15
Annual Report 2018 15
Annual Report 2018 15
Global Business Board
As of July 1, 2018
YANG CHIN CHEN
Chief Integration Officer, LIXIL Group
Corporation
Yang Chin Chen has served as Chief
Integration Officer of LIXIL Group
Corporation since April 2017. He has
also served as Head of the Synergy
Creation Office at LIXIL Water
Technology since April 2018.
Prior to joining the Group, Chen held
several senior executive positions at
W.W. Grainger, Inc., including Senior
Vice President in charge of Supply
Chain Management and President
of Grainger Industrial Supply. Before
joining W.W. Grainger, Inc., he held
regional leadership roles as the Asia
Pacific CEO of Stream International
Inc., Lotus Development Corp.,
Ashton Tate Corporation, and
Cummins Inc.
PAUL FLOWERS
Chief Design Officer, LIXIL Group
Corporation
Paul Flowers has served as the
Chief Design Officer of LIXIL Group
Corporation, overseeing design for
both LIXIL Water Technology and
LIXIL Housing Technology, since July
2018. He assumed the role of Chief
Design Officer of LIXIL Water
Technology in April 2015 after serving
as Senior Vice President of Design for
GROHE for 10 years.
Prior to joining GROHE, Flowers
served as the Design Director for
Electrolux and Senior Designer
of Philips Consumer Electronics.
Throughout his career, he has
received numerous prestigious
international product design awards,
including the Red Dot "Design Team
of the Year" Award in 2011.
NIK BAFANA
Chief of Staff, LIXIL Group Corporation
Nik Bafana serves as Chief of Staff of
LIXIL Group Corporation and has held
other global leadership roles in the
Company since joining in April 2016.
Over 18 years, Bafana has focused
on driving cross-regional strategy,
M&A integration, and operating
improvements. Prior to joining the
Group, he was the Senior Director
at W.W. Grainger, Inc. in a series of
management roles including Online
Strategy & Integration, Corporate
M&A, Transportation, and
Purchasing. He started his career at
The Boston Consulting Group, where
he focused on strategy and operations
for global manufacturers and
consumer product companies.
SATOSHI YOSHIDA
Director, Senior Managing Director,
and Chief Executive Officer (CEO) of
LIXIL Housing Technology Japan,
LIXIL Corporation
Satoshi Yoshida has served as Director
and Senior Managing Director of LIXIL
Corporation since June 2018. He has
also served as CEO of LIXIL Housing
Technology Japan since 2017. Prior
to his current position, Yoshida was
responsible for LIXIL Corporation's
marketing activities as the Head of
the Japan Marketing Division.
Yoshida developed his career in sales
and marketing, having joined TOYO
Sash Corporation (now LIXIL
Corporation) in April 1986.
HIROYUKI OONISHI
Director, Senior Managing Director,
and Chief Executive Officer (CEO)
of LIXIL Water Technology Japan,
LIXIL Corporation
Hiroyuki Oonishi has served as
Director and Senior Managing
Director of LIXIL Corporation since
June 2018. He also serves as CEO
of LIXIL Water Technology Japan.
Previously, Oonishi was responsible
for leading LIXIL's kitchen business
at LIXIL Corporation as CEO of LIXIL
Kitchen Technology Japan.
Oonishi started his career as an
engineer when he joined INAX
Corporation (now LIXIL Corporation)
in April 1988, before developing his
business management skills through
roles in marketing.
STEVEN DELARGE
Chief Executive Officer (CEO),
LIXIL Water Technology Americas,
LIXIL Group Corporation
Steven Delarge serves as CEO of
LIXIL Water Technology Americas,
with responsibility for managing North
and South American business
activities for the American Standard,
DXV, and GROHE brands.
Prior to joining the Group in July
2012 as Senior Vice President and
Chief Financial Officer of American
Standard, Delarge held various senior
executive positions at Momentive
Performance Materials, following a
more than 25-year career in global
financial and planning roles of
numerous operating units within
General Electric.
MICHAEL RAUTERKUS
Chief Executive Officer (CEO), LIXIL
Water Technology EMENA, LIXIL
Group Corporation
Michael Rauterkus serves as CEO of
LIXIL Water Technology EMENA. He
has also served as CEO of GROHE
since January 2015. Previously, he
held executive management positions
at GROHE, including Chief Sales
Officer and President of its operations
in Europe.
Prior to joining GROHE, Rauterkus
held various senior executive
positions including General Manager
of Northern Continental Europe at
Hasbro and Group Managing Director
of the North and Central Europe
region at Levi Strauss & Co.
BIJOY MOHAN
Chief Executive Officer (CEO), LIXIL
Water Technology Asia and LIXIL
Housing Technology Asia, LIXIL
Group Corporation
Bijoy Mohan serves as CEO of LIXIL
Water Technology Asia and LIXIL
Housing Technology Asia. He has
also been leading the Asia Pacific
operations of GROHE as President
of Asia Pacific since July 2009.
Previously, he managed GROHE's
South Asian operations as Managing
Director.
During his more than 25-year career,
he has held senior management
positions in Fortune 500 multinational
organizations in different markets
across Asia, including India, China,
ASEAN, Korea, and Japan. Prior to
joining GROHE, Mohan was the Asia
Pacific Marketing Director at Owens
Corning.
16
LIXIL Group Corporation
Annual Report 2018 17
Annual Report 2018 17
LIXIL's Strategy
Establish a purpose-driven,
entrepreneurial company for
sustainable growth
LIXIL's Stories
01 LIXIL's People: Purpose-Driven and Entrepreneurial
02 Motivation through Social Purpose
03 Innovation through Experimentation
04 Digital Collaboration: Increasing Organizational Effectiveness
05 LIXIL Community Day
LIXIL's People: Purpose-
Driven and Entrepreneurial
LIXIL is creating an organization that is
capable of sustained growth, and at the
heart of its plans are its people. Its goal is
to become a company that employees are
proud of, a company that evokes passion,
respect, and an entrepreneurial spirit. This,
in turn, will enable it to redefine its business
and become fitter for the future.
To achieve this future-fit state, Kinya Seto,
President and CEO of LIXIL, believes it is
important to rally employees behind busi-
ness activities that also tackle greater chal-
lenges facing society. Creating a sense of
purpose for their work, he believes, inspires
and motivates employees beyond their ev-
eryday goals.
"LIXIL is in a unique position to make a
difference because we have the technology,
expertise, and desire to contribute to environ-
mental and social issues on a global scale,
especially around challenging social issues
related to sanitation and hygiene. I believe
we can play a leadership role on these is-
sues, and LIXIL employees will be able to
find a deeper meaning in their work and feel
proud of the company. It is my mission to
foster such an environment, and I believe
this purpose-led strategy will make us more
competitive in the long run."
Through its responsible business activi-
ties, LIXIL aims to improve the quality of life
for people worldwide. It is currently working
to help 100 million people around the world
gain access to basic sanitation by 2020.
When it comes to water and environmental
conservation, LIXIL aims to achieve "Net
Zero" by 2030, in which the environmental
contributions of its products and services
match its environmental footprint. It is also
committed to embracing diversity in society
and within LIXIL.
Seto believes that employee behavior is a
key factor to unlocking sustainable growth
for LIXIL.
"LIXIL became an organization of more
than 65,000 people through the consoli-
dation of five major domestic housing and
building material companies and through
overseas M&A. To create a common foun-
dation from which all employees can work
toward the same goals, we have established
three LIXIL Behaviors that are visible, con-
crete, and easy to understand. We can
apply these behaviors in our daily work
precisely because they are observable. I
believe through these behaviors, we can
become a company that works with great-
er speed to get things done, and one that
embodies both enterprise thinking and an
entrepreneurial spirit."
The first behavior is "do the right thing,"
which means making judgments and de-
cisions with integrity and a strong sense of
ownership, regardless of past conventions.
The second is "work with respect" in
order to create an environment in which
all employees can exchange their opinions
and ideas openly and fairly, regardless of
rank or title.
The third is "experiment and learn."
Repeatedly conducting small experiments
leads to greater speed of action. Even if
mistakes are made, lessons can be learned
and shared, leading to future innovation.
To create an organization that can re-
spond to an increasingly complex and
competitive landscape and implement
innovations faster, LIXIL is promoting more
bottom-up and horizontal communication.
It is creating a work environment, leverag-
ing digital infrastructure as well as tradi-
tional channels of engagement, so anyone
can express their opinions, providing more
opportunity for ideas to be shared and ad-
opted more quickly.
18
LIXIL Group Corporation
Annual Report 2018 19
Motivation through Social
Purpose
The key to resolving some of the toughest
challenges facing sanitation and hygiene lies
in LIXIL's entrepreneurial spirit
One in three people in the world, or about
2.3 billion people, still live without access
to safe and hygienic toilets. Of these, about
900 million practice open defecation. Conse-
quently, everyday about 800 children under
the age of five lose their lives due to prevent-
able diarrheal diseases caused by unsanitary
water or toilets.
LIXIL is committed to helping resolve
these issues. It began working on its inno-
vative and affordable SATO Toilet Systems
for developing countries in 2012. Since
then, more than 1.8 million SATO products
have been shipped for use to more than 15
countries, enabling improved sanitation for
approximately nine million people so far.
Junichi Goto, who leads the Social Sani-
tation Initiatives organization (SSI), believes
LIXIL will be able to achieve its goal of im-
proving sanitation for 100 million people by
2020. The SATO business, which sits within
SSI, is LIXIL's first social business. It is man-
aged like any other business within LIXIL,
operating with a P&L, sales targets, supply
chain management, and marketing. The
only difference between the SATO business
and the more traditional businesses is that
the SATO business has both financial and
social targets to achieve.
"We have determined that one toilet is
used on average by five people, so if we sell
20 million toilets, we can achieve our goal.
Our objectives are in some ways similar to
those you find in sports; in the sense that
the most valuable goals are the ones that
you can accomplish by stretching yourself.
The SATO business is new for us and I
believe we can do it with the combination of
products, expertise, and people."
65,000 people can become a vibrant com-
munity of over 65,000 entrepreneurs."
Goto also believes that this challenge will
add value to the broader business in the
future, leading to the opening of new mar-
kets. "There is great social significance in
our SATO business. That isn't all, though.
Our sanitation business will also help in the
future when we develop LIXIL's brands in
developing markets that are experiencing
remarkable economic growth, like India.
I am proud to be responsible for a strategic
project like this."
Goto says that people who face problems
and work toward solutions are the true hold-
ers of an entrepreneurial spirit.
"This job is like laying rails in a desert,
there is no precedent. We will continue to
chart a new path and rapidly expand this
business into new countries."
Daigo Ishiyama, who today works as the
Director of Marketing and Technology of
the SATO business and has been the lead
designer for SATO products, also recognizes
the necessity for entrepreneurial spirit.
"I think ultimately you are your own boss.
You can think of your role in the company
as a business in itself. Producing results is
the same thing for a company as it is for
an individual. If all employees take owner-
ship for what they do, a company of over
Ishiyama, who has searched for local part-
ners around the world while participating in
developing the production, transport, and
sales cycle, feels that the SATO business'
expansion, which is closely connected to
its social contributions, has had a definite
and positive impact on the communities it is
trying to reach.
"Many organizations have been tackling
the global sanitation issue for decades.
When people in this sector see our SATO
products, they tell me that they have the
power to transform rural sanitation as we
know it. People that have actually used
our product say that they can use the toi-
let throughout the year because they don't
require as much water, while their children
can go to the bathroom by themselves now,
safely and without fear," says Ishiyama.
"Every time I hear feedback like this, I feel
assured that we have created something
that solves problems and is delightful to use,
and I am proud that I can use my engineer-
ing and product development skills to con-
tribute to solving this crisis."
20
LIXIL Group Corporation
Annual Report 2018 21
Innovation through
Experimentation
LIXIL encourages a creative approach
to new projects
LIXIL is encouraging its people to experiment, to unlock
new discoveries, and innovate faster. Modern-day busi-
ness is changing at a dizzying pace, and LIXIL believes
that enabling employees to think about new ways to solve
challenges, from product development to business models,
is an important investment in the future.
LIXIL's "I Love Spalet" campaign, which communicates
the wonders of the shower toilet across Asia, is one ex-
ample. Through engaging and amusing video vignettes, it
captured the initial impressions of people from a variety of
ethnicities, genders, and ages experiencing a shower toilet
for the first time. It's creative approach was recognized
as the Best Campaign Idea at the authoritative MARKies
Awards 2018.
Josephine Lee, Senior Vice President of Marketing for
American Standard and INAX in the Asia Pacific region,
explains how this unique idea came to fruition.
"This is the first campaign we have ever conducted that
aims to raise awareness of the shower toilet category rather
than a single product brand. And whereas in the past we
depended on print and other traditional media, this was
our first attempt at using only digital media throughout
a campaign."
The campaign primarily targeted China, India, and
Southeast Asian markets, where shower toilet penetration
is mixed: in China and Korea, shower toilets and e-bidets
are more common, while in ASEAN markets, people are
more used to hand-held hygiene sprays. The purpose was
to demonstrate how shower toilets can improve hygiene,
no matter where consumers live.
The campaign proved instrumental in driving both
awareness and sales opportunities. Leveraging digital
channels, it quickly spread over social networks, gen-
erating some 40 million views, 10 million more than first
targeted. Combined with strong in-store bundling promo-
tion, LIXIL experienced greater sales in each of its target
markets, including sales of bidet seats in Vietnam jumping
from almost zero to 23,000 in nine months.
To cultivate the market through the campaign, Lee first
had to train her teams.
"Our first job was to provide training for the front-liners
– people interacting directly with customers. We need our
team to be able to respond to questions about differenc-
es between our products and competing products, and
that is only possible if they have hands-on experience. We
conducted training sessions in China, where we installed
and tried out all major models, including those from other
companies."
In Indonesia, LIXIL's teams experimented with selling its
bidet seats in baby supply shops, as well as approaching
people in hospital gynecology departments. These were
entirely new, unprecedented marketing channels, and
enabled LIXIL to get closer to pregnant women and new
mothers – consumers especially concerned about hygiene.
LIXIL also branded and transformed a bus in Indonesia
into a mobile Spalet experience space with actual Spalets
installed inside. Set up in an upscale shopping mall, curious
shoppers could experience it on the spot.
"This project was a series of experiments, a process of trial
and error that required an entrepreneurial spirit," Lee says.
"Even now that the first six-month phase of this project
is complete, people continue to discover and access this
content through word of mouth. Category profits are up
30% year on year, and by continuing with activities such as
these, we expect to see further growth this year as well."
22
LIXIL Group Corporation
Annual Report 2018 23
Digital Collaboration:
Increasing Organizational
Effectiveness
Using online platforms to enhance
collaboration and create a globally
connected workforce
Since April 2015, when LIXIL launched its
first global employee communications
platform, LIXIL LINK, it has steadily invested
in new tools and programs to open up
communication, dialogue, and cross-team
collaboration. In 2018, LIXIL went further
with the introduction of Workplace by Face-
book, a digital collaboration tool, through-
out the company.
According to Facebook, LIXIL is one of
the first Japanese companies to implement
Workplace for its global employee base.
The goal is to accelerate decision-making
by lowering the barriers inherent in a com-
pany of teams working across 150 countries
around the world. Driving the program
is the Head of the Digital Technology
Center, Taku Yasui.
"We began trialing Workplace within my
team in 2017. Once we started, people's
circles rapidly expanded and I thought that
if we were to utilize it throughout the com-
pany it might be possible for us to break
down walls within the organization and
stimulate communication."
A significant change occurred when LIXIL
introduced Workplace throughout the com-
pany.
"When our CEO posted a video asking
employees for cost-cutting ideas, the post
received more than 420 comments in less
than four days, and has now totaled over
26,000 views. This is an incredible and un-
precedented response. Employees offered
great ideas, and many of them have been
taken forward for further consideration and
implementation," said Yasui.
Yayoi Yakumo of the Internal Communi-
cations Group explains how Workplace has
taken communications in LIXIL to the next
level.
"With Workplace, people are progress-
ively able to share their ideas – and do so
freely and informally, without concern for
hierarchy. Management has begun to con-
duct live stream sessions targeted at all
employees, and I think it is very significant
that information previously discussed only
among top management is now visible
throughout the company in real-time. If
time zones do not permit an employee to
watch it from their PC or phone, they can
watch it as a video later."
While it is still early days, Yasui believes
this approach has raised transparency
within the company and has begun to shift
the culture toward more open communi-
cation. Eventually, the objective is to make
work life easier at LIXIL with work process-
es integrated directly into Workplace.
"LIXIL has started to create an environ-
ment in which employees who had only
been able to see others within their depart-
ments or their direct supervisors can now
think and act more freely, all while having
an overhead view of the entire company.
Employees can now quickly come together
and contribute to ideas from employees
from other departments. Processes are be-
coming simpler, curtailing lead times and
allowing us more room to take on small
challenges," Yasui says.
"These advantages of using digital tools will
also move us closer to our goal of becoming
a highly agile, bottom-up organization."
3,500
Employees spent
8,625 hours
Worked with 37
external organizations
LIXIL Community Day
Working together to expand LIXIL's
social contribution
In 2017, LIXIL introduced LIXIL Communi-
ty Day, a day when all employees around
the world take a break from their day jobs
to collaborate on a social cause or commu-
nity issue. It's a day when LIXIL executives
and employees can dedicate work hours
to focus on the company's three strategic
pillars: Global Sanitation & Hygiene, Water
Conservation & Environmental Sustainabili-
ty, and Diversity & Inclusion.
In its first year, about 3,500 employees
from 15 countries participated in the event.
They spent a total of 8,625 hours on 70
diverse projects. Some focused on clean-
ing public spaces: parks, rivers, temples,
and stations. Others spent time with elder-
ly people living alone, or helped provide
maintenance for sanitation equipment in
schools and homeless shelters. Employees
also collaborated with 37 external groups,
providing services for more than 16,000
people living in regional communities. Of
those who participated, 94% plan to con-
tinue their LIXIL Community Day activities
moving forward.
16,600
People benefitted
LIXIL's Strategy
Develop attractive and differentiated
products
LIXIL's Stories
01 Design-Led Innovation
02 Making Things that Matter
Annual Report 2018 25
Annual Report 2018 25
Design-Led Innovation
LIXIL recently appointed Paul Flowers to an expanded role of Chief
Design Officer, building on the work he has done at LIXIL Water
Technology (LWT) to further integrate design into the entire organiza-
tion's DNA. As part of this new role, he will now be tasked with driving
design-led transformation at LIXIL Housing Technology (LHT).
The Importance of Listening to the
Consumer
For Flowers, design thinking most impor-
tantly is about putting the consumer first.
"A lot of companies don't try to solve
problems, they just bring out iterations
of the same products in order to use their
existing assets. But consumers don't pur-
chase things based on the compromises
that you have within your own setup, they
want to spend their money on products
they love. That means less time trying to
convince the consumer and more time
observing, listening, and gathering insights
to understand their frustrations and
unarticulated needs." Flowers refers to
this concept as "Presearch."
"I like that we are a large company but
not a cumbersome one. We're inquisitive,
and we want to think. That's where the
value comes from, because if you're like
that, then you are constantly questioning,
"How can I do this better?", "Why did we
do it like that?", "Can we do it in a different
way?" We have to think like this if we are
going to add value."
Building the LIXIL Design Process
Flowers has already implemented core
design processes at LWT that can be used
for any of its products and technologies.
His team can now apply what he calls a
'brand lens' – signature elements intrinsic
to a particular brand – to ensure products
are true and relevant to their consumers.
"Each of our water technology brands is
now well defined, with a unique sense of
purpose, identity, and value. That means
we can apply our brand lenses to a certain
technology, and attach things like different
materials, colors, and finishes. This way,
our brands can fulfill different consumer
needs and at different price segments."
"I think there's also a sense of cultural
appreciation. People know that Japanese
technology is amazing. Then we add
something like GROHE brand equity into
the package, and it becomes an unbeliev-
able product."
Sales growth of key products show the
approach is working, but for Flowers, it's
the fact that all of LWT's global brands are
winning design awards, not just those that
traditionally focused on design, that is the
most telling.
"I'm proud that I've got an absolute
world-class design team behind our
products, and that we've really focused
on the people and putting them in leading
design studios."
From Product Design to Experience Design
One of the benefits of having a great
in-house design team is that they are
involved in every step of the development
process.
"With an in-house design team, you can
really start to work with the engineers and
factories, and understand how you can
apply all of that information to design. We
now work very closely with marketing, too;
we name products, we focus on packaging,
attend trade fairs, and ensure design is
present at each of the consumer touch-
26
26
LIXIL Group Corporation
LIXIL Group Corporation
Annual Report 2018 27
"It's all about putting the consumer
first. We want to identify a problem,
a pain point, or an opportunity."
Making Things that Matter
LIXIL makes things that matter – to all sorts of
different people and to the world it is part of.
Integrating cutting-edge technology into consumer-
centric designs, LIXIL makes products that solve
real-life challenges, suit individual preferences, all
while contributing to environmental sustainability.
American Standard:
Spectra Shower Collection
Spectra+ eTouch empowers the consumer
with flexible shower spray choices to suit
their individual preferences. Its first-to-
market technology allows users to switch
between spray patterns by simply touching
the edge of the showerhead, making it easy
to customize – even with wet hands. The
showerhead also includes a wall-mounted
remote that can be placed anywhere in the
shower, helping consumers who cannot
reach the showerhead due to age, height,
or mobility restrictions.
In addition, the Spectra+ Duo model fea-
tures a two-in-one option: a fixed shower-
head and detachable hand shower. Offering
among the widest spray coverage of any
two-in-one showerhead, consumers can en-
joy two convenient options without requiring
significant remodeling to their bathroom.
points. This end-to-end approach really
helps to enhance and harmonize the
whole consumer experience."
Transforming LIXIL Housing Technology
Looking ahead, Flowers plans to use a
similar design-led approach at LHT.
Flowers has also overseen a transition
from product design toward 'experience-
based design.' As an example, he cites
GROHE Blue, a kitchen faucet with its
own filtration system.
"When we made GROHE Blue, we actu-
ally created a tap brand for the first time.
We wanted to show people that its value
could be symbolic. And for that, we had
to look at the whole process and the whole
experience, from how you decant water to
how you transfer it. As a result, we learned
that the consumer value of the product
didn't just lie in the fact that water will be
cheaper or safer, but that it also contribut-
ed to social interactions between people.
It became a choice for people to say,
"I drink filtered water from the tap because
it is better for the environment."
"In terms of the philosophy, it's still all
about putting the consumer first. It's not
about creating a product because we have
a factory that can do so; it's more about
what a product can do for humanity and
for consumers. That should give LIXIL
real purpose and real value. We want to
identify a problem, a pain point, or
an opportunity."
And similarly, he is also confident that
it will soon pay off.
"At LHT, we already have a design team
in place and we are busy introducing our
design processes and tools to the team.
I have no doubt that we will start to see
good progress in our products and ser-
vices, which will help to redefine this
area of the business and drive value for
the brand."
GROHE: Sensia Arena
GROHE Sensia Arena combines German
design and engineering with advanced
shower toilet technology from Japan,
blending together form and function.
Modern and elegant, its streamlined,
gentle, and stylish shape integrates seam-
lessly into any contemporary bathroom
design. No design feature has been left
unexplored, from the finer details such
as the discreet nightlight to the lid that
automatically opens and closes. Inside
GROHE Sensia Arena's sophisticated
design, it integrates some of LIXIL's most
cutting-edge technology developed in
Japan to improve the experience for con-
sumers, from AQUA CERAMIC, which
keeps the ceramic surface shiny for 100
years, to the Triple Vortex flush system.
28
LIXIL Group Corporation
Annual Report 2018 29
American Standard: Genie Hand Shower
Genie Hand Shower, designed for con-
sumers in markets with low water pres-
sure, offers a new alternative. Unlike hand
showers that rely on typical pressure boost-
ers, it delivers a robust yet non-abrasive
shower experience through 120 intricately
and evenly spaced micro-spray nozzles.
Transparent materials used in the shower-
head allow users to see when the product
needs to be cleaned. With something as
common as a key, a slot on top of the
showerhead enables consumers to open
it up in order to wipe away limescale,
mold, and dirt. Genie Hand Shower is
available in three colors – aquamarine,
petal pink, and steel gray – providing a
refreshing alternative to current metallic
offerings in the market, and matching
local trends and preferences.
LIXIL: Carport SC
LIXIL's Carport SC blends in beautifully with the look of the
modern home while maintaining all the functions of a car-
port. Its uniquely minimalist façade was created after reima-
gining the fundamental structure of carports and reducing
unnecessary decoration and noise. Thanks to the use of
aluminum extrusion, the roof is a thin, flat, elegant yet robust
surface measuring just 40mm thick. The use of aluminum
also blocks out sunlight, helping to prevent a car's colors
from fading while keeping the inside from getting too hot in
the summer. As part of this minimalist design, gutters and
bolts are invisible from beneath the roof, while components
have been reduced and ease of construction improved.
INAX: Ecocarat
Ecocarat is a wall tile that combines design and function.
Through micro-holes in the ceramic material, Ecocarat
can control humidity levels in a room five to six times
better than diatomaceous earth walls and 25 times bet-
ter than humidity-controlling wallpaper*. By maintaining
humidity levels between 40 to 70% in a room, consum-
ers can even hang their laundry to dry indoors during
the winter and rainy seasons, while it helps prevent the
spread of mites and mold, as well as skin from drying
out. Furthermore, it helps reduce odors from toilets,
* Effect varies depending on the room, ventilation, weather, and environment.
food waste, cigarettes, and pets, as well as toxic sub-
stances such as formaldehyde. A range of Ecocarat tiles
are now available in various designs to enhance both
homes and public spaces.
LIXIL's Strategy
Strategic marketing to
drive growth
LIXIL's Stories
01 Everything for the Consumer
02 Anticipating Needs Consumers Didn't Know They Had
03 Reflecting Consumer Demand
04 LIXIL's New Power Brand Strategy
05 Getting Closer to Consumers through the Retail Experience
Annual Report 2018 31
Annual Report 2018 31
Everything for the Consumer
Getting closer to the
consumer through new
business initiatives and
digital technology
Across the organization, LIXIL is introduc-
ing new business initiatives to get closer
to its consumers. Yugo Kanazawa, Senior
Managing Director, Marketing, Digital and
IT, and Chief Digital Officer, explains some
of the changes happening across Japan
that are driving these initiatives.
"The market is evolving. In the past,
consumers visiting our showrooms were
preparing to build new homes, but now
the majority are looking to renovate their
homes. As a result, the agents and dealers
that used to accompany and guide them
are no longer there, and so now LIXIL has
taken on that partnering role."
LIXIL is responding to Japan's silvering
population and the decline in demand for
new homes, switching from a product-
driven approach to solutions that reflect
consumer demands. Kanazawa sees this
as an opportunity.
"Japan's population is aging faster than
anywhere else in the world, making it an
interesting market. It's no longer about
simply making good products. The ser-
vices that you can introduce alongside
them have also become increasingly
important."
LIXIL Owners Club, a business initia-
tive that offers free product warranty
extensions and 24/7 repair services, is
one example. Consumers typically only
upgrade or replace fixtures such as toilets
or bathtubs every few decades. However,
LIXIL's new service helps it stay connected
to individual consumers and provides
them with new value.
Joint venture LIXIL TEPCO Smart
Partners is another example, offering
packaged services that help consumers
wanting to build a Net Zero Energy House
(ZEH) reduce high initial costs. Rooftop
solar energy systems can be paid for in
installments for consumers who buy LIXIL
housing materials and products for ZEH,
including high-performance windows,
doors, and building structures.
For Kanazawa, the evolution of such
services is also beneficial for society.
"If the manufacturer retains ownership
of a product and offers it to consumers
through a subscription, for example, it
gives the manufacturer greater incentive to
create high-quality and durable products.
This also helps them stay in touch with the
consumer, while ultimately, I believe it is
the better choice for the environment, too."
In addition to new services, digital
technology has been key to attracting
and gaining insight into Japan's changing
consumers. In its showrooms, LIXIL has
introduced a more sophisticated cost
quotation system, where consumers can
now see the total cost of kitchen systems
in real-time as they configure their dream
32
LIXIL Group Corporation
Annual Report 2018 33
kitchen in 3D. Some showrooms even
enable consumers to see the 3D plan in
virtual reality. This enables them to easily
change materials and colors, and if the
quote exceeds their budget, they can
test other options before receiving a
final estimate.
"Through the tens of thousands of
quotes we issue every year across our over
90 showrooms nationwide, we can now
also increase the number of options that
are popular with consumers, and at the
same time, eliminate those that aren't,"
says Kanazawa.
In addition to helping consumers make
decisions, big data is contributing to prod-
uct development. Kanazawa is confident
that based on the product combinations
that are popular among consumers,
machine learning will enable LIXIL to auto-
matically generate proposals that match
individual consumer tastes in the future.
LIXIL is now focusing on strengthening
its digital technology, data analysis, and
marketing through its internal digital
teams comprising of professional IT
specialists, which is rare for a Japanese
manufacturer. Kanazawa believes this
will enable LIXIL to get closer to the con-
sumer, which will increase competitive-
ness and differentiation.
And while continuously delivering new
initiatives that will benefit consumers,
Kanazawa has a vision for the future.
"In the future, for example, imagine a
society where we do not need elderly care
homes. If we can create products and
services that support us as we get older,
we could potentially live out our entire
lives in the comfort of our homes. And by
expanding this concept, from Japan to the
world, I believe this would greatly contrib-
ute to society."
Anticipating Needs
Consumers Didn't Know
They Had
A future-oriented business model to
cultivate new types of consumers
When it comes to protecting the home, people often think
about the risks of burglary and damage caused by fire
rather than water. To address this, GROHE developed
GROHE Sense, a movable sensor that alerts consumers
via smartphone when it detects a water leak, and GROHE
Sense Guard, a smart water controller installed in a
house's main water line that automatically shuts off
its water supply when it detects a pipe burst.
"With digitalization everywhere, staying ahead of
consumer needs was becoming increasingly important.
So to create new value for our consumers, we focused
on developing new smart products that could be
incorporated in the Internet of Things (IoT), leading us to
a new business model," says Robert Veltrup, Chief Digital
Officer at GROHE AG.
Through its new water security system,
GROHE has created a new product
category that provides an innovative
solution to a yet unsolved problem.
"We are helping consumers minimize
risk. For example, they can turn off the
water supply to their summer homes
during freezing weather – even when
they are not there. We can also help
them manage and optimize their water
consumption through the use of data,"
says Veltrup.
"And through the GROHE ONDUS app,
which is connected to the Sense system,
GROHE can also for the first time actively
interact with its consumers."
Targeting consumers directly has
also enabled GROHE to collaborate
with an entirely new type of partner:
insurance companies. An assessment in
2017 revealed that 54% of households
in Europe have experienced mains-
related water damage in their homes1.
But according to an insurer, up to 93%
of the cost of damage caused by water
can be prevented or minimized by an
automatic water security system2. As a
result, GROHE's initiatives are receiving
considerable attention from insurance
companies as they look toward new water
damage prevention models to reduce the
amount of personal property payouts, as
well as reduce insurance costs for their
consumers.
For Veltrup, GROHE's new IoT products
have opened up a whole new world of
possibilities. "We are encountering many
new opportunities because we're working
in completely new fields. We look forward
to creating even more products that help
improve the lives of our consumers in new,
and perhaps still undiscovered, ways."
1 The ConsumerView, Quantitative Assessment Europe, January 2017
2 ACE Group, ACE Private Risk Services Study, April 2011
34
Annual Report 2018 35
Reflecting Consumer
Demand
Better understanding consumer needs
leads to new and improved products
and services
In a world where consumers have more
choices than ever before, LIXIL's American
Standard Walk-In Tub business in the US
market is today demonstrating the impor-
tance of closer interaction with the con-
sumer. Having invested in new capabilities
to engage consumers and improve their ex-
perience, Walk-In Tub sales have grown at
a compound annual rate of 151%, jumping
a remarkable 50% in FYE2018 alone.
Robert Buete, President of LIXIL Home
Services at LIXIL Water Technology Amer-
icas, explains: "The Walk-In Tub is a great
solution for senior citizens and people with
limited mobility, a market with enormous
growth potential over the next 30 years.
While we previously conducted marketing
and sales through dealers and retail stores,
that approach was never really effective.
So, to unlock the real value of the busi-
ness, we decided to manage the consumer
journey end-to-end."
"We make the product, advertise it, sell it,
install it, and service it. Throughout every
phase of the consumer journey, we have
become the contact for the consumer."
The direct-to-consumer business model
has enabled LIXIL to better understand
individual consumer needs. In marketing,
for example, Buete's team experimented
with using a softer approach in its online
questionnaire, repeatedly testing and
learning until the online conversion rate of
its landing page increased 300%.
LIXIL also responded to consumer
needs in the services segment related to
Walk-In Tubs. Until now, it was necessary
to contact separate contractors for plumb-
ing, electrical, and construction work. The
new business model integrates all of these
procedures into one package under the
trusted American Standard brand, reduc-
ing the burden on consumers.
Closer engagement with the consumer
is also contributing to the product devel-
opment process, with upcoming product
features based on direct feedback.
Despite the immense growth of the
Walk-In Tub business, Buete believes it
has even more future potential. "With the
capabilities we have built, we can now ex-
pand the same platform to multiple prod-
uct categories going forward."
TOSTEM
RICHELLE
INAX
INTERIO
SPAGE
EXSIOR
SUPER WALL
LIXIL's New Power
Brand Strategy
Creating brands trusted and
loved by consumers
Since 2011, when LIXIL was formed through the consol-
idation of five renowned Japanese manufacturers, the
water technology and housing products company has
invested in strengthening its brand in the Japan market.
Seven years later, LIXIL has achieved a brand awareness
level of over 80%.
In spite of its nationwide recognition, however, a study
has also revealed that few consumers immediately think
of products such as windows, toilets, and kitchens when
they hear the name LIXIL.
"At a time when the renovation market is expanding
and consumers are more directly becoming involved in
selecting products themselves, we need to strengthen
our brand power so we become their brands of choice,
and they look for and buy our products," says Toshie
Takahashi, who heads LIXIL's Global Brand Department.
To achieve this, LIXIL implemented a new product
brand strategy in April 2018. Under this new strategy,
LIXIL will invest in what it calls its "power brands," con-
sisting of product brands TOSTEM, INAX, RICHELLE,
SPAGE, INTERIO, EXSIOR, and SUPER WALL.
"The goal is to boost the level of recognition of our
products among consumers. Our legacy brands,
TOSTEM and INAX, already have existing levels of prod-
uct recognition, so we decided to leverage them as prod-
uct category brands," explains Takahashi.
Before implementing its new strategy, the brand team
collaborated closely with other divisions to define the
identity of its power brands, their promises, and the ex-
perience that each brand will deliver.
"From products to catalogues, from showrooms to ex-
hibitions, we want our consumers to consistently expe-
rience our brands at every touch point in order to build
trust and become their brands of choice. When consum-
ers love a brand, we will be less affected by competitive
pricing, and can expect profits to increase, too."
Annual Report 2018 37
Getting Closer to Consumers
through the Retail Experience
Telling the story of LIXIL's brands through unique
displays and smart technology
LIXIL is enhancing its showroom exper-
ience worldwide as a part its user-focused
marketing strategy. One example of this
is the recently opened GROHE SPA
showroom in Singapore's famous shopping
district along Orchard Road. Wholly owned
and operated by GROHE, the flagship
store takes up a double-story space that
stretches over 6,000 square feet, offering
consumers, architects, and interior
designers a place to experience the latest
in water technology.
"To become a brand that consumers feel
close to, we wanted to create a showroom
that helps them experience cutting-edge
water technology products, all while
recreating the environments in which
they would actually be used," says Audrey
Yeo, Vice President of Marketing for
GROHE in the Asia Pacific region.
"We chose Singapore because many
consumers here are very conscious of
value, which gives us the opportunity to
start new trends with our products. From
our new flagship showroom, we also aim
to reach some of the world's top architects
and designers based in Asia."
Many GROHE products are used in
luxurious hotels around the world. GROHE
recreated seven different hotel bathroom
suites in its showroom, revealing the
stories behind each of their unique designs
and why the architects, designers, and
developers chose GROHE in each instance.
"Many of our consumers first encounter
GROHE products at five-star hotels and
later want to bring them into their own
homes. In a similar fashion, we don't
just want to exhibit our products at our
store; we want to inspire our consumers
with them."
specifications while viewing the showroom,
which they can readily share with their
architects and designers, all from the palm
of their hand.
Singapore is the first of the brand's
"Showrooms at Apple and BMW are
showrooms to also offer cutting-edge virtual
reality headsets that enable consumers
to experience what its products will look
like when installed. Through 3D images
projected in the virtual headsets, dubbed
Shower Configurators, consumers can
bring their dream bathroom to life and
experience a "live shower" without
getting wet.
The showroom also leverages the latest
in technology to provide information
about its products, using radio-frequency
identification (RFID) technology to share
information with mobile terminals. This
enables visitors to instantly receive
detailed information regarding product
fascinating places that are expertly
branded, where consumers can lose track
of time trying out products. We aimed
to create a similar world that offers that
same incredible standard. The showroom
concept is all about explaining the story
behind the brand from the moment a
consumer sets foot inside the store,
creating an instant connection with
GROHE," says Yeo.
"We are now sharing information on the
technology used in our showroom with all
of our regional facilities, discussing how
these technologies can potentially be used
in other aspects of our business."
LIXIL's Strategy
Achieve competitive costing
LIXIL's Stories
01 Pursuing Global Competitiveness
02 Collaboration that Transcends Borders
03 Revitalizing the Window Sash Business
Annual Report 2018 39
Annual Report 2018 39
Pursuing Global
Competitiveness
Achieving cost and operational efficiency
across all regions
The Japan Market
Until recently, LIXIL Water Technology
(LWT) Japan and LIXIL Housing Tech-
nology (LHT) Japan focused on product
development and production, while LIXIL
Japan Company (LJC) focused on sales in
the Japan market. This structure enabled
LIXIL to strengthen lateral communication
between the technology business units,
share knowledge, and expand sales.
But the market environment has since
changed. The emergence of new compet-
itors, big data, artificial intelligence (AI),
and digital technology are ushering in new
business models and greater competition
from non-traditional players, while modern
consumers are also demanding more in-
novative and diverse products. To respond
to these changes, LIXIL restructured its
Japan sales operations in April 2018, and
integrated product development, produc-
tion, and sales vertically under LWT Japan
and LHT Japan, respectively. The new
structure ensures closer communication
between relevant teams. This means that
not only does the new structure enable
consumer feedback to be integrated into
the development and manufacturing pro-
cess in a shorter space of time, it allows
the development of more differentiated
products and faster decision-making with-
in the business unit. Sales teams will also
be more specialized around the products
and services portfolio of their respective
businesses, further enhancing LIXIL's
competitiveness with customers and
consumers.
LIXIL Water Technology
In the global market, LIXIL is strengthen-
ing the supply chain for its water technol-
ogy business. Takeshi Teramoto, Director
of LWT's Global Supply Chain, discusses
LIXIL's key initiatives.
"LIXIL is today developing its brands,
such as GROHE, American Standard,
and INAX, leading the global market in
the fields of plumbing-related technology
and sanitaryware. To ensure our com-
petitive advantage, we are focusing on
increasing our global production capacity
and creating a supply chain network that
can efficiently and flexibly utilize all of our
production bases. This will enable us to
capture growing worldwide demand for
water technology products."
LIXIL is investing approximately US$65
million in India, a growing market where
it is enforcing its presence, to acquire
sanitaryware manufacturer Sentini Sani-
tarywares and expand capacity. This new
factory, which is set to begin operation in
August 2018, will have the capacity to pro-
duce up to two million pieces each year
and will also respond to global demand
in markets outside India by exporting to
countries such as the US.
Annual Report 2018 41
Increasing global
production capacity
and enhancing its
supply chain network
will enable LIXIL to
capture growing
worldwide demand
for water technology
products.
LIXIL also acquired a sanitaryware factory
in the Dominican Republic to respond to
rising demand for high-quality toilets in the
Americas, while it has invested a total of
US$56 million in expanding capacity and
improving efficiency in existing factories in
Thailand, Vietnam, and Mexico. It further
invested US$30 million in its GROHE zinc-
die casting factory in Thailand to double
production capacity for kitchen faucets.
By introducing new technology to manu-
facture zinc parts, it can now produce
some products completely in-house.
Synergies are playing a key role at the
heart of LWT's competitive success. In
addition to promoting cross-selling across
its brands and regions, it is now achiev-
ing synergies in sanitaryware manufac-
turing, supply chain, and procurement,
all through global task forces established
across the organization. To strengthen
these initiatives, LIXIL established the
Synergy Creation Office within LWT in
April 2018.
LIXIL Housing Technology
For LHT, breaking away from a high-cost
structure has been its top priority. The
number of new domestic housing starts in
Japan is decreasing yearly, while the busi-
ness has been susceptible to fluctuations
in raw material prices. As a result, LIXIL
has put in place short-term countermea-
sures and a long-term roadmap aimed at
creating an organization more resistant
to these external factors. One key strate-
gy to defend against commoditization is
to enhance differentiation of its products
and services through stronger design and
technology. LIXIL's Chief Design Officer,
Paul Flowers, has been appointed from
July 2018 to support LHT Japan's trans-
formation by applying design thinking to
its product development.
"LIXIL is adopting a progressive approach
to design, tapping into consumer trends
early and turning these insights into
experiences for our consumers. I look
forward to the exciting new challenge with
our housing business, and am confident
that we can bring greater value to LIXIL's
brands," says Flowers.
In addition, to accelerate its response
to changing market environments, LHT
is streamlining its product development
and manufacturing functions. One key
initiative is to improve its production effi-
ciency by reducing the number of stock
keeping units (SKU). SKUs were already
reduced by more than half in FYE2018
compared to the previous year, and LHT
is now focusing on reducing them further,
which will enable it to unify its core prod-
uct platforms. In turn, this will enable LHT
to shorten its development time by half
as well as achieve highly efficient produc-
tion lines. LIXIL believes that the effects
of these measures will be realized from
FYE2020.
LHT Japan is enhancing
differentiation of its
products and services
through stronger design
and technology.
42
Annual Report 2018 43
Collaboration that
Transcends Borders
LIXIL's Synergy Creation Office aims to build
synergies across businesses and regions
To achieve the goals laid out in LIXIL's
Medium-Term Plan, LIXIL established the
Synergy Creation Office (SCO) in LIXIL
Water Technology (LWT) in April 2018.
The SCO promotes the creation of syn-
ergies across LIXIL's geographic regions
in multiple aspects of the business, from
technology, product development, procure-
ment, and manufacturing through to hu-
man resources, IT, financial affairs, intel-
lectual property, and brand management.
LIXIL's Chief Integration Officer, Yang
Chin Chen, supervises synergy creation
activities.
"We are aiming to make LWT a network
of businesses that can respond to local
customer demands in all regions. Organi-
zations like this, however, tend to have dif-
ficulty creating synergy because they are
very independent. So, we are driving new
levels of synergy by removing barriers and
enabling collaboration between regions
without centralizing functional reporting
lines. In this way, the SCO will enable us to
work together so the whole is greater than
the sum of its parts."
The SCO differs from the traditional head-
quarter functions; it is an experimental
endeavor for LIXIL. Comprised of execu-
tives and managers who also have a
dedicated role in a region or a corporate
function, each has been tasked with a
project where they will "think globally and
act globally." The SCO is already conduct-
ing initiatives in more than 30 different
areas where synergies can be unlocked.
For example, the SCO has developed a
workstream for research and development,
creating an environment in which all re-
searchers can collaborate and take part
in the development process. In addition
to sharing best practices, ideas, and data
concerning cutting-edge technology, they
can eliminate operational redundancies at
the development stage. Through this kind
of platform, each individual can focus on
his or her area of specialty, while lever-
aging each research center's expertise
and capabilities to divide issues and solve
them separately.
LIXIL is already seeing the effects of
synergy. In FYE2018, synergy in product
development and new businesses
contributed to 34% of total sales growth
outside of Japan at LWT, the equivalent
of ¥12.1 billion.
"If this endeavor succeeds, we may
adopt it in our other businesses as well
as across the Group. The ability to create
synergy between different businesses is
becoming a unique strength of LIXIL's,
which is expanding its diverse businesses
globally," says Chen.
Revitalizing the Window
Sash Business
Implementing short-term countermeasures
and a long-term roadmap at LHT
LIXIL Housing Technology (LHT) Japan
has introduced a new organizational struc-
ture that brings development, production,
and sales functions all under one roof. For
Satoshi Yoshida, CEO of LHT Japan, the
new structure will enable the business
to reach a new level of competitiveness.
"We are creating an organization through
which we can continuously launch new
and differentiated products," Yoshida says.
This new organizational structure is one
of the turnaround strategies being imple-
mented to make LHT Japan more resilient
to external market factors, enabling it to
respond to changing conditions more flexi-
bility, and revitalize the window sash busi-
ness. To strengthen its next-generation
manufacturing capabilities, for example,
LHT Japan introduced the Next Genera-
tion Factory Strategy Department in April
2018 to help it implement its strategies
across the organization. In October 2017,
LHT also established its new Housing
Technology R&D Center in Noda, Chiba,
which will play a core role in the integra-
tion of LHT's R&D activities.
Yoshida believes it is vital for LHT to
enhance the value of each product and
service they are providing to increase
competitiveness.
"Until now, we were producing and
selling large quantities of products for the
new housing market in Japan. However, to
secure profit and growth while facing a de-
clining population and shrinking domestic
new housing market, we need to adapt to
the times."
"The most important thing is to recognize
that consumers have specific needs and
preferences. We will design and innovate
new products with the consumer in mind,
providing them with true value, whether
they are looking for health-related or envi-
ronmental benefits from our products."
Embodying this concept, TOSTEM LW is
a new window product available from Au-
gust 2018 and the first to come out since
reviving the TOSTEM brand. Consisting of
a single large glass door that slides open
sideways, the frame is almost invisible
from inside the room, creating a bright
open space that connects the inside and
outside of the house.
LHT is now also pursuing new growth
opportunities through tie-ups with domes-
tic start-ups and global businesses that
offer differentiated technologies and com-
petitive advantages. Plans are already in
place, for example, to collaborate with a
Swiss brand that produces frameless win-
dow systems to launch new mid- to high-
end range products in FYE2019. Differen-
tiated products will be key to competing
both in Japan and overseas in the future.
44
Annual Report 2018 45
Annual Report 2018 45
Beyond the Medium-Term Plan
The global population and middle-
income segment are growing, driving
new demand in the water and hous-
ing industries in the long run. As these
trends continue, people will seek better
homes that improve their comfort and
accommodate their changing prefer-
ences. LIXIL's Medium-Term Plan (MTP)
will enable it to become a company that
is better able to meet that demand, and
ultimately create an organization that
can achieve sustainable growth over the
long term. The MTP will turn LIXIL into
a company that can adapt quicker and
innovate faster, allowing it to capture
more revenue growth in the future. And
to achieve this, LIXIL's regional platforms
will play a central role in establishing its
business model, expertise, and pres-
ence around the world, positioning it to
lead and contribute to each of its mar-
kets beyond even the MTP.
Japan – A Laboratory for the Future
Japan's population is both aging and shrink-
ing. According to the latest statistics, Japan
is home to over 67,000 centenarians1, and
its current population of 127 million 2 is
expected to decrease by 20% by 2050 2. By
that time, 38% of its citizens will be over 65
years old 2.
While many other countries are experien-
cing or about to experience similar trends,
Japan is at the forefront of this demographic
challenge. As such, LIXIL's Japan business
is playing a leading role in defining the future
standard for how the company can effectively
support "aging in place." The country today
is a testament to how far living standards
have come and the critical role technology
has played in establishing this standard.
As the most comprehensive water and
housing technology company in Japan,
LIXIL sees its presence in the market, and
the Japan business itself, as a significant
opportunity for its global operations. As LIXIL's
first and largest market, Japan is where the
company draws its roots, where it has bene-
fitted from a long history of groundbreaking
research and development, and where it
continues to test its latest technologies.
"Japan's is the most advanced aging
society in the world, and that gives us the
opportunity to also face one of the most de-
manding markets in the world. To compete
Japan's current population of
127 million is expected to decrease by
20% by 2050. By that time, 38% of
its citizens will be over 65 years old.
here, differentiated products
and services are key. This
fact alone makes it a powerful
contributor to the growth of
LIXIL in the long term because
differentiated products and
services are appreciated in
mature markets first, from the
US to Europe," says Kinya Seto, President and
CEO of LIXIL. "For LIXIL, Japan plays a critical
role – not just as our largest market, but as the
innovator and driver of high-end products and
technologies that can be exported to
the world."
46
LIXIL Group Corporation
Annual Report 2018 47
By 2050, demand for water is
expected to increase by nearly
one-third.
EMENA – Driving Intelligent Water
Management
LIXIL is now on the path to becoming a full bathroom
solutions provider worldwide and has a strong position in
Europe through its GROHE brand. Under LIXIL, GROHE
was the first of the company's global brands to adopt
its technology from Japan and redesign it to match
the cultural and design
preferences of its home
market. GROHE is now
expanding its newly in-
troduced ceramic lines
and moving from selling
individual products to
full, synchronized bathrooms, positioning it to grow new
revenue streams far into the future.
But in a world of profound technological change
and population growth, the market for water technol-
ogy is still ripe for innovation. By 2050, demand for
water is expected to increase by nearly one-third 3.
GROHE is taking a lead in developing new and intel-
ligent solutions to manage water consumption in the
home. GROHE Sense and Sense Guard are among
its first products that can be integrated into IoT, but
these are only a hint of what is to come, with the
brand now sitting on a pipeline of ideas stretching
eight years into the future.
"The home is becoming smarter and more connected,
and how we manage and use water – one of our most
precious resources - will be a big part of that story.
Intelligent water products will redefine how we live,
but one of their greatest advantages is also the data
that will give us insight into the future," says Michael
Rauterkus, CEO of LIXIL Water Technology EMENA.
Americas – Leading in Consumer Centricity
The US market is the world's largest consumer market,
with 325 million people4 and household spending
accounting for nearly a third of the global total 4. In
this vast and diverse market, American Standard is a
household name that generations of Americans have
grown up with and whose products are used in three
out of five American homes.
Under LIXIL, the American Standard brand is bene-
fiting from technology imported from Japan, enabling
it to better serve the broad needs of its diverse con-
sumer base with a full spectrum of bathroom products,
from shower toilets to touch-control showers and
walk-in baths. In addition, LIXIL's portfolio in the
Americas also includes premium, aspirational brands
such as GROHE and DXV to cater to a wider range of
consumers.
To better prepare it for the future, LIXIL is now invest-
ing in more consumer insight and analytic capabilities.
"LIXIL is dramatically stepping up its focus on get-
ting closer to the consumer in the Americas. We have
invested in gaining greater consumer and business
insight, enabling us to better understand what drives
the consumer today and in the future," says Steven
Delarge, CEO of LIXIL Water Technology Americas.
In the year since this new function has been in place,
it has generated insights that are already changing
the way LIXIL approaches the market. Ultimately, this
shift will set LIXIL up for long-term future success by
providing the flexibility to adapt to rapidly changing
consumer needs and desires.
Asia Pacific is expected to account
for two-thirds of the world's middle-
income segment by 2030.
Asia Pacific – An Innovative Growth Engine
Poised as the future growth engine of LIXIL, nowhere
are LIXIL's product lines, brands, and business models
more diverse than in the Asia Pacific region. From
faucets and ceramics to interiors, sashes, and kitch-
ens, the presence of LIXIL can be felt across the
region's 23 markets.
Goods are becoming increasingly accessible to
consumers in the burgeoning middle classes of this
fast-growing region, which is expected to account for
two-thirds of the world's middle-income segment by
2030 5, and LIXIL is tailoring its approaches to target
consumer groups in these markets.
LIXIL's footprint and breadth of offering allows it to
deploy new and disruptive business models, and ex-
pand into new categories. Ultimately, it aims to simplify
the end-to-end journey for consumers, an objective
that is helped by its ability to leverage experience
and technologies from the Japan market in these
various categories.
LIXIL businesses in Asia have also traditionally been
close to the consumer, and operate within leaner value
chains; this has allowed it to launch new products fast-
er, drive consumer acceptance of new solutions, and pi-
oneer new models that add value to the end consumer.
LIXIL's consumer-focused approach is today seen
across Asian markets like Indonesia, Vietnam, India,
and Thailand, but perhaps nowhere more so than
in China. Driven by demand for renovation in major
cities as well as new sales of homes in growing large
towns, LIXIL is leveraging its multi-category and multi-
brand strengths to deliver the best experience to
increasingly discerning Chinese consumers, including
through new end-to-end business models.
"China is in the midst of a great transition to becom-
ing a consumer-driven economy, and we are orienting
all of our brands and services to fulfill the future de-
mand that this will generate. In fact, all across Asia
LIXIL is aiming to transform the industry by developing
end-to-end home solutions that will make the entire
experience easier, more enjoyable, and of true value
to the consumer," says Bijoy Mohan, CEO of LIXIL
Water Technology Asia and LIXIL Housing Technology
Asia.
Sub-Saharan Africa – The Final Frontier
The continent of Africa presents a long-term oppor-
tunity for LIXIL: it is diverse, dynamic, and growing.
Sub-Saharan Africa, in particular, is anticipated to
record one of the world's largest population growths:
1.2 billion urban residents by 2050 6.
LIXIL Africa is now positioning itself to meet the de-
mand of the rapidly growing middle-income segment
in the future. It is the only local manufacturer in South
Africa that can offer full bathroom solutions across all
categories and includes household brands such as
COBRA. It is now also working on adopting innovative
approaches to distribution, achieving greater synergy
in all areas of the business, improving operational
efficiency and governance, as well as ensuring
that it provides its customers with products of
superior quality.
LIXIL has also made significant investment in areas
of Africa with inadequate access to basic sanitation
and clean water. The company markets SATO Toilet
Systems as a true consumer brand, selling products
that not only help improve sanitation but fulfill cus-
Sub-Saharan Africa is anticipated
to have 1.2 billion urban residents by
2050.
tomer demand and function as an entry point into the
LIXIL family of brands. Through its focus on providing
innovative solutions for consumers in these markets,
LIXIL is both tackling the sanitation crisis and ensuring
a future in the region for years to come.
"The African continent is LIXIL's final frontier, a
place of great future growth beyond even the MTP
horizon, where we can make a meaningful difference
to the people who live here. Our goal is to bring global
technology, standards, and practices in our industry to
the continent," says Jay Londhe, CEO of LIXIL Africa.
1 Japan Ministry of Health, Labour and Welfare, September 2017
2 Japan Ministry of Internal Affairs and Communications, Statistics Bureau, 2017
3 United Nations, UN Water, World Water Development Report 2018, March 2018
4 US Department of Commerce, SelectUSA, 2018
5 OECD, January 2010
6 The World Bank, 2015
FYE2018
PERFORMANCE
Annual Report 2018 49
Annual Report 2018 49
Revenue
¥1,664.8 billion
Core Earnings Ratio
4.5%
ROE
9.4%
Net Interest-Bearing Debt / EBITDA
4.0 times
Ratio of Equity Attributable to Owners
of the Parent
29.3%
Year ended March 31, 2018
"The future
is bright for
companies that
can respond to
new opportu-
nities. I believe
our industry is
well positioned
to respond to
megatrends in
demography
and technology."
Kinya Seto, President and
Chief Executive Officer
50
LIXIL Group Corporation
Annual Report 2018 51
Financial Highlights
LIXIL Group Corporation and Consolidated Subsidiaries
Year ended March 31
YoY 1.9%
Core Earnings / Core Earnings Ratio
YoY 16.1%
1,664.8
(¥ billion)
100
75
50
25
0
75.3
4.5%
8.0%
6.0%
4.0%
2.0%
15
16
17
18
0.0%
0
15
16
17
18
Japan Overseas
Core Earnings Core Earnings Ratio (right)
Revenue increased by 1.9% year on year to ¥1,664.8 billion, reflecting, among
other factors, an upturn in sales of plumbing products, both within and outside
Japan, due to effective marketing activities.
Core earnings declined by 16.1% year on year to ¥75.3 billion, due to the
combined impact of an increase in distribution costs resulting from increased
sales, the rising price of raw materials and a substantial rise in SG&A expenses
relating to upfront investments.
SG&A Expenses / SG&A Ratio
YoY 5.7%
EBITDA / EBITDA Ratio
YoY 6.3%
(¥ billion)
600
450
300
150
488.2
60.0%
45.0%
29.3%
30.0%
15.0%
0
15
16
17
18
0.0%
(¥ billion)
200
150
100
50
0
12.0%
137.1
8.2%
9.0%
6.0%
3.0%
15
16
17
18
0.0%
SG&A Expenses SG&A Ratio (right)
EBITDA EBITDA Ratio (right）
SG&A expenses rose by 5.7% year on year to ¥488.2 billion as a result of upfront
investments, including marketing expenses and IT systems depreciation costs.
The SG&A expenses ratio also rose, increasing by 1.1 percentage points year on
year to 29.3%.
EBITDA declined by 6.3% year on year to ¥137.1 billion, because of the fall in
core earnings.
Profit (Loss) for the Year Attributable to
Owners of the Parent
ROE
YoY 28.4%
YoY 1.5 Points
Total Assets
ROA
(¥ billion)
15.0%
3,000
54.6
9.4%
7.5%
1,500
0.0%
0
-7.5%
YoY 3.2%
YoY 0.6 Points
2,107.1
2.6%
3.0%
1.5%
0.0%
-1.5%
Revenue
(¥ billion)
2,000
1,500
1,000
500
(¥ billion)
60
30
0
-30
-60
15
16
17
18
-15.0%
15
16
17
18
-3.0%
Net Interest-Bearing Debt / Net Debt-to-Equity Ratio YoY 14.0%
(¥ billion)
800
600
400
200
549.2
89.0%
160%
120%
80%
40%
0
15
16
17
18
0.0%
Equity Attributable to Owners of the Parent
Ratio of Equity Attributable to Owners
of the Parent
YoY 12.7%
YoY 2.5 Points
(¥ billion)
800
600
400
200
616.9
29.3%
60%
45%
30%
15%
Net Interest-Bearing Debt Net Debt-to-Equity Ratio (right)
0
15
16
17
18
0.0%
Repayment of interest-bearing debt has been proceeding steadily, and net
interest-bearing debt as of March 31, 2018 was down by 14.0% year on year
at ¥549.2 billion, representing a further enhancement of the Company's overall
financial soundness.
Earnings per Share (EPS)
Dividends per Share / Dividend Payout Ratio
YoY ¥41.1
YoY ¥5
Equity Attributable
Ratio of Equity Attributable
to Owners of the Parent to Owners of the Parent (right)
Equity attributable to owners of the parent, taking into account the profit for
the year attributable to owners of the parent, stood at ¥616.9 billion as of
March 31, 2018. The ratio of equity attributable to owners of the parent rose
by 2.5 percentage points year on year to reach 29.3%.
Purchase of Property, Plant and Equipment and
Purchase of Intangible Assets
Depreciation and Amortization
YoY 2.5%
YoY 6.5%
(¥)
200
150
100
50
0
-50
-100
57%
15
16
17
189.1
65
34%
18
100%
80%
60%
40%
20%
0%
-20%
-40%
(¥ billion)
100
75
50
25
0
70.0
64.7
15
16
17
18
Earnings per Share (EPS)
Dividends per Share
Payout Ratio (right)
Purchase of Property, Plant and Equipment
and Purchase of Intangible Assets
Amortization
Depreciation and
In the fiscal year ended March 31, 2018, earnings per share (EPS) rose by ¥41.1
year on year to ¥189.13, and dividends per share rose by ¥5 year on year to
reach ¥65. LIXIL's dividend policy is to maintain a payout ratio (on a consolidated
basis) of at least 30%.
Purchase of property, plant and equipment as well as of intangible assets
amounted to ¥70.0 billion for the fiscal year ended March 31, 2018, mainly
as a result of investment in new plants to expand production capacity.
Cash Conversion Cycle (CCC)
(Days)
86
84
82
80
78
76
74
72
70
68
85.0
82.5
78.6
76.6
15
16
17
18
JGAAP and Including Global Measures*
* Excluding project businesses
IFRS
As a result of the accumulated benefits from activities implemented to improve
the cash conversion cycle (CCC), as of March 31, 2018, the average time
elapsing from purchase of materials through to sales and receipt of payment
was 76.6 days.
Profit (Loss) for the Year Attributable to Owners of the Parent ROE (right)
Total Assets ROA (right)
Profit for the year attributable to owners of the parent rose by 28.4% year on
year to ¥54.6 billion, mainly due to an increase in profit before tax caused by
gains on sales of unused assets and shares of subsidiaries and an affiliate.
Total assets as of March 31, 2018 increased by ¥65.0 billion year on year to
¥2,107.1 billion, reflecting the impact of foreign currency translation adjustment
and the fact that banks were closed on the last day of the fiscal year, as well as
the increase in goodwill deriving from the acquisition of new subsidiaries and
other intangible assets.
Notes: 1. Due to the Company's decision to divest consolidated subsidiary Permasteelisa S.p.A. in August 2017, the Company has classified the operations of
Permasteelisa and all of its subsidiaries as discontinued operations. For this reason, figures for revenue, core earnings, SG&A expenses, and EBITDA
since the fiscal year ended March 31, 2017 include only the results for continuing operations.
2. The Company has adopted International Financial Reporting Standards (IFRS) from the fiscal year ended March 31, 2016. Figures for the fiscal year
ended March 31, 2015, have been restated based on IFRS for comparative purposes.
52
52
LIXIL Group Corporation
LIXIL Group Corporation
Annual Report 2018 53
Annual Report 2018 53
CFO Message
We have solidified the foundations for new growth,
and are making steady progress with the accounting and financial
aspects of the Medium-Term Plan
SACHIO MATSUMOTO
Representative Executive Officer
Executive Vice President, Finance, Treasury, and M&A
Chief Financial Officer (CFO)
Our measures during the fiscal year ended March 31, 2018
(FYE2018), based on the guiding principles for Phase I of the
Medium-Term Plan (MTP), were centered on improving the
balance sheet to establish a foundation for growth. We also
concentrated on strengthening the governance structure for the
entire corporate group, and by establishing a more sound finan-
cial standing, worked to lay the foundation for new growth in the
future. In April 2018, we shifted to measures for the next stage
of the plan — strengthening profitability.
Establishing a More Sound Financial Condition
In FYE2014, to enhance its financial strength, LIXIL set a goal of
generating ¥100 billion in free cash flow through improvement in
its cash conversion cycle (CCC). We have so far achieved ¥71.8
billion of the ¥88.0 billion forecasted for the end of FYE2018.
One of the main reasons behind the push to improve financial
strength was our past problems with regulating supply and de-
mand on a global level. Insufficient supply capacity for strong-
selling products had resulted in opportunity loss. To address
this issue, as well as to reduce shipping costs, we have built or
expanded production facilities to meet the needs of particular
regions.
As a result of this capital investment, working capital tempo-
rarily increased during the subject fiscal year due to adjustments
for reasonable inventory levels, and our CCC was extended.
However, with the full-fledged operation of these plants to devel-
op competitive products, we are generating a positive cycle in
which invested capital contributes to increased earnings.
More Sophisticated Management and Stronger Governance
LIXIL is pursuing a global auditing and internal control structure
to further enhance its business management and strengthen
governance. To improve the cash and financial control structure
of the corporate group, we have introduced a Treasury Manage-
ment System (TMS) to clarify cash positions and manage ex-
change risks on a global basis. We have now established and
are operating Regional Treasury Centers (RTCs) in four locations
worldwide.
We are also adopting shared services operations in order to
unify and standardize accounting processes across the corporate
group. The first Financial Shared Services Center (FSSC) was
opened in China in December 2017, and we plan to steadily ex-
pand this system worldwide. By introducing and adhering to this
new framework, we are enhancing the governance function in
terms of financial and institutional accounting for the entire LIXIL
Group in Japan and worldwide.
Considerable Improvement in Cash Flows
Our financial measures have led to a significant improvement in
cash flows. We will continue to improve working capital by focus-
ing on the CCC, and are pursuing capital investment with a
priority on optimizing investment efficiency. Specifically, we
measure our return on invested capital (ROIC), and by investing
in the areas with the highest returns, are able to make invest-
ment decisions that facilitate future growth and greater
profitability.
Future capital investments will be made within the scope of
depreciation, in line with the return from investment, in order
to reduce the absolute cost of borrowing and improve the net
Debt / EBITDA ratio.
Streamlining of Business Portfolio Revision and Investment
in Differentiated Products
LIXIL has been pursuing M&A with overseas companies, and to
further enhance the effectiveness of this strategy we have taken
a proactive stance toward revising the business portfolio.
In August 2017, LIXIL decided to divest the Italian construction
group Permasteelisa. As a result, the equity ratio improved. We
have further strengthened our financial base by selling shares
and land, including dissolving our joint venture in China with the
Haier Group.
At the same time, in line with the new MTP, LIXIL is utilizing
the cash generated to make strategic capital investments in sec-
tors where we anticipate sustainable growth in enterprise value.
This includes launching competitive new products to generate
earnings in a difficult market environment. One recent success
is LIXIL Housing Technology (LHT)'s new LW large-opening win-
dow sash announced in May 2018. This innovative new product
connects the inside and outside environments with the same
pleasing comfort of a veranda.
Another important strategy is to fully utilize LIXIL's "intangible
assets" of design and brand to offer differentiated products that
consumers are seeking across the world. This is particularly rel-
evant to global business development for innovative kitchen and
bath products. While utilizing common platforms for the basic
technologies and product frameworks to realize efficiencies in
procurement, production, and inventory, we will also pursue dif-
ferentiation with exceptional design and brand, offering a global
lineup of attractive, high value-added products.
By continually revising our business portfolio we have steadily
generated synergies, expanding overseas sales to ¥414.5
billion over the last four years, from ¥409.2 billion in FYE2015.
This was despite the reclassification of sales revenue of the
Permasteelisa Group of ¥164.5 billion in FYE2018 from continu-
ing operations to discontinued operations, due to the decision to
divest of the company and its subsidiaries in August 2017.
In the future, we will continue to provide the accounting and
financial support to advance business strategies focused on the
development of products that create new value.
Net Interest-Bearing Debt and Net Debt / EBITDA
Cash Flows
697.4
5.3
638.3
4.3
549.2
4.0
(¥ billion)
800
600
400
200
0
16
17
18
Net Interest-Bearing Debt (IFRS)
Net Debt / EBITDA
Times
(¥ billion)
6.0
5.0
4.0
3.0
2.0
1.0
0.0
200
150
100
50
98.6
0
-20.5
-50
-100
-150
-119.0
15
121.1
140.2
19.1
132.5
74.5
116.4
63.8
-58.1
-52.6
16
17
18
Cash Flows from Operating Activities
Free Cash flow*
Cash Flows from Investing Activities
* Free Cash Flow is calculated as Cash Flows from Operating Activities +
Cash Flows from Investing Activities.
Note: See P98 for details on cash flow figures. These figures are based
on IFRS Standards.
54
54
LIXIL Group Corporation
LIXIL Group Corporation
Annual Report 2018 55
Annual Report 2018 55
Review and Analysis of Operating Results
and Financial Position
LIXIL Group Corporation and Consolidated Subsidiaries
Business Environment
The Japanese economy followed a path of slow but steady recov-
ery during FYE2018 as the global economy experienced continu-
ous strong growth associated with increased exports and global
investment. Housing starts decreased to 946,000 (down 2.8%
year on year) due to a decrease in investment in owner-occupied
and rental homes that contrasted starkly with the previous year's
rise. Results in the renovation market were mostly in line with the
previous fiscal year, but performance in the extension and recon-
struction field slumped in comparison to the previous fiscal year.
In the global economy, the real economies of the US, Europe,
and China received a boost from continuously strong consumer
spending and investment, and trade grew year on year. Additio-
nally, trade volume in countries across Asia showed high, double-
digit growth and was a leading contributor of the general im-
provement in the overall global economy. At the same time, the
growing risk of trade conflict is a new cause for concern for the
global economy as the US's increasingly protectionist policy
stance becomes clear.
Business Performance
Revenue for the fiscal year under review was ¥1,664.8 billion
(up 1.9% year on year), despite the impact of divested subsid-
iaries from the previous fiscal year, as active marketing activities
achieved success and both domestic and international sales of
plumbing fixture products performed favorably. In terms of profit,
although increased revenue and continuous cost reductions
produced an increase in gross profit, core earnings fell to ¥75.3
billion (down 16.1% year on year) due to rising raw material pric-
es, higher distribution costs accompanying increased sales, and
large increases in SG&A expenses due to anticipatory invest-
ments such as marketing expenses and amortization expenses
for IT systems.
At the same time, operating profit grew to ¥80.9 billion (up
16.9% year on year) as the Company recorded gains from the
sale of subsidiaries and real estate that occurred in association
with asset reorganization, and impairment losses decreased. Profit
before tax grew to ¥90.0 billion (up 27.6% year on year) despite
the loss of one-off valuation gains recorded during the previous
fiscal year that were associated with exchange rate effects. This
increase was due to gains on the disposal of shares in affiliated
companies and a reduction in interest expenses associated with
repayment of borrowings. As a result, net profit for continuing
operations leapt to ¥68.5 billion (up 42.7%).
Furthermore, net loss for discontinued operations was ¥11.8 bil-
lion (up from the previous fiscal year's figure of ¥6.1 billion). As a
result of these conditions, profit for the year attributable to own-
ers of the parent, which excludes the equity of non-controlling
interests, grew to ¥54.6 billion (up 28.4% year on year).
The Impact from LIXIL's Decision to Divest Permasteelisa
Due to the Company's decision to divest consolidated subsid-
iary Permasteelisa S.p.A. in August 2017, the Company classi-
fied the operations of Permasteelisa and all of its subsidiaries
as discontinued operations when preparing the consolidated
financial statements. For this reason, figures for revenues,
core earnings, operating profit, and profit before tax include
only the results for continuing operations. Additionally, rates
of growth and decline were calculated by applying the same
classification changes to the previous fiscal year's figures.
Management's Analysis and Discussion Points Regarding the
Status of Operating Results
During the fiscal year under review (FYE2018), the Group steadily
proceeded with Company-wide reforms. The Group is confident
that it is positioned to start the new Medium-Term Plan (MTP) in
April 2018.
However, the progress of these reforms has not yet manifest-
ed itself through core earnings figures for the fiscal year under
review. A rise in raw material prices that exceeded forecasts and
a slow response to a decrease in the number of new housing
construction projects were major factors weighing down results
for LHT, which is focused on building materials for housing. The
Company has already worked out short-term countermeasures
in response to these issues and, moving forward, will apply long-
term strategies based on a roadmap for LHT's revival.
In contrast, LIXIL Water Technology (LWT), which is working
to expand its plumbing fixtures business, strengthened LIXIL's
four key differentiating drivers (design, technology, quality,
and brand), and achieved positive results both domestically
and internationally by introducing the technology it developed
in Japan to overseas. As a result of Company-wide initiatives
aimed at organizational simplification, cost reduction at corpo-
rate headquarters, business portfolio optimization, and balance
sheet improvement, the Group has become a leaner and faster
organization than it was previously. Profit for the year attributable
to owners of the parent rose to record-high levels for the second
straight period. A structure geared toward the new MTP is now
in place and the Company will focus its effort on implementing
these strategies and achieving the goals set out in the plan.
Performance by Segment in FYE2018
LIXIL Water Technology (LWT)
LIXIL Housing Technology (LHT)
LIXIL Building Technology (LBT)
LIXIL Kitchen Technology (LKT)
Distribution & Retail Business (D&R)
Housing & Services Business (H&S)
Adjustment
Consolidated
Revenue Core earnings (loss)
Results
715.9
535.2
107.0
120.0
173.5
52.3
(39.0)
1,664.8
YoY
(%)
8.1
-1.6
-3.1
4.5
0.9
-18.8
—
1.9
Results
Core
earnings
ratio (%)
67.7
27.5
3.4
6.2
6.9
2.5
(38.9)
75.3
9.5
5.1
3.2
5.1
4.0
4.8
—
4.5
(¥ billion)
YoY
(%)
4.0
-29.8
-37.0
42.7
-5.0
-42.6
—
-16.1
Revenue
¥1,664.8 billion
42.0%
LIXIL Water Technology (LWT)
31.4%
LIXIL Housing Technology (LHT)
6.3%
LIXIL Building Technology (LBT)
7.0%
LIXIL Kitchen Technology (LKT)
10.2%
Distribution & Retail Business (D&R)
3.1%
Housing & Services Business (H&S)
Status of Operating Results
Revenue
Revenue increased to ¥1,664.8 billion (up 1.9% year on year).
Growth rates in all product categories of LWT Japan and LKT
that exceeded market expansion contributed to the increase in
revenue. These growth rates were due to successful overseas
investment in new products and synergy at LWT, which contrib-
uted to expanding LIXIL's global plumbing fixtures business, and
product differentiation at LKT, which contributed to expanding
domestic operations for LWT.
Core Earnings
¥75.3 billion
59.2%
LIXIL Water Technology (LWT)
24.1%
LIXIL Housing Technology (LHT)
3.0%
LIXIL Building Technology (LBT)
5.4%
LIXIL Kitchen Technology (LKT)
6.1%
Distribution & Retail Business (D&R)
2.2%
Housing & Services Business (H&S)
Revenue
(¥ billion)
YoY change:
+¥31.6 billion （＋1.9%）
On a like-for-like basis:
+¥35.0 billion （＋2.1%）
+35.0
1,664.8
1,633.2
-22.9
+19.5
17
Business divestment
Forex impacts
Increase on a
like-for-like basis
18
Revenue by Segment
(¥ billion)
+53.5
-8.9
-3.4
+5.2
+1.5
-12.1
-4.2
1,664.8
1,633.2
+ 31.6 (+1.9%)
17
LWT
LHT
LBT
LKT
D&R
H&S
Consolidation
adjustments & other
18
56
LIXIL Group Corporation
Annual Report 2018 57
Profit for the year Attributable to Owners of the Parent
Including Discontinued Operations
Profit for the Year
(¥ billion)
54.6
42.5
+ ¥12.1 billion
+ 28.4% YoY
17
18
During FYE2018, profit for the year attributable to owners of the
parent including discontinued operations rose 28.4% year on
year to ¥54.6 billion. This rise occurred despite loss from dis-
continued operations recorded in relation to the decision to sell
Permasteelisa, which was made during the same fiscal year.
Business portfolio adjustments, the sale of idle assets, structur-
al changes for organizational simplification, and a reduction in
income tax expenses resulting from the choice to adopt a con-
solidated tax filing system in Japan contributed to the rise.
Review by segments are documented in the Review of Oper-
ations, on page 60. With the decision to divest Permasteelisa,
the Group is classifying core earnings and losses of the same
company and its subsidiaries, which LIXIL had previously includ-
ed under LBT, under discontinued operations. For purposes of
comparison, the Group has retroactively adjusted the previous
fiscal year's results into the post-revision reportable segments.
Core Earnings
Core earnings were ¥75.3 billion, down 16.1% from the previous
fiscal year. The primary factor leading to the decrease was a slow
response due to structural issues in LHT's business, which was
heavily impacted by raw material prices and the number of new
housing construction projects. Additionally, economic stagnation
in the Middle East and South Africa impacted results for LWT.
In response to issues facing LHT, the Company is steadily pro-
ceeding under a new organizational structure with strategies that
are based on a roadmap toward compositional reforms. These
reforms will minimize the impact of external factors affecting
LHT's business. Specifically, LIXIL will proceed with measures
designed to accelerate the development and launch cycles
of products and improve productivity by introducing common
platforms and sharing component parts. LHT will also work to
expand its overseas business through integration of its process-
ing plants by converting equipment to all-purpose equipment.
Note: Core earnings are calculated subtracting cost of sales and SG&A
expenses from revenue.
Core Earnings
(¥ billion)
89.8
75.3
- ¥14.5 billion
- 16.1% YoY
17
18
Core Earnings by Segment
(¥ billion)
+2.6
-11.7
89.8
-2.0
+1.8
-0.4
-1.9
-3.0
75.3
- 14.5 (-16.1%)
17
LWT
LHT
LBT
LKT
D&R
H&S
Consolidation
adjustments & other
18
Core earnings
ratio
5.5%
Core earnings
ratio
4.5%
Statement of Profit or Loss: Revenue, Core Earnings,
and the Core Earnings Ratio
The Group started its new MTP in April 2018. In this plan,
LIXIL aims to achieve improved profitability within three years
through organizational improvement that will enable long-term
business growth. The decline in LHT's results mentioned on
page 64 were a main factor contributing to the Group's lower
year-on-year core earnings ratio. However, the Group improved
the core earnings ratio for LBT by classifying Permasteelisa
as a discontinued operation when the decision was made to
divest it in August 2017. The Group is also working to improve
the core earnings ratio by continuously reviewing its business
portfolio, improving the product mix, and optimizing Group syn-
ergies.
Revenue / Core Earnings / Core Earnings Ratio
(¥ billion)
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
1,890.5
1,786.4
-153.2
4.9%
5.5%
1,633.2
1,664.8
4.5%
3.7%
Reclassified to
discontinued operations
due to the decision to
divest Permasteelisa
70.1
88.3
1.5
89.8
75.3
16
17
17
18
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
Revenue
Core Earnings
Core Earnings Ratio (right)
Earnings per Share (EPS) and Dividends
Basic EPS for the fiscal year under review increased year on year
by ¥41.12 to ¥189.13, and diluted earnings per share rose by
¥36.80 to ¥170.90.
The total annual dividend per share for the fiscal year under
review was ¥65, with a mid-term cash dividend of ¥30 and a
year-end cash dividend of ¥35. The dividend payout ratio
was 34.4%.
Earnings per Share / Dividend Payout Ratio
(¥)
200
150
100
50
0
-50
-100
-150
148.01
40.5%
189.13
34.4%
-89.33
16
17
18
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
Earnings per Share
Dividend Payout Ratio (right)
Financial Position
Total assets as of March 31, 2018 were up ¥65.0 billion year on
year to ¥2,107.1 billion. Current assets increased ¥63.0 billion
year on year to ¥912.8 billion due to exchange rate effects, the
influence of the closing day of the period being a bank holiday
and an increase in inventories. Non-current assets rose ¥2.0
billion year on year to ¥1,194.4 billion. This rise was due to an
increase in goodwill and other intangible assets that occurred as
a result of exchange rate fluctuations and a portion of affiliated
companies becoming consolidated subsidiaries.
As of March 31, 2018 liabilities were ¥1,457.6 billion, down
¥25.2 billion from the end of the previous fiscal year. This de-
crease was primarily due to accelerated repayment of interest-
bearing debt using capital obtained through business portfolio
adjustment and business operations. As a result, net interest-
bearing debt decreased ¥89.2 billion from the end of the
previous fiscal year to ¥549.2 billion. Additionally, the D/E ratio
improved 0.41 times from the previous fiscal year's result of 2.65
to 2.24 times.
As of March 31, 2018, total equity had risen ¥90.1 billion year
on year to ¥649.6 billion and the ratio of equity attributable to
owners of the parent had improved 2.5 percentage points year
on year to 29.3%.
Total Assets / Equity Attributable to Owners of the Parent / Ratio
of Equity Attributable to Owners of the Parent
(¥ billion)
3,000
2,000
1,000
2,130.1
2,042.2
2,107.1
29.3%
30.0%
24.6%
524.8
26.8%
547.2
616.9
25.0%
20.0%
0
16
17
18
Total Assets
Ratio of Equity Attributable to Owners of the Parent (right)
Equity Attributable to Owners of the Parent
The Impact from LIXIL's Decision to Divest Permasteelisa
Starting in the second quarter of the fiscal year under review,
the Company reclassified ¥180.2 billion of assets from discon-
tinued operations as assets held for sale, in connection with
the decision to divest Permasteelisa. Similarly, in the second
quarter, the Company began classifying ¥127.5 billion in liabil-
ities from discontinued operations as liabilities directly associ-
ated with the assets held for sale.
58
LIXIL Group Corporation
Annual Report 2018 59
Balance Sheet: Return on Equity
The Company's total assets increased during the fiscal year
under review due to active overseas M&As. The Company has
been revising its business assets and business portfolio as
well as selling shares of subsidiaries and affiliated companies
and idle assets since FYE2017. Due to these practices, the
appraised value of the Group's overseas assets rose due to
the weak yen during the fiscal year under review. Despite the
resulting increase in equity, ROE improved 1.5 points to 9.4%
due to a rise in net income.
ROE
(¥ billion)
3.0%
0.4%
3.9% 3.6%
0.1%
-1.0%
5.3%
-4.6%
9.4%
7.9%
800
600
400
200
0
9
10
11
12
13
14
15
16
17
18
15.0%
10.0%
5.0%
0.0%
-5.0%
Cash Flows from Operating Activities / Cash Flows
from Investing Activities / Free Cash Flow
(¥ billion)
200
150
100
50
0
-50
-100
140.2
121.1
19.1
16
132.5
74.5
116.4
63.8
-58.1
17
-52.6
18
Cash Flows from Operating Activities
Free Cash Flow
Cash Flows from Investing Activities
Trends in the Principal Indicators of Financial Position
2015
2016
2017
2018
Net interest-bearing debt
divided by cash flows (Times)
Net debt-to-equity ratio (Times)
5.7
1.0
-10.0%
Interest coverage ratio (Times)
16.2
5.8
1.3
16.7
4.8
1.2
7.7
5.2
0.9
15.5
Total Equity
Net Income (Loss) (JGAAP)/Profit for the Year Attributable to Owners
of the Parent (IFRS)
ROE (right)
Note: For more information regarding ROE values, please see page 98.
Additionally, ROE values are presented in accordance with JGAAP until
FYE2014. From FYE2015 onward, the values are presented in accordance
with IFRS.
Cash Flows
During the fiscal year under review, net cash provided by operat-
ing activities amounted to ¥116.4 billion, ¥16.2 billion less than
in the previous fiscal year. The decrease was attributable mainly
due to fluctuations in components of working capital such as
trade and other receivables and inventories, despite decrease in
interest paid on loans payable.
Net cash used in investing activities amounted to ¥52.6 billion,
¥5.4 billion less than was used in the preceding fiscal year.
Principal uses of cash were for the purchase of property, plant
and equipment and payments for acquisition of subsidiaries.
Net cash used in financing activities amounted to ¥43.8 billion,
¥36.1 billion more than was used in the previous fiscal year.
Primary sources of cash were the sale of shares stemming from
the initial public offering of a subsidiary and the issuance of new
shares. Other major factors included dividends paid, and proceeds
from and the repayment of interest-bearing debt.
As a result of these circumstances, cash and cash equivalents
amounted to ¥138.8 billion (up ¥17.2 billion year on year), in-
cluding the impact of exchange differences.
The values listed above represent total cash flow values and
therefore include discontinued operations.
Notes:
1. All indicators are based on figures from the consolidated accounts. The
indicators are calculated as follows:
Net interest-bearing debt divided by cash flows: (Interest-bearing debt –
Cash and cash equivalents) / Cash flows from operating activities
Net debt-to-equity ratio: (Interest-bearing debt – Cash and cash equivalents) /
Equity attributable to owners of the parent
Interest coverage ratio: Cash flows from operating activities /
Interest payments
2. Interest-bearing debt is the value of all liabilities and convertible bonds with
stock acquisition rights presented in the consolidated statement of financial
position on which the Group pays interest. Cash and cash equivalents are
the cash and cash equivalents presented in the consolidated statement of
financial position. Cash flows from operating activities are the net cash flows
from operating activities presented in the consolidated statement of cash
flows. Interest payments are interest paid, as presented in the consolidated
statement of cash flows. Furthermore, cash flows from operating activities
and interest payments for businesses classified as discontinued operations
in FYE2018 are not included in these values.
Securing Resources for Capital and Liquidity for Funds
The Group strives to generate cash flows from operating activi-
ties and employs a wide range of fundraising methods to procure
a stable and flexible supply of funds necessary for its business
activities while maintaining a sound financial position. Regarding
cash on hand, the Group, in principle, maintains adequate funds
to cover the settlement of its liabilities in an emergency. To en-
sure financial flexibility, the Group works to diversify sources of
funds, including bank borrowings and funds from other financial
institutions, by arranging for a commercial paper issuance line,
establishing commitment lines, and implementing initiatives for
the securitization of trade notes and accounts receivables.
As a result, net interest-bearing debt was ¥549.2 billion (down
¥89.2 billion year on year) as of March 31, 2018. Cash and cash
equivalents were ¥138.8 billion at the same point in time.
Forecast for FYE2019
LIXIL projects revenue of ¥1,710.0 billion (up 2.7% year on year),
core earnings of ¥85.0 billion (up 12.9% year on year) and profit
for the year attributable to owners of the parent of ¥50.0 billion
(down 8.4% year on year) for FYE2019. This drop in profit for the
year attributable to owners of the parent is due to the expiration
of temporary effects provided by gains made from the FYE2018
sales of idle assets and shares from subsidiaries and affiliated
companies.
The Company predicts that demand for plumbing fixtures and
residential building materials will continue to expand due to global
population growth, particularly in the middle income segment.
The Company started the new MTP in FYE2019 and aims to
redefine its strengths and to continue the activities as a compa-
ny that creates world-leading technology and innovates to make
high quality products that transform homes.
Additionally, the Company will improve profitability through
enhanced flexibility, pursuing innovation and creating outstanding
products and services faster than ever before.
(Forecasts for FYE2019)
Revenue: ¥1,710.0 billion
Core earnings: ¥85.0 billion
Core earnings ratio: 5.0%
Operating profit: (IFRS) ¥78.0 billion
Profit before tax: ¥75.0 billion
Profit for the year: ¥52.0 billion
Profit for the year attributable to owners of the parent:
¥50.0 billion
Basic earnings per share: (EPS) ¥172.54
Cash Flows
The Company's free cash flow was negative from FYE2012 to
FYE2015 due to large-scale M&As. However, free cash flow has
been positive for three straight years since March 2016. This
improvement is due to synergies realized from previous M&A
activities, as well as the gradual positive effects of initiatives
aimed at stabilizing the balance sheet. The Company used
the cash generated by these initiatives to invest in businesses
with growth potential and to repay interest-bearing debt. As a
result, net interest-bearing debt decreased ¥148.3 billion from
its value in FYE2016 and net interest-bearing debt/EBITDA
improved to 4.0 times from 5.3 times in FYE2016.
Cash Flows from Operating Activities / Cash Flows from
Investing Activities / Free Cash Flow*
(¥ billion)
200
150
100
50
0
-50
-100
-150
-200
40.7
35.1
0.8
16.0
74.5
63.8
140.2
-20.5
9
10
11
12
13
14
15
16
17
18
-108.1
-134.8
Cash flow from operations
Cash flow from investing activities
Free cash flow
* Free Cash Flow is calculated as Cash Flows from Operating Activities +
Cash Flows from Investing Activities.
Note: For more information regarding cash flow values, please see page
98. Additionally, cash flow values are presented in accordance with JGAAP
through FYE2014. From FYE2015, these values are presented in accordance
with IFRS.
Capital Investment
The Company made capital investment expenditures of
¥70.0 billion (up ¥1.7 billion year on year) to acquire property,
plant and equipment and intangible assets. However, deprecia-
tion and amortization, at ¥64.7 billion, was roughly equivalent
to capital investment expenditures.
60
LIXIL Group Corporation
Annual Report 2018 61
Review of Operations
Year ended March 31, 2018
Business segment
LIXIL Water Technology (LWT)
Revenue
Core Earnings
42%
¥715.9 billion
59%
¥67.7 billion
LIXIL Housing Technology (LHT)
Revenue
Core Earnings
31%
¥535.2 billion
24%
¥27.5 billion
Employees: 30,079 people
R&D: ¥16.7 billion
CAPEX: ¥34.5 billion
Employees: 19,288 people
R&D: ¥9.0 billion
CAPEX: ¥24.0 billion
LIXIL Building Technology (LBT)
Revenue
Core Earnings
6.3%
¥107.0 billion
3.0%
¥3.4 billion
Employees: 6,830 people
R&D*: ¥0.4 billion
CAPEX: ¥2.5 billion
Principal products and services
Direct customers
Competitors
Plumbing fixtures
Sanitaryware, window sashes, water faucets, washstands,
bathtubs, unit bathrooms, shower heads, washstand fixtures,
washstand cabinet units, etc.
Other building materials
External tiles for houses and buildings, internal decorative tiles, etc.
Metal building materials
Housing window sashes, entrance doors, various types of shutters, gates,
carports, banisters, high railings, tide barriers, smoke insulated screens, etc.
Wooden interior furnishing materials
Window frames, wooden furnishing materials, interior decorative materials, etc.
Other building materials
Siding, stone materials, roofing materials, etc.
Interior fabrics
Curtains, etc.
Other
Solar photovoltaic systems, etc.
Metal building materials
Curtain walls, building sashes, and store facades, etc.
– Kohler
– Roca
– Hansgrohe
– Masco (Delta)
– Fortune Brands (Moen)
– TOTO
– Geberit
– YKK AP
– Sankyo Tateyama
– Dealers
– Sales agencies
– Construction companies
– Architectural firms
– Developers
– Wholesalers
– Volume retailers
– General consumers
– Dealers
– Sales agencies
– Building material
wholesalers
– Homebuilders
– House manufacturers
– Construction companies
– Architectural firms
– Developers
– Construction companies
– Architectural firms
– YKK AP
– Yuanda
– Local companies
LIXIL Kitchen Technology (LKT)
Revenue
Core Earnings
7.0%
¥120.0 billion
5.4%
¥6.2 billion
Distribution & Retail Business (D&R)
Revenue
Core Earnings
10%
¥173.5 billion
6.1%
¥6.9 billion
Housing & Services Business (H&S)
Revenue
Core Earnings
3.1%
¥52.3 billion
2.2%
¥2.5 billion
* Figure excluding Permasteelisa S.p.A. and its subsidiaries.
Employees: 1,197 people
R&D: ¥1.5 billion
CAPEX: ¥4.6 billion
Kitchen
Kitchen systems, etc.
– Dealers
– Sales agencies
– Building material trading
– Takara Standard
– Cleanup
– Panasonic
companies
Employees: 1,373 people
CAPEX: ¥7.3 billion
Home centers
Household products, DIY products, building materials, etc.
Comprehensive building material stores
Building materials, tools, hardware, etc.
– General consumers
– Construction professionals
– DCM Japan Holdings
– Cainz
– Komeri
– Kohnan Shoji
Employees: 1,343 people
R&D: ¥0.05 billion
CAPEX: ¥0.9 billion
Housing solution businesses
Development of homebuilding franchise chains, construction on order,
ground inspections and improvements, etc.
Real estate
Land, buildings, real estate management services, support for
development of real estate franchises, etc.
Financial services business
Housing loans, etc.
[Housing franchise business]
Homebuilding franchise members
[Housing site ground inspection business]
Construction companies, real estate transaction agents
[Real estate brokerage franchise business]
General consumers
62
62
LIXIL Group Corporation
LIXIL Group Corporation
Annual Report 2018 63
Annual Report 2018 63
Water Technology
Highlights for FYE2018
Kitchen Technology
Highlights for FYE2018
– Increase in revenue by 8.1% to ¥715.9 billion, and continual
cost reduction supported by synergistic effects contributed to
an increase of core earnings by 4.0% to ¥67.7 billion.
– Steady marketing activities for products in the medium- and
high-price range both at home and abroad contributed to
favorable results. These products included the SATIS tankless
shower toilet featuring AQUA CERAMIC, new technology that
keeps toilets stain-free for a hundred years, and the SPAGE
unit bathroom.
– Increase in revenue by 4.5% to ¥120.0 billion, and continual
cost reduction supported by improvement in operation ratio
contributed to an increase of core earnings by 42.7% to
¥6.2 billion.
– Continuing from the previous term, efforts were made to ex-
pand sales of products in the medium- and high-price range
through strategic investment in media advertising. Target
products included the beautiful and functional RICHELLE SI
prefabricated kitchen system.
Revenue
(¥ billion)
800
700
600
500
400
300
200
100
0
662.4
715.9
17
18
Core Earnings / Core Earnings Ratio
(¥ billion)
70
60
50
40
30
20
10
0
65.1
9.8%
67.7
9.5%
17
18
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
Revenue
(¥ billion)
140
120
100
80
60
40
20
0
114.7
120.0
17
18
Core Earnings / Core Earnings Ratio
(¥ billion)
7
6
5
4
3
2
1
0
6.2
5.1%
4.3
3.8%
17
18
Core Earnings
Core Earnings Ratio (right)
Core Earnings
Core Earnings Ratio (right)
Priorities for FYE2019
Japan
– Reinforce the structure of LWT through organizational reform
that includes the integration of Technology, Production and
Sales, enabling it to respond to changes in the market environ-
ment and end user needs, and accelerate product develop-
ment cycles.
– Differentiate products and services from competitors through
the selection and concentration of investment.
– Reinforce capability in design and renovation.
– Further enhance the Company's overseas support system,
expand manufacturing and management technology accu-
mulated in Japan to overseas markets, and optimize LIXIL's
production technology.
– Place effort into the expansion of sales of products in the
medium- and high-price range.
Overseas
– Develop and expand product lineup to continually distinguish
the Company as a full-scale bathroom solution company.
– Enhance the development of IoT products (smart products).
– Expand the popularity of bidet toilets in Islamic nations and
reestablish business targeting South Africa.
– Establish business targeting India and expand direct sanitary-
ware sales in China to increase popularity in large Asian
markets.
– Target the promotion of specific products.
Note: Revenues by segment shown are before the elimination of intracompany
transactions, and core earnings shown are before the deduction of group-wide costs.
Revenue
(¥ billion)
1,000
900
800
700
600
500
400
300
200
100
0
120.0
115.2
715.9
750.0
18
19 (Forecast)
Core Earnings / Core Earnings Ratio
(¥ billion)
90
80
70
60
50
40
30
20
10
0
6.9
10.1%
6.0%
6.2
9.5%
5.1%
67.7
75.6
18
19 (Forecast)
LWT
LKT
LWT
LKT
LWT
LKT
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
64
LIXIL Group Corporation
Annual Report 2018 65
Housing Technology
Highlights for FYE2018
– Due to the divestment of part of its subsidiaries in the previous
term, revenue decreased 1.6% to ¥535.2 billion, while core
earnings decreased 29.8% to ¥27.5 billion due partly to the
intensification of competition and increase in distribution
costs despite efforts to improve the gross margin ratio
through cost reduction.
– LHT expanded demand for renovation through the develop-
ment of a wide variety of LIXIL PATTO Renovation products
such as RE-PLUS, which are high performance renovation
product windows.
– Revenue decreased by 3.1% to ¥107.0 billion despite continual
efforts to improve the gross margin ratio through the selective
intake of domestic orders, while core earnings also decreased
by 37.0% to ¥3.4 billion.
– Due to the decision to divest Permasteelisa S.p.A. in August
2017, business performed by Permasteelisa and its subsidiar-
ies was classified as a discontinued operation in accordance
with IFRS.
Building Technology
Highlights for FYE2018
Revenue
(¥ billion)
600
500
400
300
200
100
0
544.1
535.2
17
18
Core Earnings / Core Earnings Ratio
(¥ billion)
45
40
35
30
25
20
15
10
5
0
39.2
7.2%
27.5
5.1%
17
18
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
Revenue
(¥ billion)
120
100
80
60
40
20
0
110.4
107.0
17
18
Core Earnings / Core Earnings Ratio
(¥ billion)
6
5
4
3
2
1
0
5.4
4.9%
3.4
3.2%
17
18
Core Earnings
Core Earnings Ratio (right)
Core Earnings
Core Earnings Ratio (right)
Priorities for FYE2019
Reinforcement of approaches from the standpoint of consumers
– Promote product development and proposals from a con-
sumer-oriented viewpoint. This will include the development of
products responding to the trend of increasing interest in the
environment and health.
– Respond to consumer needs through expansion of the life
partner-type business as well as a product sales-type business
model.
– Enhance development of products differentiated from compet-
itor products to increase purchase by consumers.
Innovation in production to improve cost competitiveness
– Promote the application of platforms in production and the
commonization of parts to advance selection and concentra-
tion of investment while increasing cost competitiveness.
Expansion of global business
– Collaborate with global companies and enter Asian markets.
– Expand sales of industrial products.
Revenue
(¥ billion)
600
500
400
300
200
100
0
535.2
539.5
18
19 (Forecast)
Core Earnings / Core Earnings Ratio
(¥ billion)
30
25
20
15
10
5
0
27.5
5.1%
29.0
5.4%
18
19 (Forecast)
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
Priorities for FYE2019
– Focus on the selective intake of high-profit orders.
– Continue working on the cultivation of human resources to
reduce the shortage of specialists.
– Continue working on product platform commonization.
Revenue
(¥ billion)
120
100
80
60
40
20
10
0
107.0
113.0
18
19 (Forecast)
Core Earnings / Core Earnings Ratio
(¥ billion)
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
3.4
3.2%
2.5
2.2%
18
19 (Forecast)
Core Earnings
Core Earnings Ratio (right)
Core Earnings
Core Earnings Ratio (right)
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
4.0%
3.0%
2.0%
1.0%
0.0%
66
66
LIXIL Group Corporation
LIXIL Group Corporation
Annual Report 2018 67
Annual Report 2018 67
Distribution & Retail Business
Highlights for FYE2018
Housing & Services Business
Highlights for FYE2018
– The opening of the new home center SUPER VIVA HOME in
Ogaki and other projects that offer ideas for renovation result-
ed in an increase in revenue by 0.9% to ¥173.5 billion.
– Core earnings decreased by 5.0% to ¥6.9 billion
due to the increase in costs for the opening and closing of
stores despite the increase in gross profits from renovation
products and efforts placed into cost reduction.
– Due to the impact of elimination of some subsidiaries from the
range of consolidation, revenue decreased by 18.8% to ¥52.3
billion, while core earnings decreased by 42.6% to
¥2.5 billion. H&S placed efforts into expanding the sales of
new products that satisfied requirements for Net Zero Energy
Houses (ZEH), including the new CESIBO series that offers
a healthy and comfortable living environment, and ARIETTA
VERDEA, which offers passive human-centric designs.
Revenue
(¥ billion)
180
160
140
120
100
80
60
40
20
0
172.0
173.5
17
18
Core Earnings / Core Earnings Ratio
(¥ billion)
8
7
6
5
4
3
2
1
0
7.3
4.2%
6.9
4.0%
17
18
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
Revenue
(¥ billion)
70
60
50
40
30
20
10
0
64.4
52.3
17
18
Core Earnings / Core Earnings Ratio
(¥ billion)
5
4
3
2
1
0
4.4
6.9%
2.5
4.8%
17
18
Core Earnings
Core Earnings Ratio (right)
Core Earnings
Core Earnings Ratio (right)
Priorities for FYE2019
– Open low-cost stores in areas D&R have not yet entered.
– Place efforts into expanding the sales of renovation
– Advance the utilization of IT to streamline store operations.
– Improve customer convenience through the enhancement of
products.
Revenue
(¥ billion)
200
150
100
50
0
173.5
177.0
18
19 (Forecast)
private brand product development.
Core Earnings / Core Earnings Ratio
(¥ billion)
8
6
4
2
0
6.9
4.0%
6.5
3.7%
18
19 (Forecast)
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
Priorities for FYE2019
While taking measures to address the decrease in housing
starts, H&S will enhance services for the housing stock busi-
ness, expand new businesses, and discover new markets.
Revenue
(¥ billion)
60
40
20
0
52.3
57.0
18
19 (Forecast)
Core Earnings / Core Earnings Ratio
(¥ billion)
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
3.5
6.1%
2.5
4.8%
18
19 (Forecast)
Core Earnings
Core Earnings Ratio (right)
Core Earnings
Core Earnings Ratio (right)
8.0%
6.0%
4.0%
2.0%
0.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
68
68
LIXIL Group Corporation
LIXIL Group Corporation
Annual Report 2018 69
Annual Report 2018 69
LIXIL's Nationwide Retail Structure
LIXIL has set up a system to accommodate the needs of
consumers by placing over 203 homebuilding franchise
members and 89 home center stores throughout Japan.
Number of Homebuilding Franchise Members
Number of Home Center Stores
TOTAL
203
MEMBERS
164
EYEFUL HOME TECHNOLOGY
23
FiACE HOME
16
GL HOME
TOTAL
89
STORES
8
9
HOKKAIDO
TOHOKU
57
KANTO / KOSHINETSU
8
7
CHUBU / HOKURIKU
KANSAI
Global Manufacturing and Sales Sites
As of March 31, 2018
LIXIL has 93 factories in 14 countries and 135 showrooms in 22 countries, and is proceeding
with production and sales in areas adjacent to strategic markets. The Group has established
a global product supply system with 50 factories outside Japan.
Numbers of Factories and Showrooms by Country
and Region
Establish Factories and Showrooms
in Strategic Global Markets
LIXIL has strengthened its factories in areas where growth
is expected from a global perspective and has established a
system to enable consumers to experience its products through
showrooms.
Factories
Showrooms
*1
*2
Of the 43 factories in Japan,
39 belong to LIXIL Corporation.
Of the 104 showrooms in Japan,
92 belong to LIXIL Corporation.
Number of Factories
Number of Showrooms
TOTAL
93
SITES
11
AMERICAS
4
4
EUROPE
AFRICA
31
ASIA PACIFIC
43
JAPAN
TOTAL
135
SITES
3
AMERICAS
13
EUROPE
15
ASIA PACIFIC
104
JAPAN
Europe 4 sites 13 sitesJapan 43 sites*1 104 sites*2Asia Pacific 31sites 15 sitesAmericas 11sites 3 sitesAfrica 4 sites 70
LIXIL Group Corporation
Annual Report 2018 71
JIN SONG MONTESANO
Executive Officer and Senior
Managing Director, Public
Affairs, Investor Relations,
External Affairs, and
Corporate Responsibility
On the topic of Diversity & Inclusion, a
cross-functional group of experts within LIXIL
from R&D, product engineering, product
design, marketing, and sales finalized LIXIL's
new "Universal Design" strategy. To ensure
good governance, a senior-level committee was
formed to ensure proper and timely implemen-
tation of this initiative and its commitments.
Since the new CR strategy was implemented
in FYE2016, LIXIL's activities have begun to
receive external recognition, and even win
some global awards. For the first time, LIXIL
was included in the Dow Jones Sustainability
Asia/Pacific Index, FTSE4Good, and MSCI
Japan Empowering Women listings in FYE2018.
LIXIL joins the ranks of global firms operating
with strong sustainability agendas. LIXIL also
won a number of top prizes for its work to
elevate awareness and the dialogue around the
global challenges of sanitation and hygiene: the
SABRE Award for Best Global Campaign, the
GOLD STANDARD Award from Public Affairs
Asia, and a Japan Bronze Award from the
Public Relations Society of Japan. While this
recognition is indeed rewarding, the fuel that
drives our efforts is the growing pride among
employees who realize that, for LIXIL, it's not
just what we do, but how we do it that matters.
And this growing pride was confirmed in our lat-
est employee engagement survey, or Heartbeat,
which found that employees felt very positively
about our CR activities.
FYE2018 is focused on driving scale through
strategic partnerships. To contribute to the
United Nations Sustainable Development Goals
(SDGs), such as effectively reaching the key
populations lacking access to safe sanitation,
we must scale our efforts, and partnerships
designed around shared goals become a critical
enabler to achieving them. We look forward to
sharing more details about these partnerships
in the coming months, as well as our broader
efforts to deliver on our CR commitments.
Every person on the planet dreams of a better
home, and LIXIL's higher purpose is to help
them achieve that dream – whether it is by
renovating their kitchen in Tokyo or by installing
their first toilet in Nairobi. Our Corporate Respon-
sibility (CR) agenda is core to LIXIL's greater
purpose as a company, and in FYE2018 we
reached new heights, both in terms of progress
against our commitments as well as global
recognition from customers, business partners,
government stakeholders, and employees about
the positive contributions we are making to
society.
Significant progress was made with regard to
our three strategic pillars. As part of our efforts
to improve Global Sanitation & Hygiene, we
further bolstered resources and expertise with
the integration of the fast-growing SATO social
business and the Social Sanitation Initiatives
organization. The new integrated unit is now
led by Junichi Goto, who has established strong
business processes and a clear operating
rhythm that encourages faster decision-making,
improved communication flows, and better
collaboration. This new organization will not
only enable SATO Toilet Systems to flourish as it
expands into new markets such as Kenya and
Rwanda but will also support acceleration of
new product development such as the Portable
Toilet System, a toilet specifically designed for
households in urban informal settlements.
In addition to expanding our social business,
we continue to advocate for greater dialogue on
tackling the challenges of sanitation and hygiene,
too. President & CEO Kinya Seto provided
key remarks at a Toilet Board Coalition-hosted
round table about the "Sanitation Economy" at
the sidelines of the World Economic Forum in
January 2018.
Regarding Water Conservation & Environmen-
tal Sustainability, the Science Based Targets
initiative validated our greenhouse gas reduc-
tion targets in FYE2018. Additionally, one of
our Japanese window products, RE-PLUS, was
recognized by the Minister of Environment for
its energy-saving benefits as well as how simple
it is to add onto an existing window, making it
easy for our customers to be environmentally
friendly.
Corporate Responsibility Strategy
LIXIL is committed to improving the quality of people's lives
around the world and to pursuing the growth of its businesses
through responsible and sustainable innovations.
Global Sanitation &
Hygiene
Water Conservation &
Environmental
Sustainability
Diversity &
Inclusion
"100 Million People"
"Net Zero"
By 2020, improve the
livelihood of 100 million
people through sanitation
and hygiene solutions
By 2030, achieve a net zero
balance between LIXIL's
environmental footprint and
the positive environmental
contributions created through
its products and services
"Inclusive for All"
By 2020, establish the
culture of diversity and
inclusion within our
organization and with
all employees
Our strategy stands upon a foundational commitment to ethical business practices
Governance
Fair Business
Practices
Human Rights
Labor Practices
Quality and
Satisfaction
Supply Chain
Stakeholder
Engagement
Collaborating with Partners Key to Tackling Global Issues
LIXIL, in collaboration with a wide range of partner organizations,
is working on finding solutions to global issues by leveraging its
relevant resources and expertise.
Since LIXIL first began collaborating with the United Nations
Children's Fund (UNICEF) on sanitation issues in 2013, they
have continued to build on their work together in various areas.
For example, when SATO Toilet Systems expanded to West
Africa, UNICEF facilitated LIXIL in carrying out the first SATO
product trials in the region in terms of logistics and in working
with local governments and communities.
LIXIL is also a founding member of the Toilet Board Coalition
(TBC), which works to help solve the world's sanitation problems
by developing the Sanitation Economy and supporting new and
innovative scalable business solutions at the start-up stage. LIXIL
has collaborated with the TBC on sanitation start-up mentorship
programs, through the TBC "Toilet Accelerator" as well as advo-
cacy initiatives, such as hosting a side event at the World Eco-
nomic Forum's annual meeting in Davos in January 2018. Addi-
tionally, the TBC and the Pune Municipal Government in India
have started working together on a pilot project, one of which is
with LIXIL, aimed at developing Pune as a smart sanitation city.
LIXIL also works with a wide range of other organizations.
For example, LIXIL today is developing the activities of its SATO
social business with financial support from the Bill & Melinda
Gates Foundation and Grand Challenges Canada, a governmen-
tal investment funding organization of Canada. LIXIL's Green
Toilet System has received financial support from the Japan
International Cooperation Agency (JICA). In addition to those
organizations, LIXIL has been working with a number of NGOs
to conduct joint projects, such as with Population Services Inter-
national (PSI) and WaterAid, mainly in Africa, and BRAC in Asia.
All of these leading partner organizations possess local networks
and a wealth of knowledge on important social issues, and play
a very important role in the implementation of LIXIL's initiatives.
In the future, LIXIL will continue to build partnerships with
governments, NGOs, and other types of organizations to gener-
ate synergies and make a positive contribution to solving global
issues.
Corporate Responsibility Chairperson Message 72
72
LIXIL Group Corporation
LIXIL Group Corporation
Critical Social Issues
LIXIL's Response
Looking Back Over FYE2018
Highlights
An estimated 2.3 billion people around the
world still live without access to adequate san-
itation, while every day 800 children under the
age of five are estimated to die from diarrheal
diseases caused by a lack of clean water and
sanitary living conditions. The lack of toilets in
schools can be an obstacle to girls continuing
with their schooling after they reach puber-
ty, and women who have to defecate outside
LIXIL has pledged to provide better sanitation
to 100 million people by 2020. To address the
world's complex, multifaceted sanitary prob-
lems, LIXIL is providing multiple solutions tai-
lored to the unique circumstances and market
needs of individual regions. This includes its
SATO Toilet Systems, which have already been
commercialized; its Micro Flush Toilet System
and Portable Toilet System, which are currently
are at risk of being assaulted. Aiming to solve
these problems, the second target of Goal 6 of
the United Nations Sustainable Development
Goals (SDGs) is: "By 2030, achieve access to
adequate and equitable sanitation and hygiene
for all and end open defecation, paying special
attention to the needs of women and girls and
those in vulnerable situations."
undergoing field tests; and its Green Toilet
System, which has already been installed in
refugee camps. Through these activities,
LIXIL is building sustainable businesses rooted
in local communities, helping to solve social
problems, all while contributing to the long-
term growth of the Company.
LIXIL established new production systems and
sales networks in multiple countries for SATO
Toilet Systems. Its strategy is to develop a social
business that is rooted in the local community,
thereby helping to create jobs in the regions and
ensure the business is more sustainable. In Sep-
tember 2017, SATO was selected by Grand Chal-
lenges Canada to receive financial support, while
the business has also been developing new pro-
duction systems in six countries: Bangladesh,
India, Uganda, Kenya, Tanzania, and Nigeria.
In addition, LIXIL signed an agreement with the
United Nations Human Settlements Programme
(UN-Habitat), leading to the installation of its
Green Toilet System in refugee camps in Kenya,
which will enable the local community to safely
treat human waste and recycle it as fertilizer.
LIXIL's Portable Toilet System, which was de-
veloped for indoor use in urban informal settle-
ments, was also tested in the Philippines, and
now feedback from people who used the system
is being reflected in product development.
Cumulative total of SATO units shipped: 1.8 million
Number of people whose sanitary environment has
been improved*: Approximately 9 million
Annual Report 2018 73
Annual Report 2018 73
Connection to UN Sustainable Development Goals
LIXIL's "Toilets for All Project"
In 2017, LIXIL implemented its "Toilets for All"
initiative in collaboration with UN organizations
and international NGOs. For every LIXIL shower
toilet sold in Japan between April to September
2017, it will donate one SATO toilet primarily
to developing countries in Asia and Africa. The
aim of this initiative is not only to donate SATO
products to regions where there is an urgent
need for them but also raise awareness of glob-
al sanitation issues within Japan.
Residents of the village of Wagholi in India, who received a
donated SATO unit
Total number of SATO units to be donated: 208,805
LIXIL launches the SATO V-Trap Connection
System, a new product specially developed
to meet the needs of the Indian market
In November 2017, LIXIL's new SATO V-Trap
Connection System (SATO V-Trap) was launched
in India. The Indian government's Swachh
Bharat Mission policy aims to eliminate open
defecation in India by 2019, and approximately
80,000 toilets are being constructed across the
country every day to reach this goal. Particularly
in areas that lack underground sewage systems,
the Indian government is promoting the adoption
of Twin-Pit Pour-Flush (TPPF) latrine systems.
However, traditional systems can be prone to
clogging, and masonry work is required in order
to switch the direction of human waste between
the two pits. LIXIL's new SATO V-Trap has been
specially developed to meet the needs of the
Indian market. While retaining the original SATO
design with a self-sealing trap-door, which helps
to conserve water, reduce odor, as well as help
keep out disease-carrying insects, the SATO
V-Trap is designed so users can switch the flow
of human waste between pits easily. In April
2018, because of its superior design function-
ality, the SATO V-Trap was awarded an Honor-
able Mention at the Red Dot Design Awards in
Germany.
The SATO V-Trap is designed to reduce the risk of pipes
becoming clogged with excrement. In addition, whereas older
systems required extensive work (including concrete removal,
etc.) in order to install the junction box that allowed switching
between pits, with the SATO V-Trap switching between pits
can be accomplished easily using just a wooden stick.
* This is calculated by assuming that there is an average of
five users for every SATO unit shipped as of March 2018.
Global Sanitation & Hygiene 74
LIXIL Group Corporation
Critical Social Issues
LIXIL's Response
Looking Back Over FYE2018
GROHE's new manufacturing facility
plant in Thailand
With the impact of climate change, intense and
extreme weather conditions have increased
incidents such as water and food shortages.
The international community has come together
in an attempt to address these problems and
ratified the Paris Agreement, which aims to
achieve a balance between anthropogenic
emissions and absorption of greenhouse gases,
including carbon dioxide, in the second half
of this century, and thereby keep the increase
in global average temperature to well below
2°C above pre-industrial levels. Contributing to
SDGs Goal 13 ("Take urgent action to combat
climate change and its impacts") is not only
important for government agencies but corpo-
rations also.
services that combine both comfort and supe-
rior environmental performance, which make a
positive contribution to energy and water con-
servation in buildings and homes. In addition,
to reduce its carbon emissions related to a wide
range of processes that extend from procure-
ment through to production and distribution,
LIXIL is working to ensure efficient use of water,
energy, and other natural resources.
Approximately 32% of all energy consumed in
the world is used by buildings (with residential
buildings accounting for 24% and commercial
buildings for 8%), which is an important busi-
ness area for LIXIL. It is forecast that, if appro-
priate measures are not taken, the amount of
energy that is consumed by buildings worldwide
will more than double by 2050.
LIXIL has identified the opportunities and risks
related to climate change and is promoting an
environmental strategy that is consistent with its
overall business strategy. LIXIL's Environmental
Vision 2030, which was announced in FYE2016,
aims to ensure that, by 2030, the positive envi-
ronmental contribution through its products and
services will surpass the environmental footprint
from its entire business process, thus achieving
a Net Zero environmental footprint and helping
to realize a sustainable society.
LIXIL develops and provides products and
Opportunities and Risks for the LIXIL Group
Maximizing Opportunities
Minimizing Risks
Highlights
The key issues that LIXIL is addressing
Reducing greenhouse
gas emissions
– Increased demand for improvements in the energy-
saving performance of homes and other buildings,
and for the widespread adoption of Net Zero Energy
Houses (ZEH)
– Heightened risk of natural disasters and increasingly
stringent regulation, and increased energy costs
Water conservation
– Rising demand for water-saving products in the
global market as a whole
– Strong likelihood that areas affected by water stress
will increase, resulting in higher operational risk in
these regions
Sustainable resource use
– Technology innovation that makes effective use of
recycled materials and new forms of energy, etc.
– Rising cost of raw materials, and heightened risk of
more stringent regulation affecting the supply chain,
with a consequent increase in reputational risk
Increase positive contribution to the environ-
ment through our products and services
Reduce the environmental footprint of our
business activities
Annual Report 2018 75
Connection to UN Sustainable Development Goals
Of the various measures that LIXIL implement-
ed related to its products and services, its new
RE-PLUS window replacement product received
the Minister of the Environment's Award in the
Cool Choice Leaders Awards, which is organized
by the Ministry of the Environment of Japan.
With RE-PLUS, an existing window can be
replaced with a new window without damaging
the wall in as little as 60 minutes. This new
product is changing standard practices in
the house renovation market, contributing to
energy-savings by encouraging more people
to have their windows replaced in order to
improve insulation.
LIXIL provides opportunities to tackle envi-
ronmental issues together with its consumers
through a wide range of products and services
that are closely related to people's everyday
lives. For example, through its "ECO for All"
Program in Japan, LIXIL aims to spread aware-
ness of simple ways in which people can con-
tribute to water savings and CO2 reduction.
Other measures implemented through busi-
ness activities include the GROHE factory in the
Klaeng district in eastern Thailand adding a new,
environmentally-friendly building, which was
awarded the DGNB Silver Certification of Sus-
tainable Building by the German Sustainable
Building Council. Besides having solar panels
installed on the roof, thereby helping to reduce
carbon dioxide emissions by around 700 tons
per year, the new factory building realizes
environmentally-friendly production by using
a wastewater recycling system and through an
overall more efficient manufacturing process.
CO2 Emissions
(Thousand t-CO2)
Water Intake / Water Discharge
(Million m3)
1,400.0
1,200.0
1,000.0
800.0
600.0
400.0
200.0
0.0
1,198.7
617.8
580.9
16
17
18
20.0
18.0
16.0
14.0
12.0
10.0
8.0
6.0
18.1
16.8
16
17
18
Scope 1
Scope 2
Water Intake
Water Discharge
Scope: Covers production and non-production bases in Japan and a majority of overseas production bases. The scope of the data differs from the scope of the
consolidated financial data, and a portion of the data on the website has received the independent practitioner's assurance. For details, please refer to the website.
URL: www.lixil.com/en/sustainability/environment/ev_performance.html
LIXIL's Targets Were Certified by the Science
Based Targets initiative
LIXIL received validation from the Science Based
Targets (SBT*1) initiative for its greenhouse gas
emissions reduction target, and continues to pro-
mote efforts to reduce its environmental footprint.
To help realize the Paris Agreement's long-term
targets, LIXIL is fully aware of its responsibilities
and the contribution it can make.
In November 2017, LIXIL received validation
from the SBT initiative since the Company's tar-
gets are scientifically compatible with the Paris
Agreement's targets. LIXIL has become the 14th
company in Japan and the first company in the
building products sector globally to secure SBT
initiative certification.
By 2030 (FYE2031), reducing 30% of Scope 1 and 2
emissions*2 compared to FYE2016
By 2030 (FYE2031), reducing 15% of Scope 3 emissions*3
compared to FYE2016
1. The SBT initiative is a joint collaboration between
CDP, the World Resources Institute (WRI), the
World Wide Fund for Nature (WWF), and the
United Nations Global Compact (UNGC). It was
established in 2015 to encourage companies to
meet science-based targets for cutting green-
house gases, in order to hold the increase in the
global average temperature to below 2°C above
pre-industrial levels.
2. Scope 1 and 2: Greenhouse gas emissions from
fuel and electricity used by an organization.
3. Scope 3: Greenhouse gas emissions from an or-
ganization's supply chain, such as procurement
and use of products.
Water Conservation & Environmental Sustainability 76
LIXIL Group Corporation
Annual Report 2018 77
Annual Report 2018 77
Connection to UN Sustainable Development Goals
Critical Social Issues
The number of societies with an aging pop-
ulation is increasing throughout the world.
By 2050, more than one in every five people
around the world is projected to be over the age
of 60, with many living either alone or with their
spouse only. Approximately 15% of the world's
population today has some sort of disability,
and this rate is increasing every year. Under
these circumstances, there is a greater need
for companies to enhance the quality of life and
well-being for the elderly and those with phys-
ical disabilities through products and services.
Additionally, with the shrinking workforce in
Japan, providing all people with the opportunity
to maximize their potential, including increas-
ing efforts to foster women's empowerment in
line with SDGs Goal 5, is especially crucial for
businesses in Japan.
LIXIL's Response
LIXIL has made Diversity & Inclusion a key
pillar of its Corporate Responsibility (CR)
strategy. By embracing diversity in gender, age,
race, nationality, values, and backgrounds in
society and within the Company, LIXIL strives
for open and honest communication and uses
the dynamic energy of its diversity as an engine
for growth and innovation. LIXIL is undertaking
R&D aimed at the development of new prod-
ucts and services that embody ideas generated
from different perspectives, and uses this to
help improve people's comfort and lifestyles.
Target ally coverage rate: At least two "allies" at all 86 LIXIL branches in Japan
with over 50 employees by 2020; achieved 77% as of March 31, 2018
Participants to the "Universal Design" program: 1,290 students at 21 schools
Participants to the "Universal Run" program: 6,030 students in 80 schools
Highlights
LIXIL Diversity & Inclusion Declaration
LIXIL previously issued a Diversity Declaration
and has been implementing a wide range of
activities to promote diversity. However, since
these activities were implemented mainly in
Japan and tended to focus on fostering wom-
en's empowerment, LIXIL issued an updated
Diversity & Inclusion Declaration in March
2018 to promote a wider range of activities on
a global scale.
LIXIL has set four focus areas to uphold its
Diversity & Inclusion Declaration, not only for
recognizing diversity but also for leveraging its
differences to improve engagement. LIXIL will
promote initiatives to address and improve the
four focus areas that are the most relevant for
each country and region.
Looking Back Over FYE2018
To create a comfortable and friendly corporate
environment for all, LIXIL has been holding
workshops in Japan aimed at deepening
employees' understanding towards sexual
minorities. It has also implemented e-learning
activities for all employees.
As a part of these activities, LIXIL has been
supporting employees who want to voluntarily
register as an "ally" of sexual minority employ-
ees, who can offer a friendly ear, discuss con-
cerns, and spread awareness and understand-
ing among other employees. Additionally, LIXIL
has set a goal of having at least two "allies" in
all 86 LIXIL branches in Japan that have more
than 50 employees by 2020. As of March 2018,
LIXIL has already achieved 77% of its target.
LIXIL is also working actively to address
a wide range of Diversity & Inclusion issues
at its overseas Group companies, such as
implementing a special leadership training
program in South Africa for young employees
from ethnic groups that have historically been
discriminated against, and providing reason-
able accommodation to support employees with
disabilities at LIXIL Americas. As a part of its
efforts to help educate the next generation,
LIXIL has been conducting school visit pro-
grams such as "Universal Design: Good for
One, Good for All" and "Universal Run: Sports
Prosthesis Experience Class", mainly at elemen-
tary schools throughout Japan.
By helping children to understand what user-
friendly design means, including for people
with disabilities and the elderly, it provides them
with the opportunity to learn about the impor-
tance of respecting one another.
Percentage of Female Managers
(%)
16.0
12.0
8.0
4.0
0.0
13.9%
6.0%
16
17
18
Global (Includes Japan)
Japan
Scope: Covers the entire Group. The scope of the data differs from the scope
of the consolidated financial data, and a portion of the data on the website has
received the independent practitioner's assurance. For details, please refer to
the website. For details, please refer to the website.
URL: www.lixil.com/en/sustainability/people/performance.html
An employee teaching the "Universal Design" school visit
program at a primary school in Japan
LIXIL Diversity & Inclusion — Four Focus Areas
Gender & Age
We will drive business performance by em-
bracing diversity and ensuring that all employ-
ees have equal opportunities to be recruited,
developed, advanced, and retained globally,
regardless of gender or age.
Disability
We will raise awareness, provide education and
resources, and proactively create a culture that
embraces, enables, values, and maximizes the
contributions of persons with disabilities.
Family & Life
We will support employees through various
life stages and events, thereby allowing them
to contribute to business success while also
fulfilling personal and family priorities and
obligations.
Culture & Identity
We will foster mutual understanding, respect, and
communications in order to fully embrace the
diversity in race, religion, culture, gender identity,
and sexual orientation of everyone at LIXIL.
Launching the Universal
Design Project
LIXIL is developing measures
to foster Universal Design
(UD), which aims to make
living as convenient and easy
as possible for everyone. To
enhance LIXIL's UD project,
LIXIL established a new com-
mittee in 2017, the member-
ship of which comprises senior
managers. The committee
held UD workshops with
participants from a wide variety of functions
across LIXIL, including marketing, sales, R&D,
and PR, establishing the foundation of the
Company's UD promotion structure and
framework.
Working within this new framework, LIXIL will
continue to develop new products and services
that meet the needs of a wide range of users,
pursuing user-friendly functions, meeting needs
relating to usability and accessibility, as well as
creating designs that appeal to consumer tastes
and preferences.
Well Life is a kitchen system that embodies Universal Design
in every aspect, including size and functionality, and it can be
used safely by wheelchair users, senior citizens, and people
with weakness of the back and legs.
Diversity & Inclusion 78
LIXIL Group Corporation
Annual Report 2018 79
List of LIXIL's Material Issues,
Targets, and KPIs
LIXIL identified the following material issues under its Corporate Responsibility (CR) strategy and framework.
The Group has formulated its Medium-Term Plan and started implementing activities accordingly during FYE2017
and made notable progress towards achieving the targets for FYE2018.
Material Issues
Governance
Target
Target for FYE2018
FYE2018 Review
Corporate governance
Establish global-standard governance
Compliance
Develop a comprehensive and effective compliance structure across
the Group
– Set clear rules and procedures for governing bodies
– Ensure 100% coverage of improved governance rules
– Reviewed executive meeting formats to facilitate swift decision-making, and evaluated efficacy of
the Board
and procedures
– Scope of Group companies in which revised rules will apply: 100%
– Group-wide basic training and commitment to the Group
– Group-wide basic training and commitment to the Group Code of Conduct: 98.9% in Japan, 97.3%
Code of Conduct: 100%
overseas
– Placement of compliance committees and officers in
– Established compliance committees or alternative meeting formats in all international business
each business unit: 100%
units and distributed guides including fundamental stipulations
– Combine Japan and overseas internal concern-raising
– Integrated Japan and overseas internal concern-raising systems to "Speak Up!"
systems
Risk management
Establish and operate a Group-wide enterprise risk
management system
– Coverage of the risk management system across Group
companies: 100%
– Coverage of the risk management system across Group companies: 100%
– Developed a comprehensive insurance program and established a centralized control system for
Fair Business Practices
Anti-corruption
Develop an effective anti-corruption mechanism across
the Group
– Group-wide adoption of global policy: 100%
– Group-wide compliance-related education and training
ratio: 100%
– Group-wide compliance policy coverage:100%
– Group-wide compliance-related training ratio: 45% ～ 100% (varies by region)
– Compliance violations across the Group: 0%
liability insurance for all the Group companies worldwide
Human Rights
Human rights due diligence
Appropriately manage human rights considerations that fall within the
scope of the Company's operational influence across its entire value chain
– Implementation of training at primary LIXIL Corporation
– Implementation of training at primary LIXIL Corporation overseas subsidiaries:
overseas subsidiaries: 100%
Over 3,700 employees (June 30, 2018)
Labor Practices
Diversity and equal opportunity
Secure highly competent people by respecting diversity across
the Group
– Percentage of females among regularly recruited new
– Percentage of new female graduates (including those who completed graduate studies)
hires (LIXIL Corporation, Japan only): Over 30%
– Percentage of female participation in
Talent Acceleration Program (LIXIL Corporation,
Japan only): Over 20%
employed: 31.5％
– Percentage of female participation in Talent Acceleration Program (training for
selected young employees): 37.5％
Occupational health and safety
Establish an Environment, Occupational Health and Safety (EHS) man-
agement system across the Group
– Group-wide operational scope of occupational health and
safety covered by the EHS management system: 98%
– HQ EHS Department conducted internal audit of EHS managers of all business systems
– Implemented the EHS performance data collection and management system
– EHS performance data acquisition rate (based on employee numbers): 100％
Working environment
Build a worker-friendly environment for all employees
– Implementation of action plans derived from the global
employee awareness survey across the Group: 100%
– At least one department in all major Group companies created an action plan
– Implementation of action plans: 100%
Talent development
Promote more employee-driven human resource development to
encourage a bottom-up corporate culture
– Hold 5 Talent Acceleration Program classes for 116 em-
– Number of employees participating in the Talent Acceleration Program for next-generation leaders:
ployees (LIXIL Corporation, Japan only)
116 employees, 5 classes
Quality and Satisfaction
Product safety
Eliminate product accidents
– Number of serious product accidents across the Group:
0 cases
– Critical product-related accidents: 3 (single gas stove: 2; stove top ventilation cover:1)
– Critical product-related accidents were reported in product-related crisis management meetings,
Environment
Greenhouse gas reduction
Promote reduction in greenhouse gas emissions across the Group
Water conservation
Promote efficient use of water resources across the Group
Sustainable use of raw materials
Promote sustainable use of resources across the Group from procure-
ment through to disposal of raw materials
Supply chain management
Identify suppliers' CR risks and establish mechanisms to
respond accordingly
Supply Chain
Stakeholder Engagement
and potential corrective actions were discussed
– Information on critical product-related accidents were filed in a database and reviewed to
determine if any corrective actions were necessary. Product corrections and awareness-raising on
precautions regarding product use were carried out as necessary
– Group-wide benefits from CO2 emissions reduction
achieved from products and services increased by 1.16
times (compared to FYE2016)
– Group-wide CO2 emissions reduction attributable to products and services: 58.674t
– Implemented policy to replace all lights used in LIXIL products with LED by 2020 (LIXIL
Corporation, Japan only)
– Group-wide levels of CO2 emissions across all operational
– Group-wide CO2 emissions reduction attributable to products and services: up 4.7% from
processes reduced by 3.2% (compared to FYE2016)
FYE2016 level (down 1.1% in terms of carbon intensity)
– Achieve supplier monitoring coverage ratio (based on
purchased amount) of 90% in Japan and 60% outside
Japan, 90% conformity rate, and 100% improvement rate
– Coverage of supplier CR survey rates are 90％ in Japan and 90% overseas*. Conformity rates
(minimal levels of compliance with the evaluation criteria) are 95％ in Japan and 85% overseas*.
* Excludes GROHE Group S.a r.l., American Standard Brands, and the Permasteelisa Group during FYE2015-2018
Contribution to global sanitation
and hygiene
R&D for solving social problems
Help improve global sanitation and hygiene through our business
– Generate 10.9 million beneficiaries in FYE2018 in order to
– Beneficiaries totaled approximately 9 million
achieve our 2020 target of 100 million beneficiaries
Create products that support the lives of elderly people and
people with disabilities
– Number of IoT-driven applications developed: 10
– Development of IoT-driven applications: 3
For further details regarding the Group's material issues, and CR activities and outcomes, please refer to the Sustainability section of our corporate website.
URL: http://www.lixil.com/en/sustainability/
80
LIXIL Group Corporation
Annual Report 2018 81
Annual Report 2018 81
Board of Directors' Effectiveness Evaluation
In order to put in place and maintain the corporate governance
systems needed to support the sustainable growth and medium-
and long-term corporate value enhancement of the LIXIL Group
as a whole, the Company analyzes and evaluates the effective-
ness of the Board of Directors, and attaches great importance to
efforts to strengthen and improve the Board's effectiveness.
One aspect of the measures taken in this regard is the imple-
mentation of self-evaluation of the Board's effectiveness by every
member of the Board on an annual basis.
Corporate Governance Statement
from the Chairman of the Board
Governance and management are the dual components that
enhance the value of the corporate group. LIXIL's Board of
Directors, which controls governance, is centered on five outside
directors and non-executive directors with extensive management
experience who objectively supervise management, discuss the
future of the Group from a long-term perspective, and exchange
views with the president. We are adding two additional directors
to establish a 12-member governance structure. At the same
time, we are also strengthening the roles of three management
committees to better reflect the view from the front lines of the
business within the Board of Directors.
The region stretching from Japan to China and India accounts
for around 60% of the global population, and is expected to
generate considerable demand for infrastructure development
and construction. This will be the most important region for
growth for LIXIL over the long term. China alone already has an
annual GDP 2.5 times that of Japan. This prompts management
to pursue business expansion that keeps pace with Asia's deve-
lopment. The ceramics business has followed this direction in
India and other countries. We are also developing new aluminum
products for ASEAN markets. We are utilizing Singapore as our
center for Asian expansion, and opened a modern showroom
there in the spring of 2018.
The somewhat spread investment program employed during
the acceleration of LIXIL's multinational business development
has been refocused under the current management to place
greater emphasis on profitability. Revenue growth has slowed,
but earnings have increased. At the same time it is extremely
important to sow the seeds for the future, and I have held
discussions with management to ensure we avoid an excessive
contraction.
LIXIL's results have fallen short of plan in certain areas as a re-
sult of a slowdown in new housing starts in Japan from the latter
half of the previous fiscal year, and higher aluminum prices due
to speculation over developments in international politics. At the
same time, expanded production at our factories in Thailand,
Mexico, and the Dominican Republic have resolved supply
shortages overseas, resulting in positive growth.
Toilet conditions in developing countries present major con-
cerns in terms of hygiene and safety. LIXIL's SATO Toilet Systems
are a measure to directly address these issues. The usual pattern
for brands in advanced nations is to target small markets in
developing countries for the most well-off or foreigners, but LIXIL
is approaching these markets as a social business and respond-
ing to significant demand.
We will make further efforts to meet the expectations of share-
At the same time, protectionist measures in overseas countries
holders. Thank you for your continued support.
and counter-currents against a more open society are issues of
concern. Increasing barriers to free trade necessitate the creation
of more exacting supply chains tailored to the conditions in each
country. In response, LIXIL is employing a diverse workforce
irrespective of race, gender, or nationality, in order to reflect
different views.
Yoichiro Ushioda
Chairman of the Board, August 2018
Effectiveness
Evaluation Process
Summary of the
Evaluation Results
Measures to Be Implemented
Based on the Evaluation
Results
The Board of Directors, composed of the directors appointed at the Annual
General Meeting of Shareholders held in June 2017, implemented an evaluation
of the effectiveness of the Board of Directors and of each Board Committee us-
ing the following process, with the Chairman of the Board playing a central role.
Starting from November 2017, questionnaire surveys were administered to
–
each of the 10 members of the Board regarding the composition, operation,
agendas, and supporting systems of the Board, in addition to director training
and compliance with the LIXIL Group's Corporate Governance Guidelines*.
On the basis of the collected results of the questionnaire surveys referred to
above, the analysis and evaluation by all Board members was discussed at a
Board meeting held in January 2018.
On the basis of the results of the Board's discussions, strategies for further
enhancing the Board's functioning were reviewed and confirmed by the Board.
–
–
The results obtained in the review referred to above confirmed that the effectivness
of the Board and all Board Committees was evaluated as being adequate. At the
same time, it was clear that there were several issues that needed to be addressed,
including: (1) the necessity to establish a forum to further discuss important
topics such as Group strategy, and future vision, on a centralized basis by the
Board as a whole; (2) the necessity to review the role of the Advisory Committee
of Independent Outside Directors and Lead Independent Outside Director. These
issues were shared and discussed among the directors, and efforts were made to
enhance the supervisory function of the Board by discussing possible revisions of
the Corporate Governance Guidelines and related strategies.
In order to put in place and maintain the corporate governance systems needed
to support the sustainable growth and medium- and long-term corporate value
enhancement of the LIXIL Group as a whole, measures will be taken on an on-
going basis to enhance the functioning of the Board of Directors on the basis of
the most recent Board effectiveness evaluation results and of the diverse range
of views put forward by individual directors during the related processes.
* LIXIL Group Corporate Governance Guidelines
URL: www.lixil.com/en/about/governance/policies.html
Directors / Executive Officers
Directors/Executive Officers
2
Directors/Executive Officers
10
Composition of the Members of the Board of Directors
As of June 21, 2018
Directors/Executive Officers
Directors who Are Concurrently Serving as Executive Officers
Directors who Are Not Executive Officers
Internal directors/Outside directors
10
2
2
10
Internal Directors / Outside Directors
Internal directors/Outside directors
7
Internal directors/Outside directors
7
Diversity
Internal Directors
7
Outside Directors
10
5
5
5
Diversity
Diversity
Diversity
10
10
Male
Female
2
2
2
Name
Business
Execution
Nomination Compensation Audit
Committee
Committee
Committee
Yoichiro Ushioda
Kinya Seto
✓
✓
✓
Yoshizumi Kanamori
Yoshinobu Kikuchi
Keiichiro Ina
Haruo Shirai
Ryuichi Kawamoto
Tsutomu Kawaguchi
Main Kohda
Barbara Judge
✓
✓
✓
Chairperson
✓
✓
✓
Chairperson
Hirokazu Yamanashi
Chairperson
✓
Hiroto Yoshimura
✓
✓
s
r
o
t
c
e
r
i
D
l
a
n
r
e
t
n
I
s
r
o
t
c
e
r
i
D
e
d
s
t
u
O
i
82
LIXIL Group Corporation
83
Annual Report 2018 83
Board of Directors of
LIXIL Group Corporation
As of June 21, 2018
YOICHIRO USHIODA*
Director, Chairman of the Board,
Executive Officer, Special Mission
Yoichiro Ushioda has served as
Chairman of the Board of LIXIL Group
Corporation since June 2012. He is
also a member of the Nomination
Committee and was appointed as
Executive Officer, Special Mission in
October 2017. Previously, Ushioda
served as Executive Vice President
of the Company from 2001 and as
Chairman, CEO, and Representative
Director from 2006. He also served
as Chairman and CEO of Tostem
Corporation (now LIXIL Corporation)
in the past. Ushioda originally joined
the Company in 1977 and became
Director and General Manager of the
Sales Planning Department in 1980.
He holds 9,376,220 shares of the
Company.
KINYA SETO*
Director, Representative Executive
Officer, President & Chief Executive
Officer
Kinya Seto assumed the role of
Director, Representative Executive
Officer, President and Chief Executive
Officer of LIXIL Group Corporation in
June 2016. He also serves as
President and CEO of LIXIL
Corporation, CEO of LIXIL Water
Technology, and CEO of LIXIL Housing
Technology. Seto began his career
with Sumitomo Corporation, a major
Japanese trading company, in 1983.
After holding various key posts at
Sumitomo Corporation, he established
more than 10 companies in Japan
and overseas, including MonotaRO
Co., Ltd., a direct marketer of mainte-
nance, repair, and operating (MRO)
supplies. Seto served as President
and Director of MonotaRO from 2006
and then became Chairman and
Director in 2012. He also previously
served as Non-Executive Director of
Zoro Tools, Inc. (now Zoro Inc.) and
President of K-engine Corp.
Seto's other global leadership roles
include having led Asia Pacific opera-
tions for W.W. Grainger, Inc., a leading
global MRO supplier, and heading its
global online business operations
based out of London. He holds
103,100 shares of the Company.
YOSHIZUMI KANAMORI
Director
YOSHINOBU KIKUCHI
Director
KEIICHIRO INA
Director
HARUO SHIRAI
Director
RYUICHI KAWAMOTO
Director
TSUTOMU KAWAGUCHI
Outside Director
Yoshizumi Kanamori has served as
Director of LIXIL Group Corporation
since June 2007. Previously, he served
as Executive Officer, Senior Managing
Director, and Chief Financial Officer of
LIXIL Group Corporation, and as
Director, Senior Managing Director,
and Chief Financial Officer at LIXIL
Corporation. He joined the Company
in 1977, and he holds 13,000 shares of
the Company.
Yoshinobu Kikuchi has served as
Director of LIXIL Group Corporation
since June 2012 and is also a member
of the Company's Compensation
Committee. Previously, he also served
as Executive Vice President of LIXIL
Corporation. He joined the Company
in 1969, and he holds 21,100 shares of
the Company.
Keiichiro Ina has served as Director
of Tostem Inax Holding Corporation
(now LIXIL Group Corporation) since
June 2001. He is a member of the
Company's Compensation Committee.
From 1998, he served as a Director at
INAX Corporation (now LIXIL Corpo-
ration), responsible for Investor Rela-
tions, Public Relations, Finance and
Taxation, and Corporate Responsibility.
He originally joined the Company in
1974, and he holds 435,900 shares of
the Company.
Haruo Shirai has served as Director
of LIXIL Group Corporation since July
2018. He is also a member of the
Company's Audit Committee. Previous-
ly, Shirai served as Executive Vice
President of LIXIL Group Corporation
as well as Director and Executive Vice
President of LIXIL Corporation. After
serving as Senior Sales Director at
Tostem Corporation before it was inte-
grated into LIXIL, Shirai became
Executive Vice President, responsible
for overseeing domestic sales at LIXIL
Corporation in 2011, before assuming
the role of Chief Executive Officer of
LIXIL Japan Company in 2015. He
joined the Company in 1974.
Ryuichi Kawamoto has served as
Director of LIXIL Group Corporation
since June 2018. Previously, Kawamo-
to served as Representative Executive
Officer and Executive Vice President
of LIXIL Group Corporation. He was
responsible for the optimization of
LIXIL's global manufacturing and
supply chain operation. Kawa-
moto also served as Director, Executive
Vice President, and Chief Technology
Officer at LIXIL Corporation. He
joined INAX Corporation (now LIXIL
Corporation) in April 1976, and he
holds 16,752 shares of the Company.
Tsutomu Kawaguchi has served
as Outside Director of LIXIL Group
Corporation since June 2011. He cur-
rently serves as the Chairperson
of the Audit Committee. In addition,
Kawaguchi currently serves as an
auditor of FreeBit Co., Ltd., and as
Director of VINX Corp. Kawaguchi
has been a registered certified public
accountant since March 1974 and
used to serve as Representative
Partner for Grant Thornton Taiyo ASG.
* Indicates a director who also serves as an executive officer
Note: Number of shares of the Company owned by the directors is as of June 22, 2018
84
LIXIL Group Corporation
Annual Report 2018 85
Reasons for Nomination as Director
In addition to the 10 directors who were renominated, an additional
two persons who until recently were involved in the implementation
of the Company's business activities and are familiar with its business
were nominated with the aim of helping the Board to further enhance
the efficiency of its supervisory function. The total number of persons
nominated for directorships was thus 12.
YOICHIRO USHIODA
Director
YOSHINOBU KIKUCHI
Director
RYUICHI KAWAMOTO
Director
BARBARA JUDGE
Outside Director
Yoichiro Ushioda has a wealth of ex-
perience and knowledge working in
the important departments of the
Company and its subsidiaries (the
"Group") and has a deep understand-
ing of the overall businesses and
management of the Group. He is
making an effort to strengthen the
governance system for the long-term,
and lead the Company's transition to
a company with committees (currently
a company with nomination commit-
tee, etc.) among other things. Based
on the foregoing, it is expected that
the Company's governance and espe-
cially the Board of Directors' supervi-
sory function will be maintained and
strengthened.
KINYA SETO
Director
Kinya Seto has demonstrated his abil-
ities through his deep involvement in
the decision-making and execution of
business within the Group with his
strong leadership and making use of
his extensive experience and wealth
of knowledge as a business manager
of multiple corporations. As such, he
is expected to fulfill his responsibili-
ties to provide explanations to the
Board of Directors as a Representa-
tive Executive Officer and contribute
to the strengthening of the Company's
governance system through his in-
volvement as a Director in the deci-
sion-making of important manage-
ment matters.
YOSHIZUMI KANAMORI
Director
Yoshizumi Kanamori has been involved
in the operation and management of
accounting and finance, etc., and has
a wealth of experience and knowledge.
He has provided accurate comments
from time to time as a non-executive
Director, demonstrated his abilities as
an Audit Committee Member, and has
been making an effort to strengthen
the Company's governance system.
Based on the foregoing, it is expected
that the Board of Directors' superviso-
ry function will be maintained and
strengthened.
Yoshinobu Kikuchi has been involved
in the operation and management of
human resources and general affairs,
etc., for many years, and has a wealth
of experience and knowledge. He
provides accurate comments from
time to time as a non-executive Direc-
tor, has demonstrated his abilities as
a Compensation Committee Member
and is making an effort to strengthen
the Company's governance system.
Based on the foregoing, it is expected
that the Board of Directors' superviso-
ry function will be maintained and
strengthened.
KEIICHIRO INA
Director
Keiichiro Ina has been involved in the
operation and management of IR and
public relations, etc., for many years
and has a wealth of experience and
knowledge. Currently, while providing
insightful comments as a non-execu-
tive Director, he has demonstrated his
abilities and is making an effort to
strengthen the Company's governance
system as a Compensation Committee
Member. Based on the foregoing, it is
expected that the Board of Directors'
supervisory function will be main-
tained and strengthened.
HARUO SHIRAI
Director
With a wealth of experience and
knowledge gained from many years in
business and management in Japan
as CEO of LIXIL Japan Company, and
having shown his abilities as Executive
Vice President of the Company, Shirai
is expected to add insight to the
high-level managerial decision-making
of the Company as a non-executive
Director, and maintain and enhance
the supervisory function.
Note: Shirai resigned as Executive Offi-
cer of the Company due to the end of
his term of office as of the close of the
first meeting of the Board of Directors,
which convened after the 76th Annual
General Meeting of Shareholders held
in June 2018, and resigned as Director
of LIXIL Corporation due to the end of
his term of office as of the close of the
Annual General Meeting of Sharehold-
ers of LIXIL, which resulted in becom-
ing a non-executive Director.
With a wealth of experience and
expertise as a manager from having
worked in positions including
Representative Director of LIXIL Cor-
poration, and having shown his abili-
ties as Representative Executive
Officer and Executive Vice President,
Production Optimization of the Com-
pany, Kawamoto is expected to take
part in the high-level managerial
decision-making of the Company as a
non-executive Director, and maintain
and enhance the supervisory
function.
Note: Kawamoto resigned as Repre-
sentative Executive Officer of the
Company due to the end of his term
of office as of the close of the first
meeting of the Board of Directors
which convened after the 76th
Annual General Meeting of Share-
holders of the Company, and resigned
as Director of LIXIL Corporation due
to the end of his term of office as of
the close of the Annual General
Meeting of Shareholders of LIXIL,
which resulted in becoming a non-
executive Director.
TSUTOMU KAWAGUCHI
Outside Director
Tsutomu Kawaguchi has specialized
knowledge and extensive experience
in finance and accounting gained as
a certified public accountant, and
currently fulfills his role as an Outside
Director in a proper manner, princi-
pally in supervising decision-making
on important management matters
and business execution.
MAIN KOHDA
Outside Director
In addition to her profound knowledge
of international finance, Main Kohda
brings deep insight and an objective
perspective as a writer, and a wide
range of experiences as a member of
the councils for the Ministry of
Finance and Ministry of Land,
Infrastructure, Transport and Tourism.
She is expected to continue to fulfill
her role as an Outside Director in a
proper manner, principally in supervis-
ing decision-making on important
management matters and business
execution.
Barbara Judge reflects a global view-
point in the Board of Directors of the
Company based on her extensive ex-
perience and knowledge in compa-
nies and public service, including as
a commissioner of the US Securities
and Exchange Commission, for many
years. She is expected to continue to
fulfill her role as an Outside Director
by supervising decision making on
important management matters and
business execution.
HIROKAZU YAMANASHI
Outside Director
Hirokazu Yamanashi has specialized
experience and knowledge gained
through his business consultancy
work and extensive experience and
knowledge gained from being in
charge of internal affairs and serving
as an executive officer in charge of
business planning of a listed compa-
ny. The Company believes that these
experiences and knowledge will be
reflected in the Board of Directors of
the Company and that he will contin-
ue to fulfill his role as Outside Director
sufficiently in the decision-making on
important management matters of the
Company and supervising business
execution.
HIROTO YOSHIMURA
Outside Director
Hiroto Yoshimura has a wealth of ex-
perience working in police adminis-
trative organizations, as well as
extensive experience in personnel
and organizational reform and com-
pliance expertise. He is expected to
continue to play an appropriate role in
the major management decisionmak-
ing and business execution of the
Company as an Outside Director
MAIN KOHDA
Outside Director
BARBARA JUDGE
Outside Director
HIROKAZU YAMANASHI
Outside Director
HIROTO YOSHIMURA
Outside Director
Main Kohda has served as Outside
Director of LIXIL Group Corporation
since June 2013. She is also a mem-
ber of the Company's Nomination
Committee and Compensation
Committee. Kohda was a member
of the NHK Management Committee
since June 2010. She also serves as
Outside Director of Japan Tobacco
Inc. since June 2012, and Director
of the Japan Exchange Group since
2016. She is a best-selling writer and
has served as a member of public
advisory committees.
Lady Barbara Judge CBE has served
as an Outside Director of LIXIL Group
Corporation since June 2015. She has
been Chairperson of the Company's
Compensation Committee since 2017,
and a member of the Nomination Com-
mittee from 2018. Early in her career
she was a commissioner of the US
Securities and Exchange Commission
and subsequently Deputy Chairperson
of the UK Financial Reporting Council.
She currently serves as Chairperson
of Cifas, the fraud protection agency
in the UK and LoopUp, a premium,
remote meetings solution. Prior
thereto she was Chairperson of the
UK Pension Protection Fund and the
UK Institute of Directors. She was also
a Director of Magna International Inc
and served as Chairperson of its risk
committee. Lady Judge also served,
among her other appointments, as
a Non-Executive Director of the UK
Atomic Energy Authority from 2002
to 2004, and subsequently as
Chairperson from 2004 to 2010. In
June 2010, she was awarded
Commander of the Order of the
British Empire for services to the
nuclear and financial services indus-
tries. In April 2015, she received the
Times Non-Executive Director award
for her Chairmanship of the UK
Pension Protection Fund.
Hirokazu Yamanashi has served as
an Outside Director of LIXIL Group
Corporation since June 2016. He is
also Chairperson of the Company's
Nomination Committee and a mem-
ber of the Compensation Committee.
Yamanashi joined AEON Co., Ltd.
in 2014 and was appointed Vice
President, Chief Corporate Planning
Officer, and Chief E-Money Business
Officer in 2015. He also previously
served as Director (Senior Partner)
of McKinsey & Company, Inc.
Hiroto Yoshimura was appointed
as Outside Director for LIXIL Group
Corporation in June 2017. He also
serves as a member of the Nomination
Committee and the Audit Committee.
Yoshimura started his career at the
National Police Agency in Japan in
1971, and served as Director-General
of the National Police Agency from
August 2007 to June 2009, and Chief
Director of the Police Mutual Aid
Association from December 2010 to
November 2016.
Attendance at Board of
Directors' Meetings for
FYE2018
Name
Attendance at Board of
Directors' Meetings
Yoichiro Ushioda
Kinya Seto
Yoshizumi Kanamori
Yoshinobu Kikuchi
Keiichiro Ina
Tsutomu Kawaguchi
Main Kohda
Barbara Judge
Hirokazu Yamanashi
Hiroto Yoshimura*
100%
100%
100%
100%
100%
100%
100%
94%
100%
100%
* After serving as an outside director on
June 22, 2017
86
LIXIL Group Corporation
Annual Report 2018 87
Corporate Governance at the LIXIL Group
LIXIL Group Corporation has adopted the Company with Nomina-
tion Committee, etc., corporate governance model as provided
for under Japan's Companies Act. Under this governance system,
the Company clearly separates the conduct of management from
the surveillance of management with the objectives of creating
a system where the executive officers can make management
decisions quickly and decisively while aiming to secure manage-
ment transparency.
As a pure holding company, the Company has formed the
following meetings, committees, and councils to strengthen
governance over Group companies: Internal Audit Committee,
Compliance Committee, Risk Management Committee, M&A
Committee, Investment Review Committee, and Corporate
Responsibility Committee. These committees discuss corporate
strategy, consider medium-to-long-term policies, deliberate
investments, and work to accelerate decision-making while
enhancing the effectiveness of governance.
Governance Structure
As of June 21, 2018
Group Governance System
The Company, while respecting the indepen-
dence of each Group company, including LIXIL
Corporation, regarding its business manage-
ment, receives periodic reports on the status of
business and gives approval to important mat-
ters. Additionally, the Audit Committee of the
Company periodically receives reports on the
details of audits by the financial auditors of the
Company and the Company's internal audit
divisions while, at the same time, strengthening
cooperation with the Company auditors of each
Group company by holding periodic Group
Company Auditors' meetings.
Governance of LIXIL Group Corporation, LIXIL Corporation,
and Significant Operating Companies
As of June 21, 2018
LIXIL Group Corporation
Board of Directors
Nomination Committee
Compensation Committee
Audit Committee
Appointment
and dismissal
Supervision
Compliance audit
Validation audit
Compliance audit
Validation audit
E
x
e
c
u
t
i
v
e
O
f
f
i
c
e
r
s
LIXIL Corporation
Management
Supervision
Board of Directors
Compliance audit
Validation audit
Company
Auditors
Appoint-
ment
Management
Supervision
Management
Supervision
n
o
s
i
i
v
r
e
p
u
S
Chairman of the Board
Appointment
and Dismissal
Board of Directors
(Decision-making and supervision)
Appointment
and Dismissal
General Meeting of Shareholders
Appointment
and Dismissal
Board of Directors
(Internal and Outside)
Appointment and Dismissal
Nomination
of Director
Candidates
Nomination Committee
Compensation Committee
Report
Audit Committee
i
F
n
a
n
c
a
i
l
(Outside directors
form the majority)
A
u
d
i
t
o
r
s
Compliance audit
Report
Validation audit
Compliance audit
Validation audit
A
u
d
i
t
n
o
i
t
u
c
e
x
E
s
s
e
n
s
u
B
i
Representative Executive Officers and Executive Officers
(Decide on matters delegated by the Board of Directors and execute business)
Executive Officers Meetings and Various Committees
Internal Audit Committee, Compliance Committee, Risk Management Committee,
M&A Committee, Investment Review Committee, and Corporate Responsibility Committee
Management
Supervision
General Meeting of Shareholders
Audit and Supervisory Committee /
Company Auditors
Board of Directors
Management Meeting
Divisions
Note: This structure applies only to operating companies
(LIXIL Corporation and other subsidiaries) in Japan.
(
C
o
l
l
a
b
o
r
a
t
e
w
i
t
h
t
h
e
I
n
t
e
r
n
a
l
A
u
d
i
t
C
o
m
m
i
t
t
e
e
a
n
d
i
n
t
e
r
n
a
l
A
u
d
i
t
a
u
d
i
t
d
i
v
i
s
i
o
n
s
)
.
c
t
e
,
e
e
t
t
i
m
m
o
C
n
o
i
t
a
n
m
o
N
h
t
i
i
w
y
n
a
p
m
o
C
d
n
a
t
i
d
u
A
h
t
i
w
y
n
a
p
m
o
C
h
t
i
w
y
n
a
p
m
o
C
,
e
e
t
t
i
m
m
o
C
y
r
o
s
i
v
r
e
p
u
S
s
r
e
h
t
o
d
n
a
,
s
r
o
t
i
d
u
A
y
n
a
p
m
o
C
For further details regarding the Company's corporate governance system,
internal control systems, and other related matters, refer to the website.
URL: www.lixil.com/en/about/governance/
LIXIL Group Corporation’s significant subsidiaries
GROHE Group S.à r.l.
ASD Holding Corp
LIXIL INTERNATIONAL Pte. Ltd.
LIXIL VIVA CORPORATION
LIXIL Living Solution Corporation
LIXIL Corporation’s significant subsidiaries.
Kawashima Selkon Textiles Co., Ltd.
Asahi Tostem Exterior Building Materials Co., Ltd.
Others
Directors and Corporate Officers of LIXIL Group Corporation
and LIXIL Corporation
As of June 21, 2018
LIXIL Group Corporation
LIXIL Corporation
Executive Officers
Kinya Seto
Sachio Matsumoto
Kazuhiko Ootsubo
Jin Song Montesano
Harumi Matsumara
Ryo Nihei
Yugo Kanazawa
Yutaka Nakamura
Yoichiro Ushioda
Appointment
and dismissal
Board of Directors
Yoichiro Ushioda
Kinya Seto
Yoshizumi Kanamori
Yoshinobu Kikuchi
Keiichiro Ina
Haruo Shirai
Ryuichi Kawamoto
Tsutomu Kawaguchi
Main Kohda
Barbara Judge
Hirokazu Yamanashi
Hiroto Yoshimura
Management
Supervision
Board of Directors
Company Auditors
Yuji Tsuboi
Shoji Kono
Kinya Seto
Kazuhiko Ootsubo
Sachio Matsumoto
Jin Song Montesano
Harumi Matsumura
Ryo Nihei
Yugo Kanazawa
Yutaka Nakamura
Satoshi Yoshida
Hiroyuki Oonishi
Compliance audit
Validation audit
Internal Directors who Are Not Executive Officers
Executive Officers of LIXIL Group Corporation who Are Concurrently Serving as Directors of LIXIL Corporation
Outside Directors who Are Not Executive Officers
Appointment and dismissal
Determination of compensation
88
88
LIXIL Group Corporation
LIXIL Group Corporation
Annual Report 2018 89
Annual Report 2018 89
Independence Criteria of Outside Directors
The Board of Directors shall monitor on an ongoing basis whether persons
serving as outside directors continue to satisfy the following criteria.
Review of Corporate Governance
Composition of the Board of Directors and committees
and position of the Chairperson
Collection of Information by Directors and Support Systems*2
The Company has provided the following support and oppor-
tunities to help ensure the active participation of the Board of
Directors in management.
–
The Company shall implement a system for the collection of
information by all directors that allows them to obtain infor-
mation from the Board of Directors' Office or directly from
relevant business departments.
In addition, the Company shall implement a system for the
collection of information for audits by members of the Audit
Committee that allows them to obtain information from the
Audit Committee Office or directly from relevant business
departments.
As necessary, directors may either through organizations such
as the Board of Directors' Office or the Audit Committee Office
and the Compensation Commitee Office, etc., or directly
themselves obtain with respect to their duties the advice of
outside experts such as lawyers or certified public accoun-
tants at the cost of the Company.
*2 LIXIL Group Corporate Governance Guideline Article 29
–
–
Corporate Governance Guidelines
LIXIL Group Corporation, in order to realize the Group corporate
philosophy, has been striving to implement the best possible
corporate governance system, one which enables it to achieve
maximum sustainable improvement in corporate value.
Please see the LIXIL Group Corporate Governance Guidelines
on the following website for details on the Group's corporate gov-
ernanceframework, relationships with shareholders, relationships
with stakeholders other than shareholders, corporate governance
system, and information disclosure
URL: www.lixil.com/en/about/governance/policies.html
Independence Criteria*1
The Company considers an outside director to be independent
unless he or she is:
1. A shareholder, or an executive officer of such shareholder
(an executive officer means an "executive officer" provided in
Article 2, Paragraph 3, Item 6 of the Ordinance for Enforce-
ment of the Companies Act; the same shall apply hereafter in
this article), who holds 10% or more of the voting rights of the
Company;
2. An executive officer of a company of which the Company
holds 10% or more of the voting rights;
3. A business partner whose transactions with the Company
exceed an amount of 2% or more of the consolidated gross
revenue of either the Company or such business partner in a
fiscal year, or an executive officer of such business partner;
4. A financial institution or other major creditor which is essential
for the financing of the Group and on which such financing is
irreplaceably dependent on, or an executive officer thereof;
5. A member, partner, or employee of the audit firm or tax
accountant firm which is an accounting auditor or accounting
advisor of the Group;
6. A person receiving a donation or subsidy of ¥10 million or
more from the Group in a fiscal year, or if the person receiving
the donation or subsidy is a corporation, partnership, or other
organization (the "Juridical Persons, etc."), an executive officer
of the Juridical Persons, etc., receiving a donation or subsidy
of more than 2% of the consolidated gross revenues of such
Juridical Persons, etc., from the Company in a fiscal year;
7. A person receiving monetary payments or other financial
assets of ¥10 million or more from the Group as a lawyer,
accountant, tax accountant, consultant, or other professional
advisor, besides the director compensation, or if a person
receiving such financial assets is a juridical person, partner-
ship, or other organization (the "Juridical Persons, etc.") such
as a legal professional corporation, law firm, audit
corporation, tax accountant corporation, or consulting firm
(the "Law Firm, etc."), a person belonging to the Law Firm,
etc., receiving monetary payments or other financial assets of
more than 2% of the Law Firm, etc.'s annual gross revenues
from Group;
8. A person whose spouse, a relative within the second degree of
kinship, or a relative who lives with such person corresponds
to any of aforementioned (1) through (7);
9. A person who corresponded to any of aforementioned (1)
through (8) in the past five years; or
10. An executive officer of a company to which an executive
officer (meaning an executive director, executive officer, cor-
porate officer, manager, or other employees, notwithstanding
aforementioned (1)) of the Group serves as an officer of such
company.
*1 LIXIL Group Corporate Governance Guideline Article 27.1
Board of Directors
Number of members
10
Nomination Committee
Compensation Committee
Audit Committee
3
5
3
Internal directors Outside directors
5 (all 5 are inde-
5
pendent directors)
2
3
2
1
2
1
Chairperson
Internal director
Outside director
Outside director
Outside director
Number of Meetings Held During FYE2018
Board of Directors
Nomination Committee
Compensation Committee
Audit Committee
Executive Officers
Internal Audit Committee
Compliance Committee
17
9
7
16
24
4
4
Risk Management Committee
4
Investment Strategy Committee 13
Investment and Loan Council
16
New Business Council
6
Business Divestment Council
12
Corporate Responsibility
4
Made decisions on matters specified by law, basic management policies, and
important management matters as well as monitored the conduct of duties by the
directors and executive officers
Made decisions on the content of proposals to be submitted to the General Meeting
of Shareholders regarding the election and dismissal of directors
Discussed and made decisions regarding the content of compensation of individual
directors and executive officers
In addition to auditing the conduct of duties by the directors and executive officers,
discussed and made decisions on auditing policy, auditing plans, and the content
of proposals to be submitted to the General Meeting of Shareholders regarding the
selection and dismissal of the financial auditors
As the decision-making body responsible for the execution of business activities
in accordance with the basic policies approved by the Board of Directors, decided
on important matters related to the execution of business in the Company and the
Group as a whole
Undertook inspections and checks of legal compliance and appropriateness of
corporate activity and of management conformity not only with legal requirements
but also with standards as determined by the Company
Provided guidance for structuring and operational management of compliance
systems in Group companies and monitoring of the status of requiring compliance
with laws and regulations
In addition to forming a risk management committee in the Company, also moni-
tored the formation of such committees for risk management in Group companies
mainly in Japan and confirmed the status of risk management
Discussed Group strategy (investments, funding, M&A, overseas strategy, etc.) and
set directions with the objective of increasing the LIXIL Group's corporate value
Deliberated proposals made by the Company and the Group that are (1) invest-
ments that are closely involved with Group strategy, (2) investments that are related
to more than one Group operating company, and (3) investments that exceed the
approval authority of the president of the relevant operating company
Deliberated proposals made by the Company and the Group that are (1) invest-
ments that involve the establishment of a new company or are investments in
an existing company, and (2) investments for the acquisition, etc., of a business
partner company of an operating company
Deliberated proposals made by the Company and the Group that are (1) plans
regarding business continuity of subsidiaries performing unsatisfactorily, and (2)
opportunities with respect to transfer of shares of subsidiaries to a third party
Selected the material issues for the overall Group, formulated the CR strategy,
and provided oversight and guidance for the implementation of priority themes
and activities
Note: From April 1, 2018, the Investment Strategy Committee, Investment and Loan Council, New Business Council, and Business
Divestment Council have been reorganized into the M&A Committee and the Investment Review Committee to enhance the effec-
tiveness of corporate governance.
90
90
LIXIL Group Corporation
LIXIL Group Corporation
Annual Report 2018 91
Annual Report 2018 91
Corporate Officer Compensation
Compensation of the Company's corporate officers in
FYE2018 was as per the following tables.
1. Total amount of compensation by corporate officer title, by type of compensation, and number of officers receiving
Corporate officer title
Total compensation
(Millions of yen)
compensation
Total compensation by type (Millions of yen)
Basic
based
Performance
Stock option
Other
Number of corporate
officers eligible for
compensation
Directors
(excluding outside
directors)
Executive officers
Outside directors
151
151
－
－
－
2,636
78
750
78
1,773
－
65
－
48
－
4
14
6
Notes:
1. The total compensation shown above consists of both the compensation paid
by the Company and the compensation paid by the Company's subsidiaries.
The amount paid by the Company was ¥2,611 million (¥227 million for
10 directors and ¥2,384 million for 14 executive officers).
2. The total compensation paid to the five directors who also served as executive
officers as of the end of the fiscal year under review, and the number of these
executive officers, are included in the total amount of compensation paid to
executive officers and the total number of executive officers. Furthermore, the
total compensation corresponding to the period during which they did not
concurrently serve as executive officers for some period during the fiscal year
under review, paid to the two directors and the number of these executive
officers, are included in the total amount of compensation paid to
executive officers and the number of the directors is added to the number
of executive officers.
3. The compensation for executive officers includes single annual and medium-
to long-term performance-based compensation of ¥1,773 million booked in
the fiscal year under review (with respect to 13 executive officers).
4. The total number of directors and executive officers eligible to receive stock
options is one.
5. One officer is eligible for "Other."
2. Total compensation of officers receiving ¥100 million or more
Name
Company
Corporate
officer title
Total compensation
(Millions of yen)
Yoichiro Ushioda
Director
Executive
Officer
Director
Executive
Officer
Executive
Officer
Executive
Officer
Executive
Officer
Director
Executive
Officer
Executive
Officer
Executive
Officer
Kinya Seto
Ryuichi Kawamoto
Sachio Matsumoto
Haruo Shirai
Jin Song Montesano
Harumi Matsumura
Laurence William
Bates
LIXIL Group
Corporation
LIXIL Group
Corporation
LIXIL INTERNATIONAL
Pte. Ltd
LIXIL Group
Corporation
LIXIL Group
Corporation
LIXIL Group
Corporation
LIXIL Group
Corporation
LIXIL
Corporation
LIXIL Group
Corporation
LIXIL Group
Corporation
LIXIL Group
Corporation
Total compensation by type (Millions of yen)
Basic
compensation
Performance based
57
60
5
57
60
5
－
－
－
Stock Other
option
－
－
－
－
－
－
1,127
195
867
65
－
255
270
103
117
195
117
139
68
68
–
63
56
50
55
187
－
－
202
－
－
103
－
－
54
91
66
84
－
－
－
48
－
－
－
－
Notes:
1. Performance-based compensation for the executive officers is the sum of the single annual performance-based compensation and the medium- to
long-term performance-based compensation allocated as the fiscal year under review to be the end of that term.
2. Stock options are booked as expenses in the fiscal year under review with regard to the 9th share acquisition rights, and differ from the amounts obtained from
the actual execution and sale.
3. "Other" consists of factors such as cost of living assistance and medical insurance associated with overseas postings.
4. Laurence William Bates left the Company as of March 31, 2018.
3. Policy for determining the amount and method of calculation of corporate officers' compensation and decision-making method
Basic Policy Regarding Directors' and Executive
Officers' Compensation
The Company's policy on the compensation plan for corporate
officers is to implement a fair compensation structure that will
motivate each corporate officer to execute his or her duties in or-
der to meet shareholders' expectations and fulfill the Company's
management policy.
–
Performance-related compensation in order to provide
effective incentives designed to optimize short-, medium-,
long-term business results and corporate value.
Attract and retain the best global talent who will be necessary
to maintain sustainable growth.
Fair and reasonable decision process with regards to compen-
sation that will provide accountability to shareholders and
employees.
Conduct comparative evaluation with domestic and foreign
companies in order to ensure transparency.
Individual compensation shall be determined in accordance
with role and responsibility, performance contribution,
economic environment, industry trends, and company
performance.
–
–
–
–
Individual Compensation
The individual amount of each component shall be determined
in accordance with the above basic policy based on research
provided by an outside compensation consultant to the Compen-
sation Committee on an annual basis.
Compensation Component
–
–
–
–
Fixed-amount compensation (Base pay): Determined by role
and responsibility in principle.
Compensation linked to business result: Determined based
on the Company's financial result and individual perfor-
mance on an annual basis. The amount paid shall fluctuate
within a range from 0% to 200%.
Compensation linked to stock price: Restricted stock will be
provided to incentivize directors and executive officers to
increase long-term shareholder value.
Others: Compensation of personnel with advanced expertise,
qualifications and knowledge, etc. shall be deliberated and
decided separately in accordance with the basic policy of
compensation.
Compensation Structure, Individual Compensation, and
Compensation Component
Directors are responsible for giving the advice to and supervising
the Company's management from an objective point of view.
Executive officers are responsible for the execution of business.
Accordingly, there shall be separate compensation schemes
for each group in order to align with their different roles. When
a director serves as an executive officer, the compensation
scheme of the executive officer shall be applied in principle.
Compensation Committee
In order to provide the best corporate governance, the
majority of members and the chairperson shall be non-
executive directors.
Fixed-amount compensation (Base pay)
Compensation linked to stock price
Compensation Structure
Director
–
–
Executive Officer
–
–
–
Compensation of personnel with advanced expertise, qualifi-
cations and knowledge, etc. shall be discussed and decided
separately in accordance with the basic policy of compensation.
Fixed-amount compensation (Base pay)
Compensation linked to business result
Compensation linked to stock price
92
92
LIXIL Group Corporation
LIXIL Group Corporation
Annual Report 2018 93
Annual Report 2018 93
Introduction of a New Incentive Plan for Sustainable Growth
The Company and LIXIL Corporation, at a meeting of the
Company's Compensation Committee held on June 25, 2018 and
in the written resolution of the LIXIL Board of Directors meeting
dated June 25, 2018 and which is in accordance with Article 370
of the Corporate Act and Article 28 of the Articles of Incorpora-
tion of LIXIL, resolved to introduce a new stock compensation
scheme as part of the revision to its executive compensation
scheme. The scheme will award shares with restrictions on
transfer to the Company's directors and executive officers and
LIXIL's directors with the aim of sharing the benefits and risks of
stock price fluctuations with shareholders, and provide greater
incentive to contribute to enhancing the Company's stock price
and enterprise value.
Compensation Structure of Board of Directors and Executive
Officers of LIXIL Group Corporation
Former Structure
(Only for executive officers)
Basic Compensation
Performance-Based
Cash Incentive (1 year) Based Compensation (3 years)
Medium-Term Performance-
New Structure
(Only for executive officers)
Basic Compensation
Performance-Based
Cash Incentive (1 year)
Medium-Term Stock-Based
Compensation (3 years)
Long-Term Stock-Based
Compensation (30 years)
– Fixed Compensation – –––––––– Performance-Based Compensation*2–––––––––
–––––––––––– Stock-Based Compensation*3––––––––––––
Weight*1
31%~66%
17%~23%
17%~46%
*1 Weight
Percentage of total compensation of executive officers
(estimate for when target is achieved). This percentage
varies by title.
*2 KPI (financial indicators) for short-term performance-based
compensation
The Compensation Committee will determine KPIs based on
business targets (financial indicators) for the fiscal year.
For the current fiscal year, compensation will be determined
based on the achievement rate of the following (Consolidated
Group Results):
(1) Revenue, (2) Core earnings, and (3) Profit for the year
attributable to the owners of the parent
*3 Stock-based compensation: Restricted stock based
compensation
※ By introducing the stock-based compensation scheme to
non-executive directors, we aim to achieve a higher level of
corporate value.
Messages from Chairpersons of
the Nomination, Compensation,
and Audit Committees
Under the leadership of
Kinya Seto, the President &
CEO, the LIXIL Group has
steadily worked toward shoring
up its financial footing and
improving profitability. With
these efforts and the current
Medium-Term Plan's progress,
the Company expects to
strengthen earning capacity,
expand its foundations for
growth, and further boost
shareholder value.
The Nomination Committee
will aim for ongoing evolution
in the Group's governance and
conduct fact-based evaluation
of management results while
discussing what kind of gover-
nance will best help the Group
progress into its next phase.
Additionally, in the pursuit of
fair and open governance, the
Group intends to make every
effort to clarify and publicly
announce its decision stand-
ards and processes for appoint-
ment and dismissal of Board
members.
HIROKAZU YAMANASHI
Chairperson of the
Nomination Committee
The Compensation Committee
has a fundamental role to play
in promoting the corporate
growth and sustainability of the
LIXIL Group. In the FYE2018,
we introduced a new compen-
sation system that aims to
better align the long-term
interests of directors and
executive officers with share-
holders and stakeholders
through a restricted stock-
based incentive plan, helping
to ensure that management
decision-making is appropri-
ate, sustainable, and consid-
ered fair. Attracting and
retaining global talent in an
increasingly global setting is
also vital to supporting the
growth of the Company and
creating new value for share-
holders. As members of the
Compensation Committee, we
will continue to monitor and
develop the Company's
compensation system to
ensure it is culturally sensitive
to different payment structures
around the world, enabling the
LIXIL Group to achieve its
financial and non-financial
goals and interests today and
in the future.
BARBARA JUDGE
Chairperson of the
Compensation Committee
In the new Medium-Term Plan
(MTP), announced last
November, we identified the
next three years as a period
for focusing on improving
profitability in pursuit of
long-term sustainable growth.
We also set numerical targets
such as core earnings ratio
and return on equity. The
Audit Committee will continu-
ously monitor our progress in
attaining these targets and
support the steady realization
of our new MTP.
Additionally, although global
business development is one of
the LIXIL Group's fundamental
policies, it is also important to
minimize risk through internal
controls. The Company estab-
lished the Corporate Audit
Group (CAG) as a managing
body for Group-wide internal
controls to maintain internal
systems. The collection of
resources in the CAG is helping
us to level out and improve
operations. In particular, the
Global Internal Controls Depart-
ment, which is subordinate to
the CAG and specializes in
internal audits of overseas
subsidiaries, is essential to our
globalization efforts. The Audit
Committee will also keep a
close eye on the role of the
CAG and make sure it
functions effectively.
TSUTOMU KAWAGUCHI
Chairperson of the
Audit Committee
94
LIXIL Group Corporation
Annual Report 2018 95
Internal Control Systems and Compliance
LIXIL has been strengthening compliance systems and raising
compliance awareness throughout the Group, including overseas
subsidiaries, through the following initiatives.
Internal Control Systems
The Group has established and operates and evaluates internal
control systems in accordance with the Internal Control Report-
ing System, or "J-SOX," issued by the Financial Services Agency
in Japan to ensure the appropriate and efficient business
operations of the Company and each Group company as well
as the accuracy and appropriateness of consolidated financial
statements.
Global Corporate Audit Staff (GCAS):
GCAS has advanced audit and consulting functions with two
major objectives. The first is to minimize risks and costs and en-
hance internal controls and governance by proactive detection,
resolution of problems, and improvement of processes through
close communication with top management. The second is
to develop human resources through auditing and consulting
projects.
How the LIXIL Group Views an Internal Audit
The Group's internal audit, including assessment of internal
controls, promotes the Group accomplishing its objectives by
evaluating and improving the effectiveness of risk management,
controls and governance processes considering integrity and
efficiency of the organization as a whole. This is in line with the
definition of internal audit (i.e., an independent, objective assur-
ance and consulting activity designed to add value and improve
an organization's operations) by the Institute of Internal Auditors,
an international professional association.
Restructuring the Corporate Audit Group (CAG) Organization
The Group reformed the Corporate Audit Group (CAG) into a
network structure organization with the aims of comprehensive
and efficient internal audit and internal control assessment,
driving synergies through collaborative work across LIXIL as well
as adding further value through independent assurance and
high impact consulting.
Network Structure Organization:
J-SOX and Quality Assurance (QA) have been established as
global functional axes. IT may be established as another functio-
nal axis in the future.
The J-SOX axis will serve as a Center-of-Excellence leading
J-SOX work conducted by other parts of CAG. QA shall work
across a wide spectrum toward improving the quality of work
done by CAG. This includes, but is not limited to, global risk
mapping, harmonization of audit methodologies, education and
training, and secretariat work of the Internal Audit Committee.
The functional axes will be overlaid with audit teams by region
such as Japan, Asia, Europe, and Americas. These teams will
focus on assurance, consulting, and J-SOX work in their respec-
tive coverages.
While not under the Corporate Audit Group Officer (CAGO),
heads of internal audit / control units of overseas significant enti-
ties also report to the CAGO. Closer liaison among the expanded
units and reporting bodies will lead to further comprehensive
governance and improvements.
Corporate Audit Group Officer (CAGO)
I
n
t
e
r
n
a
l
A
u
d
i
t
(
D
o
m
e
s
t
i
c
)
QA
J-SOX
GCAS
G
l
o
b
a
l
I
n
t
e
r
n
a
l
C
o
n
t
r
o
l
s
(
L
C
A
S
)
I
n
t
e
r
n
a
l
A
u
d
i
t
/
C
o
n
t
r
o
l
S
i
g
n
i
fi
c
a
n
t
O
v
e
r
s
e
a
s
S
u
b
s
i
d
i
a
r
i
e
s
*88 members throughout the Group as of the end of March 2018
Internal Audit Committee
The Company has set up a voluntary Internal Audit Committee.
Periodic meetings with Executive Officers as members of the
committee allow them to make decisions in a timely fashion by
sharing and discussing the results and progress of the Group's
internal audit, internal control assessment, risk management,
governance, and improvements thereof.
LIXIL Group Code of Conduct
LIXIL established the LIXIL Group Code of Conduct as a set of
rules to be adhered to by all LIXIL Group officers and employees
worldwide with the aim of undertaking business activities appro-
priately and with a shared sense of values and ethics across the
entire Group. The Code of Conduct has been translated and is
available in 18 languages. The Company introduced a system
whereby every year all Group company officers and employees
are required to participate in training on the Code of Conduct and
acknowledge they will comply with its terms. For further details re-
garding the Code of Conduct, please refer to the Company's
website.
URL: www.lixil.com/en/about/governance/pdf/LIXIL_CoC_en.pdf
To integrate and clarify in detail the Code of Conduct across
theGroup, as of May 2018 LIXIL established Global Policies for 10
high-priority areas, including Anti-Corruption, Fair Competition,
and Protection of Personal Information. These policies are
translated into major languages. LIXIL implemented education
and training programs for officers and employees to facilitate
their understanding of the policies.
Corporate Culture
Company management is working to raise compliance awareness
and embed it in the Group culture by discussing compliance
issues, making use of opportunities provided by "all-employee"
meetings and site visits, and by using communication tools
within the Group.
business units to the Group Compliance Committee. In the
previous fiscal year, the Company implemented compliance
reviews in each compliance committee as a regular review of
their compliance infrastructure.
Education and Training Programs
LIXIL held education and training programs for new employees,
new managers, and executives to develop its compliance cul-
ture. Also, LIXIL is implementing education and training pro-
grams on the Global Policies for all officers and employees. The
Company will continue to further develop the education and
training programs by planning suitable programs using e-learn-
ing and face-to-face training and based on the risks of the
business and business areas. In addition, the Group publishes
newsletters both in Japan and overseas, and has been striving to
increase and cultivate employees' knowledge and awareness of
compliance.
Concern-Raising System
LIXIL has established an internal concern-raising system with
the aim of gathering information on compliance breaches, taking
measures to prevent fraudulent and unlawful behavior, and
responding quickly where action is required. The Company has
also been striving to construct a standardized global process for
LIXIL. The Company introduced a 24-hour, multilingual con-
cern-raising system "Speak Up!" to Japan in October 2017, which
had been already introduced for all subsidiaries overseas.
Compliance Committees
In addition to the compliance committees of the Group and sub-
sidiaries in Japan, LIXIL have established compliance committees
in each technology business unit. This is to strengthen compli-
ance measures globally and to improve the reporting system of
Compliance Investigation Department
In order to detect potential compliance issues at an early stage,
respond, and control risks through investigation and remedial
actions, the Group established the Compliance Investigation
Department in October 2017.
96
96
LIXIL Group Corporation
LIXIL Group Corporation
Annual Report 2018 97
Annual Report 2018 97
Risk Management
LIXIL Group Enterprise Risk Management (ERM)
LIXIL ensures the continuity and stable development of its
business, and in turn increases its corporate value, through
the implementation and operation of ERM for the entire
Group. Risks related to crises that require immediate responses
when occurred are controlled through crisis management as
part of ERM.
In addition, based on a quantitative assessment of the likelihood
and financial impact of a risk occurring, measures are proposed
and implementation schedules are formulated by each factory,
sales base, and functional headquarters. PDCA management is
carried out on a quarterly basis with the aim of implementing the
proposed measures, making assessments, and monitoring the
situation.
Risk Management
Risks to the Group's MTP are identified from various perspec-
tives such as finance, compliance, disasters, business strategy,
and internal operations as well as external macro factors such
as geopolitics and the economy. A risk owner is assigned to
each risk and is responsible for responding to the assigned
risks. Identified risks are prioritized based on the evaluation and
categorized as material risks for focused management.
LIXIL aims to take both a top-down and bottom-up approach
in risk management. In order to achieve this, efforts are made
to nurture a Group ERM culture so that executive officers and
employees can have a consistent mindset in managing risks.
Risk managers are appointed in each region to ensure coordina-
tion between HQ and regional / local operations.
Risk management is conducted considering the business
characteristics in each region.
In Japan, for example, risk management working groups are
established in order to cover various themes and manage risks
horizontally across the organization. Each risk management
working group identifies risks on a yearly basis and assesses the
impact on the business, frequency of occurrence, and measures
taken. Based on these assessments, targets are set, measures
are refined, and implementation schedules are formulated.
Plan-Do-Check-Act (PDCA) management is carried out on
a quarterly basis to monitor the execution and effectiveness of
these activities.
Risk statuses by working groups are aggregated to be
discussed and monitored regularly from technology business
perspectives.
Overseas, management identifies comprehensively and
takes measure of significant risks including geopolitical and
economic macro risks, operational risks, and other types of risk.
Crisis Management
In order to prepare for crises, a crisis management framework
has been established for the entire Group. The Crisis Manage-
ment Basic Policy has been created to stipulate such matters
as basic principles, definitions and structures related to crisis
management, and implemented thoroughly in the Group com-
panies. A Group-wide response framework is clarified so that
when an incident may possibly develop into a crisis, damages
and losses will be minimized through prompt initial responses,
timely escalation and sharing of information among relevant
departments for management decision-making, and proper
external disclosure with consistency and sincerity.
2. Timely information sharing
with internal stakeholders
Sharing of decisions
Assessment of situation
and forecasting
3. Decision-making by
top management
4. Consistent and faithful
disclosure to external stakeholders
LIXIL Group Crisis Management Framework
Measures against Risks that May Influence
Management Strategy
The Company endeavors to foresee possible risks and manages such
risks in a swift and proper manner before executing management
strategies. The Company takes measures as follows against major risks
that may influence the progress of its ongoing management strategy.
Main Risks and Risk Management Measures Related to Business Strategies
Establish a purpose-driven entrepreneurial company for sustainable growth
Main risks
–
Risk management measures
–
Damages and losses from overlooking potential risks, fraud, or misbehavior due to
insufficient management of the Group companies
Assign personnel responsible for risk management at each company to carry out
periodical inspections as well as hold regular meetings among all Group companies
to share information on employee education and other information regarding
governance
Develop attractive and differentiated products
Main risks
–
–
Risk management measures
–
Deterioration of profitability due to severe price competition caused by rapid
changes in the market environment and demands
Occurrence of excessive costs caused by sales of low-quality products due to
prioritization of product launch schedule
Develop products appealing to consumers by focusing on technology, design,
and brands
Enhance technological development in preliminary process for product development
and allocate sufficient time to ensure quality
Deterioration of profitability due to severe price competition caused by rapid
changes in the market environment and demand
Insufficiency of production capability and facility specifications against market
demands
Promote platforms for major structures and mechanical parts
Shorten product development period
Improve productivity and efficiency in supply chains
Optimize plant operation rate, and create investment plans based on a long-
term demand forecast
Strategic marketing to drive growth
Main risks
Risk management measures
Damage to brand equity due to improper marketing strategies
Clarify guidelines and perform activities in accordance with the guidelines
Assign global brand heads to avoid conflicts between each individual brand
Create data-driven marketing strategy standards
–
–
–
–
–
–
–
–
–
–
–
Crisis Incident
Achieve competitive costing
Main risks
Implementation of
decisions
1. Quick initial action
and escalation
Risk management measures
98
98
LIXIL Group Corporation
LIXIL Group Corporation
Annual Report 2018 99
Annual Report 2018 99
Consolidated 10-Year Summary
LIXIL Group Corporation and Consolidated Subsidiaries
JGAAP
IFRS
2009
2010
2011
2012
2013
2014
2015
2016
2015
2016
2017
2017*5
Millions of yen
2018*5
¥1,046,854
25,603
2.4%
¥982,607
25,984
2.6%
¥1,214,939
40,409
3.3%
¥1,291,396
17,915
1.4%
¥1,436,395
50,485
3.5%
¥1,628,658
69,080
4.2%
¥1,673,406
51,674
3.1%
¥1,845,117
56,259
3.0%
Years ended March 31
Results of Operations
Net sales (JGAAP) / Revenue (IFRS)
Operating income (JGAAP) / Core earnings (IFRS)
Operating income ratio (JGAAP) / Core earnings ratio (IFRS)
Operating profit (IFRS)
Profit (loss) for the year attributable to owners of the parent*1
Research and development expenses
Capital expenditures
Depreciation and amortization
EBITDA*2
Cash Flows
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Cash and cash equivalents, end of year
Financial Position
Total assets
Total equity
Net interest-bearing debt
Per Share Data
Earnings per share*1 (EPS)
Total equity per share (BPS)
Dividends per share
Key Ratios
EBITDA ratio*2
ROE
ROA
Total assets turnover (Times)
Equity ratio (JGAAP) / Ratio of equity attributable
to owners of the parent (IFRS)
Dividend payout ratio
Net debt-to-equity ratio*3
Number of employees*4
Stock Indicators
Stock price (closing), end of year (Yen)
Market capitalization (Millions of Yen)
Price earnings ratio (Times)
Price book-value ratio (Times)
475
15,978
35,088
35,158
61,013
63,927
(63,082)
21,914
73,973
(5,332)
14,756
30,844
32,916
60,485
68,074
(27,334)
(27,825)
89,302
15,780
13,688
45,779
36,289
80,106
1,868
15,350
52,107
39,370
59,887
48,680
(13,543)
(41,687)
92,329
33,979
(142,067)
138,348
127,351
1,048,838
533,073
175,883
1,033,504
516,322
158,980
1,166,834
536,408
175,487
1,481,063
538,776
266,771
¥ 1.70 ¥ (19.12)
1,842.78
1,903.69
40
40
¥ 55.50
1,850.34
40
¥ 6.49
1,817.34
40
5.8%
0.1
0.04
1.0
50.6
2,352.9
33.1
32,700
6.2%
(1.0)
(0.5)
0.9
49.7
—
30.9
35,976
6.6%
3.0
1.4
1.0
45.2
72.1
33.3
41,090
4.6%
0.4
0.1
1.0
35.7
616.3
50.5
48,163
¥ 1,106
346,238
650.6
0.58
¥ 1,903
595,742
(99.5)
1.03
¥ 2,160
676,197
38.9
1.17
¥ 1,733
542,523
267.0
0.95
*1 Figures are after amortization of goodwill (JGAAP).
*2 EBITDA is calculated under JGAAP as operating income + depreciation and
amortization + goodwill amortization and under IFRS as core earnings +
depreciation and amortization.
*3 The net debt-to-equity ratio is calculated as net interest-bearing debt / total
equity based on the fiscal year-end.
*4 The number of employees from FYE2016 is on an IFRS basis, the definition
of which differs from the number under JGAAP.
Recent M&As (Figures as of the acquisition)
July 2009
American Standard Asia Pacific
Sales
Acquisition cost
Equity owned
Goodwill
Intellectual property
¥23.5 billion
¥17.6 billion
100%
¥2.1 billion (net)
¥3.5 billion
April 2010
Shin Nikkei Company, Ltd.
Sales
Acquisition cost
Equity owned
Goodwill
¥110.0 billion
¥0.7 million
100%
¥5.4 billion
April 2010
SUN WAVE CORPORATION
Sales
Acquisition cost
Equity owned
Goodwill
*6 100% in March 2013
¥85.0 billion
¥13.7 billion
80%*6
¥6.1 billion
(negative)
August 2011
Kawashima Selkon Textiles Co., Ltd.
Sales
Acquisition cost
¥34.3 billion*7
¥2.2 billion and
share exchange
100%
¥1.7 billion
Equity owned
Goodwill
*7 Excludes interior fabric business for
vehicles which the Company sepa-
rated from the main business
20,952
17,380
64,321
49,168
124,822
22,013
18,199
62,622
50,724
108,887
(18,664)
—
76,403
60,451
128,692
¥1,705,427
51,722
3.0%
48,041
30,864
18,211
61,454
50,404
102,126
¥1,890,450
70,069
3.7%
39,011
(25,605)
25,523
72,083
62,205
132,274
¥1,786,447
88,312
4.9%
67,535
42,503
26,362
68,215
60,701
149,013
¥1,633,229
89,781
5.5%
69,251
42,503
26,089
68,215
60,701
146,441
¥1,664,817
75,319
4.5%
80,949
54,581
27,601
69,953
64,661
137,143
83,533
(218,333)
153,144
139,039
138,931
(129,228)
10,010
160,378
137,012
16,547
(171,758)
138,801
98,563
(119,041)
46,618
147,708
121,085
19,122
(154,403)
129,646
132,531
(58,052)
(79,899)
121,563
132,531
(58,052)
(79,899)
121,563
116,362
(52,606)
(43,843)
138,751
21,347
14,025
73,795
44,736
100,627
28,432
(12,397)
(31,753)
114,662
1,465,689
566,312
307,089
1,786,294
601,795
463,479
1,875,249
613,651
418,720
2,060,873
637,517
528,386
1,915,427
590,855
559,971
2,130,120
537,308
697,413
2,042,165
559,431
638,345
2,042,165
559,431
638,345
2,107,131
649,573
549,159
¥ 73.42
1,930.02
40
¥ 72.06
2,041.34
55
¥ 75.46
2,104.27
60
¥ (65.11)
1,894.55
60
¥ 105.80 ¥ (89.33)
1,828.84
60
2,038.56
60
7.0%
3.9
1.4
1.0
38.3
54.5
54.7
45,602
7.7%
3.6
1.3
0.9
33.2
76.3
78.1
51,419
6.5%
3.7
1.2
0.9
32.1
79.5
69.5
52,427
7.0%
(3.3)
(0.9)
0.9
26.4
—
97.2
—
6.0%
5.3
1.7
0.9
30.5
56.7
95.9
—
7.0%
(4.6)
(1.3)
0.9
24.6
—
132.9
60,677
¥ 148.01
1,902.18
60
%
8.3%
7.9
2.0
0.9
26.8
40.5
116.6
59,248
¥ 148.01
1,902.18
60
¥ 189.13
2,128.77
65
9.0%
7.9
2.0
0.8
26.8
40.5
116.6
59,248
8.2%
9.4
2.6
0.8
29.3
34.4
89.0
61,140
¥ 1,858
540,221
25.3
0.96
¥ 2,846
827,426
39.5
1.39
¥ 2,847
891,265
37.7
1.35
¥ 2,295
718,459
—
1.21
¥ 2,847
891,265
26.9
1.40
¥ 2,295
718,459
—
1.25
¥ 2,825
884,378
19.1
1.49
¥ 2,825
884,378
19.1
1.49
¥ 2,376
743,817
12.6
1.12
*5 Due to the LIXIL Group's decision to divest consolidated subsidiary Permas-
teelisa S.p.A. in August 2017, the Company has classified the operations of
Permasteelisa and all of its subsidiaries as discontinued operations. For this
reason, figures for revenue, core earnings, operating profit, research and
development expenses, and EBITDA include only the results for continuing
operations.
Note: Under JGAAP, figures of less than ¥1 million are truncated, while under
IFRS, figures of less than ¥1 million are rounded.
December 2011
Permasteelisa S.p.A.
Sales
Acquisition cost
Equity owned
Goodwill
Intangible assets
¥116.0 billion
¥60.8 billion
100%
¥34.3 billion
¥35.0 billion
August 2013
ASD Holding Corp. (ASB)
Sales
Acquisition cost
Equity owned
Goodwill
Intangible assets
¥82.0 billion
¥30.5 million
100%
¥14.7 billion
¥21.7 billion
January 2014
GROHE Group S.à r.l.
Sales
Acquisition cost
Equity owned
Goodwill
Intangible assets
¥157.5 billion
¥80.1 billion
44%*8
¥157.3 billion
¥209.3 billion
October 2014
GROHE DAWN WaterTech
Holdings Pty Ltd
Sales
Acquisition cost
Equity owned
Goodwill
Intangible assets
¥12.9 billion
¥8.6 billion
51%*9
¥1.2 billion
¥7.8 billion
*8 100% in September 2016
*9 100% in December 2017
100 LIXIL Group Corporation
Annual Report 2018 101
Business Risks
This annual report contains information about business conditions,
the financial situation, and other factors that may influence investor
decisions. Forward-looking statements are based on the judgement
of the LIXIL Group's management as of March 2018.
Statements concerning the future and assumptions are subject to
uncertainty and risks, and actual results may vary significantly.
1 Economic Environment Risk
1) Changes in the Economic Environment
Operating revenues of most companies in the LIXIL Group are
significantly affected by domestic demand in Japan. In particular,
major fluctuations in new housing starts or the level of construc-
tion orders received could have a negative effect on business
performance and financial position of the Group. In addition,
the LIXIL Group undertakes production and sales activities
overseas, in Asian countries such as China and Thailand, and
also in Europe and North America, etc. War, civil war, unrest,
rioting, terrorist attacks, etc., in these countries could also have
a negative impact on the business performance and financial
position of the LIXIL Group. In order to be able to manage this
type of situation, the Group is working to strengthen its renovation
strategy and to develop new products that offer strong potential
for successful development of overseas markets, etc. Further-
more, the LIXIL Group strives to ensure that it can recognize
early-warning signs of political instability, etc., developing in
foreign countries, by working with external, third-party organiza-
tions to implement regular monitoring of changes in the political
situation, government finances, government policies, etc.
2) Exchange Rate Fluctuations
Exchange rate fluctuations have the potential to exert a substan-
tial effect on the yen equivalents of assets and liabilities resulting
from the foreign currency-denominated transactions of the LIXIL
Group. Where transactions are denominated in foreign curren-
cies, the prices of goods and amounts of sales could also be
substantially affected. In order to be able to manage this type of
situation, in addition to LIXIL's finance department in Japan, the
LIXIL Group has also established four Regional Treasury Centers
(RTCs) in LIXIL offices in China, Singapore, Germany, and the US.
Besides implementing monitoring of exchange rates on a monthly
basis, each RTC also implements hedging when necessary, in or-
der to minimize the negative impact of exchange rate fluctuations.
3) Interest Rate Fluctuations
The Group's fund procurement is primarily in the form of interest
bearing debt such as loans from financial institutions. If market
interest rates were to increase substantially, it could have a ma-
terial impact on the Group's business performance and financial
position. In order to be able to manage this type of situation, in
addition to LIXIL's finance department in Japan, the LIXIL Group
has also established four RTCs in LIXIL offices in China, Singa-
pore, Germany, and the US. By implementing fund management
operations in each region on a consolidated basis, the RTCs are
helping to make fund procurement more efficient, with enhanced
stability. Besides monitoring interest rates in each country on a
monthly basis, LIXIL has also put in place the systems needed
to support the use of fixed interest rates, etc., when necessary.
2 LIXIL Group Business Activity Risk
1) Competition with Competitors, and Falling Product Prices
Competition with Competitors, and Falling Product Prices The
LIXIL Group faces severe competition in most of the markets
in which it operates. For this reason, it is difficult to always
set prices at levels that are advantageous to the Group.
Although the Group takes pride in its sperior products and ser-
vices that contribute to improving people's comfort and lifestyles,
there is no guarantee that it will enjoy a competitive advantage
in terms of pricing. The LIXIL Group's products and services
are exposed to intense price competition, which could have a
negative effect on business performance and financial position of
the Group. In order to be able to manage this type of situation, the
LIXIL Group implements cost reduction measures and under-
takes the development of new products that have high appeal.
2) New Product Development Risk
In its operations, the LIXIL Group is committed to providing
exceptional products and services to satisfy its customers
around the globe. The Group creates high-quality living spaces
that are healthy, comfortable, and safe by continually develop-
ing attractive products based on an accurate understanding
of available technology and consumer needs. However, the
Group's business performance and financial position could
be adversely affected if a failure to respond appropriately to
changes in market or industry needs were to result in a decline
in growth and earning potential. In order to be able to manage
this type of situation, the LIXIL Group is using collaboration with
innovative start-ups and the effective utilization of global infor-
mation networks in order to put in place the systems needed to
be able to respond rapidly to changes in consumer needs. To
develop attractive new products that can satisfy these needs,
LIXIL is developing advanced new technologies such as AQUA
CERAMIC (a new type of ceramic material), and is striving to
realize speedy product development through the strengthening
of design capabilities and the integration of product platforms.
3) Effectiveness of Tie-Ups with Other Companies,
and of Corporate Acquisitions, etc.
The LIXIL Group may plan to expand its business operations through
investments, including corporate acquisitions and capital partici-
pation. To maximize the benefits of these acquisitions, the Group
seeks to integrate them into its corporate culture and management
strategies. However, there is no guarantee that the anticipated
returns and synergy benefits will be realized. In addition, while the
LIXIL Group makes every endeavor to avoid risk in the execution
of acquisitions by undertaking detailed prior assessments of the
financial conditions, contractual relationships, and other matters
relating to the company involved, it is possible that contingent
liabilities and unrecognized financial obligations may be revealed
following acquisitions. As a result, it is possible that the business
performance and financial position of the LIXIL Group will be
adversely affected by these acquisitions and capital participation
activities. In order to be able to manage this type of situation, the
Group has formulated a common global policy on acquisitions, and
has designed a process for post-acquisition review and monitoring
which is now being utilized. LIXIL is also promoting organizational
changes aimed at building an efficient, flat, simple organizational
structure that facilitates the post-acquisition generation of synergy.
4) Effectiveness of Business Restructuring
In order to enhance management efficiency and competitiveness,
the LIXIL Group may conduct business restructuring, including
withdrawal from unprofitable businesses; the realignment of
subsidiaries and affiliates, manufacturing bases, and sales and
logistics networks; and the rightsizing of the workforce. These mea-
sures could have an adverse impact on the business performance
and financial positions of the LIXIL Group. In order to be able to
manage this type of situation, the Company aims to maximize
synergies generated between technology businesses after restruc-
turing and to bring about an enhancement of its strategic effec-
tiveness. It is doing so by strengthening communications between
the management of the Company and technology businesses,
the Directors and Executive Officers of Group companies, and
employees to ensure the dissemination of the Company’s strategy,
and by strengthening the management of companies and regional
portfolios. In addition, in order to build an organizational structure
that will not necessitate large-scale business restructuring, as part
of the strengthening of the post-merger integration (PMI) process
in relation to M&A activity, LIXIL is striving to strengthen subsidiary
governance through the creation and utilization of an effective, ap-
propriate PMI process, by means of updating guidelines and clari-
fying the PMI implementation process and progress report process.
5) Shortages of Raw Materials, etc., and Rising Procurement Prices
The LIXIL Group procures materials, parts, services, and other
supplies as required for its production activities. There is a pos-
sibility that the amounts paid for these supplies will rise because
of increased industry demand or increasing raw material prices.
There is also a possibility that the reliability or reputation of the
Group's products will be adversely affected by defects in or stock-
outs of materials, parts, services, or other supplies. These factors
could, in turn, adversely affect the Group's business performance
and financial position. In order to be able to manage this type
of situation, the LIXIL Group is working to build a stable supply
system, by implementing measures that include the use of product
swaps, multiple sourcing, performing supplier credit checks,
maintaining regular communication with suppliers, implementing
periodic quality tests, maintenance of safe inventory levels, etc.
3 Regulatory and Litigation Risk
1) Harm Resulting from Official Regulations
The LIXIL Group is subject to various official regulations, including
the need to obtain approvals and permits from the government
or official agencies for its business and investment activities,
as well as patents and other intellectual property rights, envi-
ronmental regulations, and other requirements. Such official
regulations can be expected to change over time, possibly
creating obstacles to business activities or imposing additional
costs relating to compliance with new official regulations. These
factors could have an adverse impact on the business perfor-
mance and financial positions of the LIXIL Group. In order to be
able to manage this type of situation, the Group has formulated
the necessary policies and procedures for responding to chang-
es in official regulations. By arranging regular opportunities for
the exchange of information with managers at the LIXIL Group's
overseas business locations, LIXIL has been able to put in place
the systems needed to be able to draw up strategies for obtain-
ing early warning of potential changes in official regulations.
2) Direct and Indirect Costs Associated with Product Liability
and Compensation Claims
There is a risk that defects will occur in products and services
supplied by the LIXIL Group, or that product recalls may be
required. Major compensation claims or product recalls relat-
ing to manufacturers' liability issues could result in substan-
tial payments and have a negative effect on the reliability and
reputation of the Group's products. Such situations could have
an adverse impact on the business performance and financial
position of the LIXIL Group. In order to be able to manage this
type of situation, the Group has established quality manage-
ment checkpoints for each stage in the new product design
and development process, and has formulated rules that en-
sure that design and development do not proceed until rele-
vant issues have been overcome. In this way, LIXIL is able to
reduce the likelihood that large-scale product liability claims or
recalls will arise in relation to LIXIL's products and services.
3) Damages Arising Out of Lawsuits and Other Legal Proceedings
The LIXIL Group conducts its business activities in Japan and in
countries overseas. Accordingly, there is a risk that it may face
lawsuits and legal proceedings. If the Group becomes the object
of such legal action, there is also a possibility that this may result
in major payments for damages. These circumstances could have
an adverse impact on the business performance and financial
position of the LIXIL Group. In order to be able to manage this
type of situation, the Group has put in place systems that enable
it to consult external experts such as attorneys, etc., when
necessary.
4) Environmental Regulations and Occurrence of Related Issues
The LIXIL Group, based on the Group Environmental Sustainability
Principles, engages in a wide range of activities aimed at global
environmental preservation. However, the Group cannot guaran-
102 LIXIL Group Corporation
102 LIXIL Group Corporation
Annual Report 2018 103
Annual Report 2018 103
tee that it will be able to completely prevent or mitigate any risk of
environmental pollution. Should serious environmental pollution
occur as a result of the Group's business activities, it could have an
adverse impact on the Group's business performance and financial
position. In order to be able to manage this type of situation, the
LIXIL Group has formulated inspection rules regarding the clarifi-
cation of and compliance with environment rules, in relation to ISO
14001 and environmental management systems. LIXIL also imple-
ments periodic review in light of current implementation status.
6 Risk Relating to Accounting Estimates
In cases where it is necessary to make accounting estimates in
order to draw up financial statements, the LIXIL Group makes
such estimates on the basis of reasonable criteria. However,
due to the inherent uncertainty that characterizes estimates,
amounts may need to be adjusted and actual results may differ
from the estimates, which could have an adverse impact on
the Group's business performance and financial position.
4 Information Security Risk
In the course of carrying out its business activities, the LIXIL Group
has occasion to handle various types of personal data, including
customer data, necessitating rigorous information management. In
the event that a personal data leak were to occur because of some
unforeseeable circumstance, there is a possibility that the Group
might suffer severe harm to its reputation, as well as possibly incur-
ring significant monetary loss; this in turn could have an adverse
impact on the Group's business performance and financial position.
In order to be able to manage this type of situation, the LIXIL Group
is working to strengthen personal data management, through the
establishment of a dedicated unit for promoting rigorous personal
data management, the putting in place of relevant regulations,
ongoing implementation of appropriate training, etc. The Group
has also established a Computer Security Incident Response
Team (CSIRT) to deal with all types of cyberattack. The Group thus
has a system in place not only for ongoing monitoring of external
attempts to gain unauthorized access but also for implementing
appropriate measures in the event of an incident occurring.
5 Disaster and Accident Risk
The LIXIL Group undertakes production and sales activities at
many facilities in Japan and in other countries around the world, so
there is a possibility that an earthquake, typhoon, or other natu-
ral disaster occurring in one of these areas could cause serious
damage to the Group's production, logistics, sales, or information
management facilities. If a large-scale natural disaster such as a
major earthquake did occur in Japan or in another country, it might
result in the suspension of production operations or in delays in the
supply of products, etc., which could have an adverse impact on
the Group's business performance and financial position. There is
also a possibility that industrial action, equipment breakdown, etc.,
could result in the suspension of, or placing of constraints on, the
Group's business activities. While there is no guarantee of being
able to prevent or mitigate the impact of such natural disasters, etc.,
in order to manage this type of situation the Group has formulated
business continuity plans (BCPs) and updates them regularly; par-
ticularly with regard to the Group's business locations in Japan, the
Group aims to reduce the potential operational and financial impact
by implementing geographical dispersal of production facilities,
implementing seismic reinforcement work, etc., so that if a natural
disaster does occur the negative impact will be kept to a minimum,
and operations can be restored to normal as soon as possible.
1) Default on Receivables
In order to prepare for losses due to default on receivables by
business partners, the LIXIL Group records the amount consid-
ered to be uncollectible as a provision for doubtful accounts.
Should the actual default level significantly exceed assumptions,
the provision for doubtful accounts could be insufficient. More-
over, as a result of reviewing assumptions due to the worsening of
overall economic conditions and uncertainty in the credit standing
of business partners, the Group could make additional provisions
to this allowance. These developments could have an adverse
impact on the Group's business performance and financial
position. In order to be able to manage this type of situation,
within Japan the LIXIL Group has drawn up rules and manuals
relating to credit checks and the setting of credit facilities. Re-
ceivables review meetings are held on a regular basis, and in the
case of business partners where it is judged that there is a strong
possibility of receivables being uncollectible, the Group imple-
ments monitoring of management improvement status and risk
reduction strategies at the level of individual business partners.
2) Changes in Pension Plan Obligations
The employee defined benefit pension plan obligations and
related service costs of the LIXIL Group are calculated based
on discount ratios and other underlying ratios. Changes in
these basic ratios could cause a significant impact on busi-
ness performance and financial position. In particular, a fall in
discount rates could have an adverse impact on the Group's
business performance and financial position. In order to be able
to manage this type of situation, the Group has implemented
various measures, including the returning to the government of
the substitutional portion of the Employees' Pension – in respect
to which there is a particularly strong need to minimize potential
negative impacts – and the adoption of defined benefit contribu-
tion pension plan and cash balance pension plan systems, etc.
3) Reduction of Fixed Asset Value
The LIXIL Group periodically uses asset impairment account-
ing to calculate future cash flows relating to property, plant and
equipment (PP&E), goodwill and other intangible assets, etc.,
and implements impairment measurement and impairment
testing. It is therefore possible that the Group's business per-
formance and financial position could be adversely affected if
fixed asset impairment losses are shown in the accounts. In
order to be able to manage this type of situation, the Corporate
Financial Governance Office (which is supervised directly by
the CFO) is implementing a performance management process
with respect to both subsidiaries in Japan and those overseas,
as part of its measures to strengthen financial governance.
This makes it possible to obtain advance warning of potential
fixed asset impairment losses arising in relation to idle assets or
deterioration in performance, and to put in place a system that
makes it possible to implement timely measures in cases where
there are early-warning signs of performance deterioration.
4) Recoverability of Deferred Tax Assets
The LIXIL Group implements tax-effect accounting, and operating
loss carried forward for tax purposes and deductible tempo-
rary differences are booked as deferred tax assets. Judgments
regarding the recoverability of deferred tax assets are made on
the basis of forecasts that include estimates relating to future
taxable income, etc. In cases where a change in the forecast of
future taxable income means that a deferred tax asset calculated
based on the forecast of future taxable income may be deemed
to be non-recoverable, in part or in whole, the deferred tax asset
in question will be abated, which could have an adverse impact
on the Group's business performance and financial position. In
order to be able to manage this type of situation, the Corporate
Financial Governance Office (which is supervised directly by
the CFO) is implementing a performance management process
with respect to both subsidiaries in Japan and those overseas,
as part of its measures to strengthen financial governance. This
makes it possible to obtain advance warning of potential deteri-
oration in performance, and systems have been put in place so
that when the Group becomes aware of such a potential future
deterioration in performance, LIXIL's finance and accounting
department and tax department can formulate timely strategies
in response, which may include the need to revise the judgment
regarding recoverability of the deferred tax assets in question.
7 Risk Relating to International Taxation and
Taxation Related to Organizational Restructuring
The LIXIL Group undertakes production and sales activities in
countries outside Japan, and Group member companies supply
raw materials, products, etc., to one another; consequently, there
is the potential for international taxation risk in relation to trans-
fer pricing taxation, etc. In addition, the Group may on occasion
need to implement organizational restructuring within the Group
in order to improve operational efficiency and strengthen compet-
itiveness, and depending on the restructuring scheme adopted,
even though the restructuring is intra-Group, it may be treated
as a valuation at current cost transaction for tax purposes, or
it may not be possible to carry forward operating loss from the
non-surviving company, etc., in which case there may be an
increased tax burden that could have an adverse impact on the
Group's business performance and financial position. In order
to be able to manage this type of situation, LIXIL's tax depart-
ment has formulated the necessary policies and procedures
and updates them as necessary, and has put in place a frame-
work that makes it possible to select an appropriate approach
when implementing organizational restructuring, by establishing
systems that provide for opportunities for regular exchange of
information with tax specialists at the Group's overseas busi-
ness locations, and for timely consultation with experts.
8 Human Capital Risk
1) Securing and Cultivation of Human Talent
For the LIXIL Group to continue to develop as a business on a
sustainable, long-term basis, it is vitally important for the Group
to promote the ongoing retention and cultivation of human talent
that possesses a high level of specialist skills, and also human
talent with first-rate management capabilities in relation to busi-
ness strategy and organizational management. However, partic-
ularly in Japan, the trend towards smaller families and the aging
population structure is leading to a shrinking of the workforce.
If the competition to secure vitally important human resources
becomes increasingly intense, and if human talent recruitment
and cultivation cannot proceed as planned, then over the long
term this will degrade the efficiency of the Group's business
operations, and there could be an adverse impact on the Group's
business performance and financial position. In order to be able
to manage this type of situation, besides working actively to recruit
both new graduates and experienced personnel on a year-round
basis, and promoting measures to ensure the handing down of
skills within the Group, for example by strengthening the human
resources and training systems and by recruiting retired techni-
cal specialists aged 65 or over as part-time workers, the Group
is also promoting unified human resources cultivation planning
that applies worldwide throughout the Group's global operations,
and is endeavoring to ensure that the implementation of every
individual program (including training for overseas assignments,
shared e-learning programs, etc.) contributes to employee
retention and cultivation. In addition, the Group is promoting
diversity management (including management efforts directed
towards the retention of female employees), and is proceeding
with the establishment of the systems and environment needed
to enable a wide range of employees to grow as individuals and
maximize their capabilities. The LIXIL Group has also established
a Shared Services Center in the Asia region. Besides working to
help strengthen governance in the Asia region, it is also intended
that the Center will assist in the building of a flexible organization-
al structure that will be less vulnerable to changes in the labor
environment, both in Japan and in the Asia region as a whole.
2) Labor Issues (Strikes, etc.)
There are significant differences in labor practices between the
various countries and regions in which the LIXIL Group oper-
ates, and there is the possibility of unforeseeable events such
as changes in the regulatory environment, a worsening in the
economic climate, etc., leading to a deterioration in labor rela-
tions, possibly leading to strikes or other forms of labor dispute
that might continue over an extended period, which in turn could
represent an obstacle to the Group's operations and have an ad-
verse impact on the Group's business performance and financial
position. In order to be able to manage this type of situation, the
Group holds regular labor-management coordination meetings
at each business location, and consults with workers regarding
improvements to the working environment and working condi-
tions. Currently, the Group enjoys harmonious labor relations.
104 LIXIL Group Corporation
Annual Report 2018 105
Principal Group Companies
As of March 31, 2018
Consolidated Subsidiaries
Name
Location
Paid-in capital
(¥ million)
Equity owned
by the holding
company (%)
Business
segment
Name
Location
Paid-in capital
(¥ million)
Equity owned
by the holding
company (%)
Business
segment
LIXIL Corporation*1
Koto-ku, Tokyo
34,600
LIXIL Total Service Corporation
Dinaone Corporation
TM.S Corporation
GROHE Group S.à r.l.
59 affiliate companies of GROHE Group S.à r.l.
ASD Holding Corp.
12 affiliate companies of ASD Holding Corp.
A-S CHINA PLUMBING PRODUCTS Ltd.
LIXIL Vietnam Corporation
LIXIL Building Materials Manufacturing
(Suzhou) Corporation
LIXIL Sanitary Fitting Manufacturing
(Suzhou) Corporation
Taiwan Inax Corporation
LIXIL Total Hanbai Corporation
Kawashima Selkon Textiles Co., Ltd.
G TERIOR Corporation
Asahi Tostem Exterior Building Materials Co., Ltd.
LIXIL SUZUKI SHUTTER CORPORATION
LIXIL Toyo Sash Shoji Co., Ltd.
Sonitech Corporation
Kuwata Co., Ltd.
Oita Tostem Co., Ltd.
Nishi Kyushu Tostem Co., Ltd.
LIXIL ENERGY Co., Ltd.*1
LIXIL TEPCO Smart Partners Inc.
LIXIL INTERNATIONAL Pte. Ltd.
TOSTEM THAI Co., Ltd.
LIXIL Manufacturing (Dalian) Corporation
LIXIL GLOBAL MANUFACTURING
VIETNAM Co., Ltd.
LG-TOSTEM BM Co., Ltd.*2
PT. LIXIL ALUMINIUM INDONESIA
Koto-ku, Tokyo
Tokoname, Aichi
Chiyoda-ku, Tokyo
Luxembourg
—
New Jersey, USA
—
Cayman Islands
Hanoi, Vietnam
100
90
60
€ thousand 57,143
—
US$ thousand
412,956
—
US$ thousand
24,907
VND million 743,386
Suzhou, Jiangsu, China
4,000
Suzhou, Jiangsu, China
Taipei, Taiwan
Koto-ku, Tokyo
Sakyo-ku, Kyoto, Kyoto
Setagaya-ku, Tokyo
Koto-ku, Tokyo
Toshima-ku, Tokyo
Chiyoda-ku, Tokyo
Shinjuku-ku, Tokyo
Suma-ku, Kobe, Hyogo
Oita, Oita
Saga, Saga
Koto-ku, Tokyo
Koto-ku, Tokyo
Singapore
Pathumthani, Thailand
Dalian, Liaoning, China
Dong Nai, Vietnam
1,730
NT$ thousand
282,677
75
9,382
316
2,000
1,989
100
66
30
50
30
100
450
30,565
Baht million 2,767
US$ thousand 43,500
US$ thousand 40,700
Seoul, Korea
Cileungsi, Indonesia
Won million 15,355
IDR million 134,733
100
100
100
100
100
—
100
—
100
100
100
100
67
100
100
100
80
100
100
100
100
100
100
100
60
100
100
100
100
50
75
LWT, LHT,
LBT, LKT,
H&S
LWT
LWT
LWT
LWT
LWT
LWT
LWT
LWT
LWT
LWT
LWT
LWT
LHT
LHT
LHT
LHT
LHT
LHT
LHT
LHT
LHT
LHT
LHT
LHT
LHT
LHT
LHT
LHT
LHT
LHT
LIXIL Renewal Corporation
Star Alubuild Private Ltd.*3
LIXIL VIVA CORPORATION*4
LIXIL Living Solution Corporation
LIXIL Housing Research Institute, Ltd.
JAPAN HOME SHIELD CORPORATION
LIXIL REALTY, Corp.
GHS Corporation
JHS Engineering Corporation
LIXIL Home Finance Corporation
LIXIL Group Finance Corporation
Koto-ku, Tokyo
Haryana, India
Urawa-ku, Saitama, Saitama
Koto-ku, Tokyo
Koto-ku, Tokyo
Sumida-ku, Tokyo
Chuo-ku, Tokyo
Koto-ku, Tokyo
Sumida-ku, Tokyo
Chiyoda-ku, Tokyo
Koto-ku, Tokyo
Permasteelisa S.p.A.
38 affiliate companies of Permasteelisa S.p.A.
67 other companies*6
Veneto, Italy
—
Equity-Method Affiliates
Name
Location
100
INR thousand 727,818
24,596
450
1,250
205
160
100
20
500
3,475
€ thousand 6,900
—
100
100
52
100
100
100
100
100
100
100
100
100
—
LBT
LBT
D&R
H&S
H&S
H&S
H&S
H&S
H&S
H&S
(Financing
services for
Group com-
panies)
—*5
—*5
Paid-in capital
(¥ million)
Equity owned
by the holding
company (%)
Business
segment
Sanyo Homes Corporation*7
Ken Depot Corporation
65 other companies*8
Nishi-ku, Osaka, Osaka
Chiyoda-ku, Tokyo
5,945
100
24
34
H&S
D&R
*1 LIXIL ENERGY Co., Ltd. was acquired by and merged with LIXIL Corporation on April 1, 2018.
*2 The holding of shares of this company is less than 50%, but it is treated as a subsidiary because it is effectively controlled by the Group.
*3 Star Alubuild Private Ltd. changed its name to LIXIL WINDOW SYSTEMS PRIVATE LIMITED in April 2018.
*4 The company submits securities registration statements and securities reports.
*5 Manufacture and sales of curtain walls.
*6 Among the other companies, LIXIL-Haier Housing Products (Qingdao) Co., Ltd. ceased to be a subsidiary of the Company due to the
transfer of all of its shares. GraceA Co., Ltd. was acquired by and merged with the Company.
*7 The company submits securities reports.
*8 Among the other companies, Fukui Computer Inc. ceased to be an equity-method affiliate due to the partial transfer of its shares.
106 LIXIL Group Corporation
106 LIXIL Group Corporation
106 Investor Relations
107 Our History
Annual Report 2018 107
Annual Report 2018 107
Investor Relations
LIXIL Group Corporation regards investor relations (IR) as
facilitating communication with capital markets in Japan and
overseas and thereby helping enhance corporate value. Accord-
ingly, the Company's IR activities convey messages from senior
management to markets while providing senior management
with feedback from markets in an unflagging effort to boost
corporate value.
Regarding the disclosure of important information that affects
investment judgments, such as decisions, events, or informa-
tion regarding accounts settlement, the Company discloses the
information based on the timely disclosure rules enacted by the
Tokyo Stock Exchange. It is also the Company's policy to dis-
close information that does not fall under the timely disclosure
rules, as positively and fairly as possible, in order to better meet
investors' needs.
URL: www.lixil.com/en/investor/
External Recognition
From April 1, 2017 to July 31, 2018
Gomez IR Site Ranking 2017
Awarded silver prize in the over-
all IR site ranking and first place
in the "Metal Products" industry
category from Morningstar
Japan K.K. (October 2017)
Internet IR
Commendation Award
Received "Internet IR Commen-
dation Award 2017" from Daiwa
Investor Relations Co., Ltd.
for six consecutive years
(November 2017)
Morningstar Socially
Responsible Investment
Index (MS-SRI)
Selected as a constituent stock
of the Morningstar Socially
Responsible Investment Index
(MS-SRI) (December 2017)
MSCI Japan Empowering
Women Index
Selected as a constituent of
the MSCI Japan Empowering
Women Index (WIN), created by
MSCI Inc. for two consecutive
years (July 2018)
Disclaimer
The inclusion of LIXIL Group 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 LIXIL Group 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.
IR Team (from left): Mariko Mikami, Yukiyo Uto, Kayo Hirano (Senior Manager,
Investor Relations Office), Jin Song Montesano (Executive Officer and Senior
Managing Director, Public Affairs, Investor Relations, External Affairs, and
Corporate Responsibility), Shizuka Fukushima, and Hiroyoshi Fujiwara
FTSE4Good Index Series and
FTSE Blossom Japan Index
Became a constituent of the
FTSE4Good Index Series and
FTSE Blossom Japan Index,
created by FTSE Russell for two
consecutive years (June 2018)
DJSI Asia Pacific Index
Selected as a component of the
Dow Jones Sustainability Indices
(DJSI Asia Pacific Index), creat-
ed by S&P Dow Jones Indices
and RobecoSAM (September
2017)
Nadeshiko Brand
Selected as a component of the
Nadeshiko Brand, co-hosted by
the Ministry of Economy, Trade
and Industry and the Tokyo
Stock Exchange (March 2018)
LIXIL's History
TOSTEM
1923 The Company is founded.
1949 Nihon Tategu Kogyo Co., Ltd. (now LIXIL Group Corporation
is established.
1966 Housing aluminum sash business commenced.
1971 Toyo Sash Co., Ltd. is established after absorbing Toyo Door
INAX
1924 Ina Seito Co., Ltd.* is established as a producer of tiles,
ceramic pipe, and terra cotta.
1945 Production of sanitary ware commenced.
1958 Production of Polybath commenced.
1967 Production of first integrated-type Japanese bidet toilet
and four other companies.
commenced.
1974 Toyo Exterior Co., Ltd.* is established. Housing exterior
business commenced.
1977 Viva Home Corporation (later TOSTEM VIVA CORPORA-
TION) is established. Home center business commenced.
1984 Eyeful Home Technology Inc. (now LIXIL Housing Research
Institute, Ltd.) is established. Homebuilding franchise chain
operation commenced.
1968 Production of unit bathrooms commenced.
1985 Company name is changed to Inax Corporation*.
1996 VINAX (now LIXIL Vietnam Corporation), manufacturing
joint venture for sanitary ware in Vietnam, is established.
Suzhou Inax Sanitary Fitting Co., Ltd. (now LIXIL Sanitary
Fitting Manufacturing (Suzhou) Corporation) is established
in China.
1985 Mitsui Light Metal Processing Co., Ltd., Nittetsu Curtain-
1998 Suzhou Inax Building Materials Co., Ltd. (now LIXIL
wall Corporation, and Nittetsu Sash Sales Corporation join
the Group.
Building Materials Manufacturing (Suzhou) Corporation),
a tile manufacturing company in China, is established.
1987 TOSTEM THAI Co., Ltd. is established. Overseas production
of sashes commenced.
1992 Toyo Sash Co., Ltd. is renamed Tostem Corporation.
1999 JIO Corporation is established.
2000 Toyo Exterior Co., Ltd.*, Eyeful Home Technology Inc. and
Suzuki Shutter Manufacturing Co., Ltd. (now LIXIL SUZUKI
SHUTTER CORPORATION) became wholly owned subsid-
iaries.
2001 Tostem Corporation is renamed Tostem Inax Holding
2010 New Group brand LIXIL is introduced.
Corporation, became a pure holding company, and swaps
stocks with Inax Corporation*.
Tostem Corporation*, an operating company, is established
through a corporate separation.
2002 Jyu-Tsu Corporation (now LIXIL REALTY, Corp.) joins the
Group.
Production of wooden interior furnishings commenced at
subsidiary Tostem Housing Products (Dalian) Co., Ltd.
(now LIXIL Manufacturing (Dalian) Corporation) in Dalian,
China.
Century 21 Housing Research Institute Ltd. (now LIXIL
Housing Research Institute, Ltd., after becoming Tostem
Housing Institute) is established.
2004 Tostem Inax Holding Corporation renamed JS Group
Corporation.
2005 Asahi Tostem Exterior Building Materials Co., Ltd. is estab-
lished as a result of integration of Tostem Corporation* and
Asahi Glass Co., Ltd.
2006 JS Group Senior Life Corporation (now a business of Senior
Life Company of LIXIL Corporation) founded and enters
fee-based senior citizens assisted-living home business.
2008 Jaxson S.P.I. Inc. became a subsidiary of Inax Corporation*.
2009 Tostem Corporation* establishes LG TOSTEM BM Co., Ltd.
jointly with LG Chem, Ltd., an LG group company in South
Korea.
American Standard Asia Pacific became a subsidiary of
Inax Corporation.
SUN WAVE CORPORATION* and Shin Nikkei Company,
Ltd.* became subsidiaries.
2011 Tostem, Inax, Shin Nikkei, SUN WAVE (not including the
production division), and Toyo Exterior are integrated and
LIXIL Corporation is born.
Kawashima Selkon Textiles Co., Ltd. became a subsidiary.
Permasteelisa S.p.A. of Italy became a subsidiary of
LIXIL Corporation.
2012 JS Group Corporation renamed LIXIL Group Corporation.
2013 INAX ENGINEERING Corporation and six other companies
merge. The company is renamed LIXIL Total Service
Corporation.
ASD Holding Corp. (ASB) of the US became a subsidiary
of LIXIL Corporation.
2014 GROHE Group S.à r.l. of Europe became an equity-method
affiliate of LIXIL Corporation. (The Company acquires 87.5%
of GROHE Group shares jointly with the Development
Bank of Japan.)
LIXIL Corporation acquires shares in GROHE DAWN
WaterTech Holdings Pty Ltd of South Africa.
2015 LIXIL Corporation converts GROHE Group S.à r.l. into a
consolidated subsidiary.
2017 LIXIL VIVA CORPORATION is listed on the first section of
the Tokyo Stock Exchange.
* Currently LIXIL Corporation
Major Shareholders
Name of shareholder
Number of shares held Percentage
(Thousand shares) held
Company Name
7,853
2.71%
Paid-In Capital
¥68.1 billion
108 LIXIL Group Corporation
108 LIXIL Group Corporation
Shareholder Information
As of March 31, 2018
Number of Shares and Shareholders
Number of shares authorized
Number of shares outstanding
Number of shareholders
1,300,000,000
289,790,526
(excluding treasury stock of
23,263,729 shares)
44,369
Distribution of Ownership among Shareholders
(Thousand shares)
Financial institutions
Domestic companies
Foreigner Investors
Individuals and others
Treasury stock
Total
90,698
23,513
124,244
51,334
23,263
313,054
Treasury Stock
7.4%
TOTAL
313,054
Thousand shares
Financial
Institutions
29.0%
Domestic
Companies
7.5%
Individuals
and Others
16.4%
Foreigner
Investors
39.7%
Monthly Stock Price Range (Tokyo Stock Exchange)
For the Years
Ended March 31
High*2 (yen)
Low*2 (yen)
2014
3,060
1,732
2015
2,973
2,063
2016
2,959
2,233
2017
2,999
1,593
2018
3,255
2,285
*2 High and low share prices are from the First Section of the Tokyo Stock
Exchange.
Japan Trustee Services Bank,
Ltd. (Trust Account)
The Master Trust Bank of Japan, Ltd.
(Trust Account)
STATE STREET BANK CLIENT OMNIBUS
OM04 (Standing proxy The Hongkong
and Shanghai Banking Corporation
Limited, Tokyo Branch)
The Nomura Trust & Banking Co., Ltd.
(Trust Account)
JPMC OPPENHEIMER JASDEC
LENDING ACCOUNT (Standing proxy
The Bank of Tokyo-Mitsubishi UFJ, Ltd.)
Daiichi Life Insurance Company,
Limited (Standing proxy Trust &
Custody Services Bank, Ltd.)
LIXIL Employee Stock Ownership
Japan Trustee Services Bank, Ltd.
(Trust Account 5)
Sumitomo Mitsui Banking Corporation
STATE STREET BANK WEST CLIENT - TREATY
505234 (Standing Proxy Mizuho Bank, Ltd.
Settlement & Clearing Services Department)
13,315*1
4.59%
13,129*1
4.53%
9,683
3.34%
8,896*1
3.07%
6,561
6,422
2.26%
2.22%
5,571*1
5,543
1.92%
1.91%
4,782
1.65%
Notes:
1. In addition to the above, LIXIL Group Corporation holds 23,263 thousand
shares of treasury stock. Shareholding calculations exclude treasury stock.
2. *1 indicates a trust service arrangement.
3. 8,896 thousand shares entrusted to The Nomura Trust & Banking Co.,
Ltd. are the trust property of Yoichiro Ushioda, who has voting rights for
these shares.
4. The Bank of Tokyo-Mitsubishi UFJ, Ltd. changed its legal name to MUFG
Bank, Ltd. as of April 1, 2018.
Stock Price (¥)
LIXIL Stock Price
Nikkei Average (right)
3,500
3,000
3,500
2,500
3,000
2,000
2,500
1,500
2,000
1,000
1,500
500
1,000
0
500
0
Stock Trading Volume (Thousand shares)
50,000
25,000
20,000
25,000
15,000
20,000
10,000
15,000
5,000
10,000
0
5,000
0
50,000
25,000
25,000
0
0
April 2013
April 2013
April 2014
April 2014
April 2015
April 2015
April 2016
April 2016
April 2017
April 2017
March 2018
March 2018
LIXIL Group Online Information
Corporate Website
In addition to the Group profile, CR activities,
and the latest news, the LIXIL Group's
corporate website also contains sections
covering recent business initiatives within the
Group and insights from the Company's CEO.
> www.lixil.com
Financial Information
LIXIL Group Corporation's IR website
offers enriched content for shareholders
and other investors, including information
regarding financial results, audio streaming
of results briefings, and market data.
> www.lixil.com/en/investor
Non-Financial Information
Our sustainability website introduces the
LIXIL Group's CR commitment to and
activities for enhancing living spaces
through innovative responsible engage-
ments and initiatives around the world.
> www.lixil.com/en/sustainability
Annual Report
PDF versions of the annual reports
are available on the website.
> www.lixil.com/en/investor/li
brary/annual_reports.html
Corporate Data
As of March 31, 2018
LIXIL Group Corporation
(JS Group Corporation renamed LIXIL
Group Corporation on July 1, 2012)
Established
September 19, 1949
Registered Office
2-1-1 Ojima, Koto-ku,
Tokyo 136-8535, Japan
Headquarters
36F, Kasumigaseki Building,
3-2-5 Kasumigaseki, Chiyoda-ku,
Tokyo 100-6036, Japan
Fiscal Year Closing
March 31
Employees
50 (Consolidated employees: 61,140)
Accounting Auditors
Deloitte Touche Tohmatsu LLC
Overview of Major
Businesses
The Company controls and manages domestic and
overseas companies that operate housing-related
businesses and urban environment related busi-
nesses through acquisition or holding of stocks.
Securities Traded
(Common stock)
Tokyo Stock Exchange
Nagoya Stock Exchange
Transfer Agent and Special Mitsubishi UFJ Trust and Banking Corporation
Management of Accounts
Annual Meeting
of Shareholders
Normally held in June in Tokyo, Japan
Cautionary Statement with Respect to Forward-Looking Statements
Statements made in this annual report with respect to plans, strategies, and
future performances that are not historical facts are forward-looking statements.
LIXIL Group Corporation cautions that a number of factors could cause actual re-
sults to differ materially from those discussed in the forward-looking statements.
Editorial Policy
This annual report aims to enhance communication with the Company's share-
holders by presenting its initiatives to achieve long-term, sustainable growth. As
the Company determined to divest Permasteelisa S.p.A. in August 2017, informa-
tion regarding Permasteelisa is not included unless otherwise stated, except for
pages on financial reporting and governance. (Pages 50-69 and pages 80-109)
TSE Securities Code: 5938
LIXIL Group Corporation
36F, Kasumigaseki Building, 3-2-5 Kasumigaseki,
Chiyoda-ku, Tokyo 100-6036, Japan
www.lixil.com
*XW7400 *
XW7400 01 2018.8.27発行
Printed in Japan