LIXIL GROUP
ANNUAL REPORT
2019
CONTENTS
ABOUT LIXIL GROUP
CR STRATEGY AND RESULTS
02
04
LIXIL Group’s Businesses
Stages of LIXIL Group’s Evolution
LIXIL GROUP’S VALUE CREATION
06 CEO Message
10
12
14
Value Creation Process
LIXIL’s Business Landscape
Financial & Non-Financial Highlights
BUSINESS STRATEGY AND RESULTS
16 CFO Message
18
Review and Analysis of Operating Results and
Financial Position
24 Review of Operations
26
28
30
LIXIL Water Technology (LWT)
LIXIL Housing Technology (LHT)
LIXIL Building Technology (LBT)
32 Distribution & Retail Business (D&R)
33 Housing & Services Business (H&S)
34 Corporate Responsibility Chairperson Message
35 Corporate Responsibility Strategy
36
LIXIL’s Material Issues
38 Global Sanitation & Hygiene
40 Water Conservation & Environmental Sustainability
42 Diversity & Inclusion
CORPORATE GOVERNANCE
44 Board of Directors of LIXIL Group Corporation
46
Executive Officers of LIXIL Group Corporation
48
Messages from the Chairperson of the Board and
Committee Chairpersons
50 Corporate Governance at the LIXIL Group
52
Activities of the Board of Directors and
Board Committees
53 Board of Directors’ Effectiveness Evaluation
54 Corporate Officer Compensation
56
Procedures and Policies Regarding the Nomination of
Director Candidates, the Removal of Directors, and
the Appointment and the Removal of Executive Officers
57
Internal Control Systems
CORPORATE INFORMATION / DATA
60 Consolidated 10-Year Summary
62 Principal Group Companies
64 Basic Policy for Investor Relations
65
Shareholder Information
66 Corporate Data
Before Reading this Report
In this report, we have sought to share LIXIL’s value creation story with our readers by organizing
the information into six sections. Each section includes key pages that explain the main story
and supplementary pages that supply background information for the main story pages.
Orange pages: these make up the report’s main content and framework
Gray pages: these supply background information and supporting details
Making Better
Homes a Reality
for Everyone
Every person on the planet dreams of a better home.
LIXIL makes that possible with pioneering water and
housing products.
Born in 2011 through a merger of five of Japan’s most
successful building materials and housing companies,
we draw on our Japanese heritage to create world-leading
technology and innovate to make high-quality products
that transform homes. Today, we are a global enterprise
with approximately 75,000 employees in more than 150
countries worldwide, having expanded internationally by
acquiring some of the most trusted names in our industry,
including GROHE and American Standard.
But the LIXIL difference is not what we do or where
we do it, it is how we do it. We combine meaningful
design, an entrepreneurial spirit, a dedication to
improving accessibility for all, and responsible business
growth to make things that matter – to people, to
communities, and to the world we live in.
At LIXIL, we are proud that our products touch the
lives of more than a billion people every day, but believe
we have the potential to still do so much more.
Editorial Policy
This annual report aims to enhance communication with the Company’s
stakeholders, especially investors, by presenting its initiatives to achieve long-term,
sustainable growth. In editing, we focused on key content and aimed for an easy-to-
understand structure. Information not included in this annual report, such as
detailed non-financial information, the Group profile, detailed financial information,
and the latest news, is available on our corporate website.
Note:
Due to the LIXIL Group’s decision to divest Permasteelisa
in August 2017, the Company previously classified the
operations of Permasteelisa as discontinued operations.
However, during the fiscal year ended March 2019
(FYE2019), LIXIL Group was unable to secure the
necessary approval to sell Permasteelisa as is. Therefore,
Permasteelisa’s profit and loss have been restated as
profit and loss from continuing operations. Business
results for FYE2017 and FYE2018 shown in LIXIL Group’s
Annual Report 2018 have been retroactively restated.
01
ABOUT LIXIL GROUP
LIXIL Group’s Businesses
(Fiscal Year Ended March 31, 2019)
Enhancing
how people
live through
our five
businesses
H&S
3.1%
D&R
9.5%
LBT
13.7%
Revenue
¥ 1,832.6
billion
LWT
LHT
LB T
D& R
H& S
LIXIL Water Technology
LIXIL Housing Technology
LIXIL Building Technology
Distribution & Retail Business
Housing & Services Business
LWT makes attractive and purposefully
designed products for bathrooms and
kitchens through powerful global brands
such as INAX, GROHE, and American
Standard, as well as product brands such
as RICHELLE and SPAGE.
LHT’s brands such as TOSTEM, INTERIO,
EXSIOR, SUPER WALL, and Kawashima
Selkon Textiles produce a range of housing-
related products, from window sashes to
entrance doors, exterior building materials,
interior furnishing materials, and fabrics,
helping to make better homes a reality.
LBT manufactures products and offers
services to support the construction of
buildings that are environmentally conscious
and which provide better spaces to live,
work, study, and play.
D&R provides consumers with a unique array
of housing and lifestyle-related products,
materials, and services through its Super
VIVA Home and VIVA Home stores in Japan.
H&S offers comprehensive housing and
lifestyle support to customers in Japan
throughout all stages of their lives.
Revenue
¥833.1 billion
Core earnings
¥60.2 billion
Revenue
¥540.8 billion
Core earnings
¥20.7 billion
Revenue
¥256.0 billion
Core earnings
- ¥38.1 billion
Revenue
¥176.4 billion
Core earnings
¥7.8 billion
Revenue
¥57.9 billion
Core earnings
¥3.5 billion
Principal products and services
Principal products and services
Principal products and services
Principal products and services
Principal products and services
Plumbing fixtures
Sanitaryware, shower toilets, water faucets,
washstands, bathtubs, prefabricated
bathrooms, showerheads, washstand fixtures,
washstand cabinet units, kitchen systems, etc.
Metal building materials
Housing window sashes, entrance doors,
shutters, gates, carports, banisters, high
railings, tide barriers, insulated smoke
screens, etc.
LHT
29.0%
LWT
44.7%
Tile building materials
Tiles for houses and buildings, interior
decorative tiles, 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 power systems, etc.
Metal building materials
Curtain walls, building window sashes, store
facades, etc.
Home centers
Household products, DIY products, building
materials, etc.
Comprehensive building material stores
Building materials, tools, hardware, etc.
(Divested in June 2019)
Housing solution businesses
Development of homebuilding franchise
chains, construction on order, ground
inspections and improvements, etc.
Real estate
Land, building, and real estate management
services, support for development of real
estate franchises, etc.
Assisted living retirement home business
Assisted living retirement homes, etc.
(Divested in September 2019)
Financial services business
Housing loans, etc.
Major brands
Major brands
Major brands
Major brands
Major brands
02
03
ABOUT LIXIL GROUP
Stages of LIXIL Group’s Evolution
Continually strengthening LIXIL in order to
create superior products and services
that improve the comfort and lifestyles of
people around the world
FYE2012–2013
FYE2014–2016
FYE2017–
Creating LIXIL through
the merger of five companies
LIXIL was born out of the merger of Tostem, INAX, Shin
Nikkei, SUNWAVE, and Toyo Exterior in 2011. Through its
integration, the Company generated synergies between its
businesses to establish a powerful foundation for
sustainable growth, opening the way to delivering a
comprehensive lineup of products that cover all aspects of
living spaces. The brand name LIXIL is derived from the
combination of “LI” from two words that closely represent
our business: “LIVING” and “LIFE.”
In 2011, LIXIL adopted the corporate governance
structure, a “Company with Nominating Committee, etc.”,
as outlined in Japanese Corporation Law. 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
executive officers can make management decisions quickly
and decisively while aiming to secure management
transparency.
Net sales (JGAAP) / Revenue (IFRS) (Years ended March 31) (¥ billion)
Establishing the foundation for
business expansion and
global growth
From 2011, LIXIL’s business rapidly globalized through
a series of acquisitions and investments, including the
integration of some of the most iconic and leading
names in our industry, such as GROHE, American
Standard, and Permasteelisa.
FYE2016
¥598.6 billion
(IFRS)
FYE2013
¥205.1 billion
(JGAAP)
32%
14%
Overseas revenue
ratio reached
32%
1,890.5
1,628.7
1,705.4
Simplifying the balance sheet,
improving the organizational structure,
and strengthening profitability
In becoming one of the most comprehensive companies
in the industry, LIXIL developed a top-heavy organization
with areas of overlapping authority and a broad business
portfolio. To achieve further growth, the Company began
delayering its organizational structure to accelerate
decision-making and improve efficiency, enabling it to
become leaner, simpler, and faster. LIXIL also began to
review its portfolio in order to strengthen its balance
sheet, focusing on businesses that have synergistic
relationships with its core business and high potential
profitability, in turn enabling it to prioritize its
investments in high growth areas. LIXIL will now
continue to build on its competitive advantage through
differentiated products, services, and business models,
setting the Company on the path to higher profitability
and sustainable growth.
1,786.4
1,829.3
1,832.6
Growth
in the future
As the world’s population and the middle
income segment grow, the demand for
housing and water technology products
and services will continue to expand. LIXIL
will harness its strengths to become a truly
differentiated and unique housing and
water technology company with the world’s
most respected and powerful brands. It will
become an organization that can adapt
and innovate faster, providing differentiated
products and services that will enable it to
capture revenue growth in the future.
1,436.4
1,291.4
2012
2013
2014
2015
2016
2017
2018
2019
JGAAP
IFRS
Japan
Overseas
05
2,000
1,500
1,000
500
04
LIXIL GROUP’S VALUE CREATION
CEO Message
Creating
Stakeholder
Value as
One LIXIL
06
Kinya Seto
Director, Representative Executive Officer,
President and CEO
I would like to first sincerely thank you for your support
this year. I am humbled by your many voices, which
helped determine the outcome of this year’s Annual
General Meeting of Shareholders (AGM). I believe this
is a rare watershed moment for LIXIL, marking who we
really are and what we stand for.
Doing the Right Thing
On November 1, 2018, I was replaced as CEO. But there
were governance-related concerns surrounding the
change in leadership, including the undue influence of a
founding family member over the Board of Directors and
Nomination Committee. The unfortunate reality is that
founding families and past leaders can still hold back
the growth of some older and larger companies in
Japan. I do not believe this is right, though, which is why
I chose to seek re-election in the hopes of correcting
governance at LIXIL and ensuring the company is
working in the best interests of all of its stakeholders.
A number of stakeholders held similar concerns.
Some of our institutional investors who are not activists
became more vocal, asking the company to improve its
governance and accountability. Senior managers and
employees also spoke up for what they believed in
despite the risk of doing so. I would like to express my
appreciation for their support. Without it, we would not
be able to address this issue today and strengthen
governance at LIXIL.
Unfortunately, I recognize that the eight-month
period leading up to the AGM impacted many of our
internal and external stakeholders. I would like to take
this time to also apologize to you for the concern and
confusion caused.
I believe, though, that we will emerge stronger
because of this. We live in a world where the
expectations of what a company should be are much
higher than ever before. The importance of ESG
(Environment, Social, and Governance) for stakeholders
continues to rise, and good corporate governance is a
key component of ensuring the sustainability of a
company. I am committed to ensuring that, as a
company, doing the right thing becomes part of the
foundation that LIXIL stands on.
I am eager to now renew our pursuit of the future
we promised you not so long ago: a truly differentiated
LIXIL that we can all be proud of.
Introducing the New Management System
The outcome of the AGM is a new Board of Directors
that offers a heightened supervisory function, and a
new Board of Executive Officers that will enhance the
efficiency of business execution.
In total, shareholders elected 14 directors. However,
11 directors, including myself, only secured between
50–60% of votes. I believe this reflects shareholders’
demand for greater supervision and stronger
governance in the company following recent events.
The new Board of Directors has made a strong
commitment to work together as one team to achieve
this greater supervision and stronger governance. Now
consisting of nine outside directors and five internal
directors, the new Board offers a broad range of
supervisory skillsets. This Board structure will enable
LIXIL to strengthen its governance and build on
strategic continuity in order to enhance the corporate
value of the company.
We also welcome a new Board of Executive
Officers, which is responsible for business execution
and has the authority to decide on matters delegated
by the Board of Directors. While in the past it mostly
consisted of functional leaders, for the first time, I am
pleased to say that we now have representation from
the commercial businesses – both domestic and
international – on this Board. This includes Bijoy
Mohan, CEO of LIXIL International, who oversees LIXIL
Water Technology (LWT) and LIXIL Housing
Technology’s (LHT) overseas businesses; Satoshi
Yoshida, CEO of LHT Japan; Hiroyuki Oonishi, CEO of
LWT Japan; and Kazuhiko Ootsubo, who leads sales
and management of domestic subsidiaries in Japan.
Their presence will ensure that decisions are closely
aligned with the business on the ground, enabling us
to execute our business strategy more efficiently and in
line with our overall Group strategy.
Addressing our Medium-Term Plan
The management team is now in the process of
reviewing LIXIL’s medium-term strategy.
In April 2018, we initiated the “Medium-Term Plan
(MTP): Toward Sustainable Growth.” Under the MTP,
LIXIL will become a truly differentiated maker of
pioneering water and housing products with the world’s
07
LIXIL GROUP’S VALUE CREATION
CEO Message
most respected and powerful brands. It will be an
organization that can innovate faster and provide
differentiated products and services to become more
profitable and financially robust in the medium term.
I believe the fundamentals of this strategy still
remain on track and we do not expect to change the
direction significantly. Following developments over the
past year, however, we have to re-evaluate internal and
external conditions in order to determine our short-
term priorities.
Reviewing the Business Portfolio
There is a high degree of management complexity that
accompanies LIXIL, which was formed through the
integration of five companies in Japan and further
overseas acquisitions. To improve management
efficiency, simplifying the organization and improving
the balance sheet are vital to creating a leaner and
more operationally efficient company.
We have now begun to review specific assets in our
business portfolio and their relationship to our core
business, as well as their potential profitability. This will
enable us to prioritize investment in potentially high
growth areas and move toward the potential divestment
of non-core or unprofitable businesses. Cleaning up the
balance sheet is essential to improving management
resources and the management efficiency of the
company.
Addressing the Window Sash Business
in Japan
In the short term, we also have to address the high cost
and volatility of our window sash business in Japan in
order to become more competitive and re-invest
management resources in high growth areas.
Due to high fixed costs, LIXIL’s window sash
business is vulnerable to external factors, including the
number of new housing starts, rapid changes to the
business environment, and fluctuations in raw material
costs. We have to accelerate initiatives to create a more
resilient business, such as improving the production
and space efficiency of factories, and accelerating the
development and launch cycle of differentiated
products. Specifically, this includes reducing the
number of stock keeping units (SKUs), standardizing
parts, and unifying our core product platforms, which
will then enable the generalization of production lines.
In turn, this will enable us to respond to demand more
flexibly and adapt to changes faster. While progress has
been made in this area in the last year, we need to
accelerate initiatives to cope with the unique challenges
of the market, particularly in production. It is important
that we transform this business into one that employees
are confident in and proud of.
Becoming the World’s No. 1
Bathroom Solutions Provider
Yet, while we have to address structural issues in Japan
such as our window sash business, Japan offers LIXIL a
great opportunity for global growth. Amid Japan’s
shrinking and aging population, high-quality
differentiated products and services are key. This
makes Japan a powerful contributor to our international
business, too, as an innovator of differentiated products
and technologies that can be exported to the world.
Globally, LIXIL is now in a unique place. The world’s
population is growing, especially the middle-income
segment. While doing business overseas increases our
exposure to greater political, economic, and social risk,
it is where we will find future growth. There is growing
demand for water technology products – from the most
luxurious to the most basic. Today, through our
powerful portfolio of brands, which includes names
such as GROHE, American Standard, and INAX, we are
meeting the different lifestyle preferences and tastes of
our consumers.
As the next step toward becoming the world’s
leading bathroom solutions provider, we recently
appointed Bijoy Mohan as the CEO of LIXIL
International. LIXIL International is not a new
organization structure, but it will serve as a position
from where Bijoy can oversee LIXIL’s LWT and LHT
overseas businesses. LIXIL will continue to manage its
businesses by region, chiefly through the regions of
Asia Pacific, EMENA, the Americas, and South Africa.
LIXIL International, however, will enable us to deploy
and focus resources at both the Group and regional
level in order to execute our strategies. It will also
enable us to accelerate synergies in R&D, marketing,
and innovation to drive a more focused approach to
enhancing growth.
A Company We Are Proud of
LIXIL CORE (Corporate Philosophy)
To achieve all of this, we must do so as One LIXIL.
On the day after the AGM, I held two town hall
meetings in Tokyo at 8:30 am and 4:00 pm, which
were live-streamed across our internal social media
platform so everyone could participate. During these
sessions I was asked, “Who do you think a company
really belongs to?”
A company is owned by its shareholders. But it is
the employees who create value for those
shareholders, who provide for customers, and who
carry out the strategy that management sets out. They
are responsible for improving the company, and they
are responsible for contributing to the societies we
work in. At LIXIL, there are approximately 75,000
employees, and I believe it is important that they are
proud of who we are.
Delivering corporate value is a high priority, but we
will do so as a company that inspires pride. We will
deliver on performance, but we will be employee-
oriented. I believe this is the foundation to achieving One
LIXIL – and the path to achieving sustainable growth.
The Group’s superior
products and
services contribute
to improving
people’s comfort
and lifestyles.
LIXIL Behaviors
The three LIXIL Behaviors provide a unified way of
working for all LIXIL employees, helping to make
LIXIL a purpose-driven, entrepreneurial company
for sustainable growth.
08
09
LIXIL GROUP’S VALUE CREATION
Value Creation Process
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
LIXIL’s Capital
INPUT
Employees
Approximately 75,000 people
working around the world
Brands
Portfolio of 17 industry-leading
product brands and 6 retail and
housing services brands
Intellectual Property
¥28.4 billion invested in R&D
Financial Capital
¥533.7 billion in capital and
¥726.0 billion in interest-bearing debt
Natural Capital
22.2 million GJ of energy used and
16.7 million m3 of water intake
Manufacturing Assets
Capital investment of
¥67.6 billion
Social Engagement
Over ¥1.1 billion in social investments
and community contributions
How LIXIL Creates Value
The Value LIXIL Creates
LIXIL CORE (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
OUTPUT
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*1
Brands
LIXIL products are used by
a billion people every day
Intellectual Property
Approximately 1,100 utility and design patent
applications generated and filed worldwide
every year
Financial Capital
Core earnings ratio of 0.7% and ROE of
-9.1% in FYE2019
Natural Capital
Reduced carbon intensity per
economic output*2 by 4.5%
(Carbon intensity: 1,488 kg-CO2 / ¥1 million)
Manufacturing Assets
103 factories globally
Social Engagement
Over 115 projects related to the three
strategic pillars of the Company’s CR strategy
*1 Result from 2017. This survey is conducted every two years.
*2 Carbon intensity per economic output = CO2 emissions (kg-CO2) / total economic
output (¥1 million)
10
11
LIXIL GROUP’S VALUE CREATION
LIXIL’s Business Landscape
The World that
Shapes Us
2 Japan’s Silvering
Population
Japan’s population of about 127 million people is expected to
decrease by 12% by 2040*4. By then, 35% of the population
will be over 65 years old*4, resulting in a smaller workforce
and potentially heavier tax burden. But Japan’s demographic
transition also ushers in new, lucrative opportunities. Japan is
a testament to how far living standards have improved
through critical technologies. In this market, companies that
offer differentiated and consumer-centric products and
services will emerge as its leaders.
Opportunity
Lead transition from new housing market to home renovation, a
potential ¥7.4 trillion market by 2030*5
Develop advanced technologies that can one day be exported to
mature markets
Risk
New housing starts are forecast to decline by one-third by 2030*5
Manpower is forecast to shrink by as much as 13 million people
by 2040*6
*4 Ministry of Internal Affairs and Communications, September 2018
*5 Nomura Research Institute, June 2019
*6 Ministry of Health, Labour and Welfare, January 2019
4
The Digital
Lifestyle
In a world being programed by Millennials and Gen-Zers,
digitization envelops us. From IoT solutions through to AI,
big data analysis, and blockchain, new technologies are
constantly transforming how we live, work, learn, and play.
Opportunities appear limitless and, day by day, more and
more people are coming online. In 2018 alone, over 365
million new users connected to the internet, bringing the
total to approximately 4.4 billion people*8. This is a world
where change is constant, and for companies, where
adaptability determines survivability.
6
A Company’s
Social Purpose
A company’s social purpose is how it makes a positive
difference to the world around it – and it matters to all kinds
of stakeholders*10. For increasingly ESG-focused investors,
it has become an important indicator of a company’s
sustainability. For the increasingly Millennial workforce, it is a
source of pride and a reason to believe in a company. And
for the communities it benefits, it is life-changing. This is the
power of the shared value created by a company’s social
purpose, which is truly a competitive differentiator for
companies that live by it.
Opportunity
Opportunity
Gain new consumer insight and drive discovery and development
Establish high levels of stakeholder engagement, loyalty, and trust
of consumer-centric products and business models
by authentically contributing to social issues
Risk
Risk
Non-traditional and disruptive competitors increasingly entering
Lack of social purpose could impair business by weakening
and changing the market
support of stakeholders, including employees
*8 We Are Social and Hootsuite, January 2019
*10 EY Beacon Institute, April 2018
1
The Rising Global
Middle Class
About 3.8 billion people*1 make up the growing middle class
today – and they are driving global economic demand. But
where the middle class was once the hallmark of mature
markets such as the US, Europe, and Japan, middle-class
numbers are now on the rise in developing markets. By
2040, 40% of global consumption will be driven by Asia*2,
especially China and India*3. It is here, among the new
entrants into the middle class, that spending growth is set
to take off.
Opportunity
3
The New
Consumer
As the middle class grows, the lifestyle preferences and
tastes of consumers are broadening, made even more
diverse by the distinctive cultural preferences of each
market. But the “hollowing out” of the middle class in
traditional mature markets is influencing spending habits,
too, especially as the net worth of younger generations
there decreases*7. This, coupled with the rise of peer-to-
peer networks, means the consumer now has the
motivation and the choice to be more selective and
educated about products.
5
The Effects of
Climate Change
From extreme weather events to rising temperatures and
changing rainfall patterns, the risk of climate change to
economies and individuals alike is real. The Paris
Agreement aims to keep the increase in temperature to
below 2°C above pre-industrial levels, but concerted efforts
to rein it in are looking increasingly unconcerted. For the
world’s 215 biggest companies alone, climate change risks
could cost as much as US$1 trillion in five years*9.
Addressing climate change is key to a company’s
sustainability and competitive advantage.
7
The Work
Environment
Technology has enabled employees to connect anytime and
anywhere, adding new dimensions of flexibility and diversity
to work. Working spaces are being redesigned, too, in bids
to attract talent and unlock new productivity. But the
employment landscape is shifting altogether, with workers
around the world becoming increasingly independent and
companies looking for a more agile, contingent workforce*11.
This is the gig economy and it is growing. A human
resources system that can keep up with changing work-
style trends will be key to securing the best talent.
Capture growing global demand for new and differentiated water
Opportunity
Opportunity
Opportunity
and housing products
Risk
Increased exposure to rising geopolitical, economic, and social
tensions around the world
*1 Brookings Institution and World Data Lab, September 2018
*2 McKinsey, July 2019
*3 World Data Lab, November 2018
Differentiate through design, technology, quality, and brands
Increase demand for products with energy- and
Hire a greater caliber of engaged, diverse, and productive people
Risk
Mass production of limited items, which is better suited to
fast-growing markets, increases risk of being caught in the
commodity trap
*7 Deloitte, May 2019
water-saving functions
Risk
Heightened risk of regulation affecting supply chain and
reputational risk
Higher operational risk in regions of energy and water stress
*9 CDP, June 2019
Risk
Hiring and retaining talented employees may become difficult
*11 BCG, January 2019
12
13
LIXIL GROUP’S VALUE CREATION
Financial & Non-Financial Highlights
LIXIL Group Corporation and Consolidated Subsidiaries (Years ended March 31)
Revenue
Overseas
Japan
(¥ billion)
2,000
1,500
1,000
500
0
Core earnings / Core earnings ratio
Net interest-bearing debt / Net debt-to-equity ratio
Core earnings (left)
Core earnings ratio (right)
Net interest-bearing debt (left)
Net debt-to-equity ratio (right)
Equity attributable to owners of the parent /
Ratio of equity attributable to owners of the parent
Equity attributable to owners of the parent (left)
Ratio of equity attributable to owners of the parent (right)
1,832.6
557.0
1,275.6
(¥ billion)
100
80
60
40
20
0
(%)
5.0
4.0
3.0
2.0
1.0
0.0
0.7
12.8
(¥ billion)
1,000
800
600
400
200
0
109.5
584.5
(%)
150.0
120.0
90.0
60.0
30.0
0.0
(¥ billion)
800
600
400
200
0
533.7
25.9
(%)
40.0
30.0
20.0
10.0
0.0
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
SG&A expenses / SG&A ratio
SG&A expenses (left)
SG&A ratio (right)
Earnings (loss) per share (EPS) / Dividends per share /
Dividend payout ratio
EPS (left)
Dividends per share (left)
Payout ratio (right)
Relative reduction in CO2 emissions due to
Group products and services
(Compared to FYE2016)
(¥ billion)
600
500
400
300
200
100
0
519.8
28.4
(%)
60.0
50.0
40.0
30.0
20.0
10.0
0.0
56.7
(¥)
200
150
100
50
0
-50
-100
-150
(%)
80.0
60.0
40.0
20.0
0.0
-20.0
-40.0
-60.0
34.4
70
-180
(Times)
1.4
1.2
1.0
0.8
0.6
1.21
CO2 emissions from Group activities (Scope 1 and 2)
Scope 2
Scope 1
(Thousand t-CO2)
1,500
1,200
900
600
300
0
1,185
616
569
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
2016
2017
2018
2019
2017
2018
2019
* CO2 emissions reduction: the reduction possible when customers use LIXIL’s
environmentally friendly products and services (in comparison to the reduction due to
previous versions of those products)
Profit (loss) for the year attributable to owners of the parent / ROE
Total assets / ROA
Profit (loss) for the year attributable to owners of the parent (left)
ROE (right)
Total assets (left)
ROA (right)
Ratio of women among recent graduate recruits
(university undergraduate and graduate students)
(LIXIL Corporation, Japan)
Cumulative number of participants in the Talent Acceleration
Program (TAP) for next-generation leaders
(LIXIL Corporation, Japan)
(%)
10.0
5.0
0.0
-5.0
-9.1
-52.2
-10.0
(¥ billion)
2,400
1,200
0
2,059.5
-2.5
(%)
4.0
2.0
0.0
-2.0
-4.0
33.2
(%)
40.0
30.0
20.0
10.0
0.0
1,195
(People)
1,500
1,200
900
600
300
0
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
2017
2018
2019
2017
2018
2019
(¥ billion)
60
30
0
–30
–60
14
15
BUSINESS STRATEGY AND RESULTS
CFO Message
Sachio Matsumoto
Representative Executive Officer and
Executive Vice President,
Finance, Treasury, M&A, and Legal,
Chief Financial Officer and
Chief Legal Officer
Strengthening Cash Flow
and Profitability to
Improve Corporate Value
and Ensure Stable
Shareholder Returns
Overview of FYE2019
Consolidated revenue for the fiscal year ended March 31,
2019 (FYE2019), increased by 0.2% year on year. This
increase can be attributed to factors such as the
stabilization of market and sales conditions in Japan from
October 2018. Core earnings, however, were down by
83.2% year on year. There are several reasons for this
significant decline. In Japan, we encountered operational
challenges after making organizational changes and
implementing a new trading framework at the same time.
Moreover, Japan experienced a series of natural disasters,
which reduced our profitability in the first half of the fiscal
year. A large, one-off loss was also incurred in relation to
the operations of Italian subsidiary Permasteelisa.
Specific to Permasteelisa, in August 2017, LIXIL
decided to sell all of the company’s shares to a Chinese
company. However, the sale did not go through after a
key US regulatory authority announced it would not
approve the sale in October 2018. At the time, there were
concerns that Permasteelisa’s business, centered on its
North American operations, would deteriorate rapidly due
to rising costs related to human resources and raw
materials. Therefore, an immediate and thorough
examination of all of its ongoing projects was carried out.
Subsequently, we recorded a one-off ¥41.5 billion loss
related to Permasteelisa in FYE2019 to account for
higher construction costs required to complete projects,
bad debt, and similar items.
Profit for the year attributable to owners of the parent
resulted in a loss of ¥52.2 billion, down ¥106.8 billion year
on year. Various reasons contributed to this decline. Profit
before tax decreased by ¥83.1 billion, which was due to
the absence of a ¥23.6 billion gain on sales of affiliates
and investment property recorded in the previous year, a
¥24.8 billion impairment loss attributed to reputational and
intangible asset losses related to Permasteelisa’s situation,
and the decrease in core earnings. On top of this, we
recorded an increase in income tax expenses owing to the
reduction of deferred tax assets recorded at the time of the
decision to sell Permasteelisa.
Focus on Recovering Profitability in FYE2020
I regret LIXIL was unable to meet the expectations of our
shareholders and investors, ending FYE2019 with
significantly lower core earnings and a net loss.
With the exception of Permasteelisa, however,
business rebounded in the second half of FYE2019,
especially in Japan after the operational challenges we
encountered and the effects of natural disasters
stabilized in the first half. This rebound was the result of
various initiatives progressing according to plan, such as
meeting the demands of both new housing and home
renovation projects. Meanwhile, in our overseas
businesses, our endeavor to provide a full lineup of
bathroom and kitchen products is progressing smoothly,
while other than Permasteelisa, we made progress in
reviewing our cost structures to improve profitability. As a
result of these factors, combined with our solid business
foundation, I believe our future looks bright.
At the same time, we have already identified the
reasons for the losses at Permasteelisa – the main cause
of our large drop in profit in FYE2019 – and are making
progress in our recovery plan. Thus, while aiming to return
Permasteelisa to profitability, we will continue advancing
our core measures, targeting medium- and long-term
sustainable growth that fully utilizes our Group potential.
Preventative Measures Against
Inappropriate Actions by Subsidiaries
In FYE2019, inappropriate actions at four subsidiaries –
including the changing of project completion dates to
prematurely account for revenue – were reported via our
concern-raising system. Not only were there internal
compliance issues at one of these companies, but its third-
quarter consolidated results were also delayed by one
month because of doubts over accuracy, which caused
considerable concern among shareholders and investors.
In response to these issues, after much deliberation
among our executive officers and internal audit division,
we are taking concrete steps to thoroughly strengthen
compliance. Specifically, we reviewed the trustworthiness
of subsidiary executives, reflected compliance items in the
selection and assessment processes of subsidiary
executives, and set up an education program for subsidiary
CEOs. In addition, various highly effective measures are
being implemented to ensure even stronger compliance
and to prevent such incidents from occurring again. These
include structural and communications measures, such as
setting up a meeting platform for subsidiary CEOs,
establishing communication channels between subsidiary
CEOs and Group senior management, and strengthening
the effectiveness of compliance committees. They also
include financial measures such as reviewing accounting
processes, and auditing measures such as reviewing
auditing systems and improving auditing practices.
Strengthening the Balance Sheet to
Support Sustainable Growth
A strong balance sheet is vital for supporting continued
investments that sustain medium- and long-term growth,
improve corporate value, and provide reliable returns to
shareholders. For these reasons, it goes without saying
that we need to improve our financial stability and capital
efficiency. I believe these are the most important
challenges we face.
LIXIL’s equity ratio (ratio of equity attributable to owners
of the parent) in FYE2019 was 25.9% as a result of large
losses and the sale of Permasteelisa not being approved.
This was 3.4 percentage points worse than the previous
fiscal year and 4.1 percentage points below 30%, which
is our indicator of financial soundness. Moreover, our net
debt to EBITDA ratio worsened by 3.3 times year on year.
It is under these circumstances that we, the new
management team, are faced with the urgent tasks of
continuing to focus our business portfolio from a new
perspective, re-evaluating the balance sheet while
increasing cash flow to ensure funds for investments in
growth areas, and clarifying priorities for investment.
Thus, in FYE2019, in addition to continuing
efforts to improve our cash conversion cycle (CCC),
which began in FYE2014, we have established and
started implementing a set of guidelines across the
group. With a focus on capital costs, this will enable
each department to make investments efficiently. We
are now reflecting this in our businesses through
various initiatives. For example, this includes using
return on invested capital (ROIC) as an internal
management indicator to assess the degree of
improvement in investment efficiency; entrenching
these efforts by regularly holding meetings and
discussions between the various departments; and
striving to improve profitability by trying to increase
the efficiency of investments and returns.
Results of FYE2018 and FYE2019 (IFRS)
Revenue
Excluding Permasteelisa
Permasteelisa
Core earnings*
Excluding Permasteelisa
Permasteelisa
Profit (loss) for the year attributable to
owners of the parent
Excluding Permasteelisa
Permasteelisa
FYE2018 results
1,829.3
1,664.8
164.5
76.0
75.3
0.7
54.6
66.4
-11.8
Expected
1,845.0
1,679.5
165.5
45.0
54.0
-9.0
1.5
25.0
-23.5
FYE2019 results
Actual
1,832.6
1,689.4
143.2
12.8
54.3
-41.5
-52.2
25.3
-77.5
YoY
0.2%
1.5%
-13.0%
-83.2%
-27.8%
—
—
-61.9%
—
(¥ billion)
Vs. expected
-0.7%
0.6%
-13.5%
-71.6%
0.6%
—
—
1.2%
—
*Core earnings is revenue minus costs, such as of production, sales, management, and administration.
16
17
BUSINESS STRATEGY AND RESULTS
Review and Analysis of Operating Results and Financial Position
Status of Operating Results
Revenue in FYE2019
LIXIL Group generated ¥1,832.6 billion in revenue in FYE2019, up
by 0.2% year on year. In the Japan market, revenue increased for
all domestic businesses except LIXIL Water Technology (LWT),
which maintained the same level of revenue as the previous fiscal
year (FYE2018). LIXIL Housing Technology (LHT) in particular
recorded strong sales during the second half of the fiscal year,
leading the year-on-year growth in revenue in the Japan market.
In overseas markets, revenue for LWT increased in the Asia Pacific
region, especially the China market. The Europe, Middle East and
Africa (EMEA) region also recorded steady sales. On the other
hand, the Americas region maintained the same level of revenue as
in FYE2018, while Permasteelisa S.p.A. (Permasteelisa) continued
to proceed with selective order intake as part of its recovery
strategy. As a result, total revenue from overseas markets decreased
year on year.
FYE2019 revenue by segment for the domestic and overseas businesses
First half
FYE2019
626.1
208.0
251.5
52.6
87.8
26.2
277.2
194.0
5.6
77.7
-15.1
888.2
Increase /
decrease
-2.3
0.2
-6.5
1.4
0.3
2.3
0.9
5.5
-1.7
-2.9
-0.8
-2.2
FYE2018
660.5
227.8
262.9
55.5
86.0
28.4
295.1
203.8
7.1
84.2
-16.7
938.9
Second half
FYE2019
686.3
227.3
278.6
60.2
88.5
31.7
274.6
203.9
5.2
65.5
-16.5
944.4
Increase /
decrease
25.8
-0.5
15.7
4.8
2.5
3.3
-20.5
0
-1.9
-18.6
0.2
5.5
FYE2018
1,289.0
435.6
520.8
106.7
173.5
52.3
571.4
392.3
14.4
164.8
-31.1
1,829.3
Full year
FYE2019
1,312.4
435.3
530.0
112.8
176.4
57.9
551.8
397.8
10.8
143.2
-31.6
1,832.6
FYE2018
628.4
207.8
257.9
51.2
87.5
23.9
276.3
188.5
7.3
80.6
-14.4
890.4
Japan
LWT
LHT
LBT
D&R*
H&S*
Overseas
LWT
LHT
LBT
Adjustment
Total
(¥ billion)
Increase /
decrease
23.5
-0.3
9.2
6.1
2.9
5.6
-19.6
5.5
-3.6
-21.6
-0.6
3.3
*D&R: Distribution & Retail Business, H&S: Housing & Services Business
Core Earnings in FYE2019
LIXIL Group generated core earnings of ¥12.8 billion in FYE2019,
down 83.2% year on year. In the Japan market, core earnings
decreased in the first half of the fiscal year. This was primarily due
to the cost increase associated with the introduction of the new
trading framework and due to the impact of natural disasters.
However, in the second half of the fiscal year, core earnings were
positively affected by a recovery in demand and by controlling selling,
general and administrative (SG&A) expenses. As a result, core
earnings for the three domestic businesses, namely LWT, LHT, and
LIXIL Building Technology (LBT), improved significantly compared
with the first half of the fiscal year. With regard to the overseas
businesses, however, LIXIL Group recorded a significant drop in
core earnings mainly due to the provision for losses related to
construction costs at Permasteelisa, in addition to an increase in
personnel and material costs.
FYE2019 core earnings by segment for domestic and overseas businesses
First half
FYE2019
22.3
10.4
5.1
0.8
4.7
1.4
10.2
15.2
-0.5
-4.5
-18.8
13.8
Increase /
decrease
-19.3
-6.5
-11.6
-1.7
0.1
0.3
-8.0
-3.0
-0.8
-4.2
0.4
-26.9
FYE2018
34.3
16.7
11.6
2.3
2.3
1.5
21.2
22.0
-1.1
0.2
-20.2
35.3
Second half
FYE2019
42.9
18.8
16.2
3.0
3.0
2.1
-21.4
15.9
-0.1
-37.2
-22.5
-1.0
Increase /
decrease
8.6
2.1
4.6
0.6
0.7
0.6
-42.6
-6.2
1.0
-37.4
-2.3
-36.3
FYE2018
76.0
33.6
28.3
4.7
6.9
2.5
39.4
40.3
-0.8
-0.1
-39.3
76.0
Full year
FYE2019
65.2
29.2
21.3
3.6
7.8
3.5
-11.2
31.1
-0.6
-41.7
-41.2
12.8
FYE2018
41.7
16.9
16.7
2.5
4.6
1.1
18.2
18.2
0.3
-0.3
-19.2
40.7
Japan
LWT
LHT
LBT
D&R*
H&S*
Overseas
LWT
LHT
LBT
Adjustment
Total
(¥ billion)
Increase /
decrease
-10.7
-4.4
-7.0
-1.1
0.8
0.9
-50.6
-9.2
0.2
-41.6
-1.9
-63.2
*D&R: Distribution & Retail Business, H&S: Housing & Services Business
18
incurred in FYE2020, primarily from initiatives to recover the
profitability of Permasteelisa.
Within this context, the Group projects increases both in revenue
and in profit in FYE2020.
The foreign exchange rate assumptions used to forecast FYE2020
. However, for the forecast on a
results are ¥115/US$ and ¥133/
consolidated basis, the fluctuation of the euro between the planning
and announcement of our forecast (which was approximately ¥123/
on May 13, 2019) was taken into consideration as a risk factor. As a
result, the impact on the profit and loss incurred from the difference
between the two rates, namely ¥133/
“Consolidation adjustments and other.”
, was added to
and ¥123/
Profit (Loss) Attributable to Owners of the Parent in FYE2019
LIXIL Group recorded a net loss of ¥52.2 billion, down ¥106.8 billion
year on year. Profit before tax dropped by ¥83.1 billion mainly due to
the absence of a ¥23.6 billion gain on sales of affiliates and
investment property recorded in FYE2018, a ¥24.8 billion impairment
loss on goodwill and intangible assets related to Permasteelisa, in
addition to the decrease in core earnings. Moreover, a ¥13.5 billion
reversal of deferred tax assets recorded on the decision to divest
Permasteelisa resulted in an increase in income tax expenses.
Forecast of Operating Results for FYE2020
During the fiscal year ending March 31, 2020 (FYE2020), uncertainty
in the business environment surrounding LIXIL Group is forecast to
continue. While the Japanese economy is expected to continue its
slow recovery trend, in addition to the anticipated long-term
downward trend in the number of new housing starts, the
consumption tax increase planned in October 2019 is a potential
concern as it could negatively affect demand. Meanwhile, geopolitical
developments overseas, such as the US-China trade conflict and the
Brexit issue, are expected to cause instability in the global market.
LIXIL Group also anticipates structural reform expenses to be
FYE2020 forecast
Revenue
Core earnings
Operating profit
Profit (loss) before tax
Income tax expenses
Profit (loss) attributable to non-controlling interests
Profit (loss) attributable to owners of the parent
EBITDA*
Basic earnings per share (EPS) (yen)
FYE2019
1,832.6
12.8
-15.0
-18.0
-31.3
-2.9
-52.2
81.3
-179.98
Full year
(¥ billion)
FYE2020
(forecast)
1,850.0
47.0
38.0
44.0
-26.4
-2.6
15.0
150.4
51.71
Increase /
decrease
17.4
34.2
53.0
62.0
4.9
0.3
67.2
69.1
231.69
YoY
0.9%
267.2%
—
—
—
—
—
85.0%
—
* The impact of approximately ¥34.0 billion from the adoption of revised IFRS 16 “Leases” effective from April 2019 is included.
Revenue / Core earnings
(¥ billion)
EBITDA
(¥ billion)
2,500
2,000
1,500
1,000
500
0
Revenue
Core earnings
Revenue
Core Earnings
100
200
88.3
1,786.4
76.0
1,832.6
1,850.0
1,829.3
1,829.3
47.0
12.8
80
60
40
20
0
150
149.0
140.7
140.7
150.4
81.3
100
50
0
2017/3
2018/3
2019/3 2020/3
(forecast)
2017/3
2018/3
2019/3 2020/3
(forecast)
19
BUSINESS STRATEGY AND RESULTS
Review and Analysis of Operating Results and Financial Position
Financial Position as of March 31, 2019
Cash Flows in FYE2019
In accordance with the decision in FYE2018 to divest Permasteelisa,
the assets and liabilities related to Permasteelisa and its subsidiaries
were recorded as assets held for sale and liabilities directly
associated with the assets held for sale, respectively. During
FYE2019, however, it became clear that the shares of Permasteelisa
could not be transferred. Therefore, this classification was
discontinued, and Permasteelisa and its subsidiaries’ assets and
liabilities were reclassified to their original accounts in the FYE2019
consolidated statement of financial position.
The figures for year-on-year fluctuation of assets and liabilities
shown below are actual fluctuations that exclude the impact of the
following reclassifications: the assets and liabilities of Permasteelisa
to their original accounts in September 2018, and those of one
consolidated subsidiary held for sale during FYE2019.
Consolidated financial position
(¥ billion)
［A］
［B］
Increase / decrease
March 2018
March 2019
Cash and cash equivalents
Trade and other receivables
Inventories
Assets held for sale
Others
Total assets
Trade and other payables
Interest-bearing debt
Liabilities directly associated with the
assets held for sale
Others
Total liabilities
Treasury shares
Others
Total equity
Equity ratio (%)
Net assets per share (yen)
Number of shares (in thousands)
Net interest-bearing debt
138.8
343.3
217.9
180.2
1,227.0
2,107.1
339.0
687.9
127.5
303.2
1,457.6
-49.0
698.6
649.6
29.3%
2,128.77
289,790
549.2
141.4
401.7
234.6
11.4
1,270.4
2,059.5
392.4
726.0
5.0
369.0
1,492.4
-48.9
616.1
567.2
25.9%
1,839.59
290,095
584.5
Assets held for sale and liabilities directly
associated with the assets held for sale
Discontinued
operations
5.1
59.2
5.0
-181.0
111.7
—
38.3
23.3
-137.8
76.2
—
—
—
—
Others
-1.7
-4.1
-1.1
11.3
-4.5
—
-2.0
0
5.0
-2.9
—
—
—
—
Others
(actual increase /
decrease)
-0.8
3.2
12.8
0.9
-63.7
[B]-[A]
Total increase /
decrease
2.7
58.4
16.7
-168.8
43.5
-47.6
17.1
14.8
10.4
-7.5
34.8
0.1
-82.5
-82.4
-47.6
53.4
38.0
-122.4
65.8
34.8
0.1
-82.5
-82.4
-3.4pp
-289.18
305
35.4
Assets
Total assets as of March 31, 2019, stood at ¥2,059.5 billion, down
by ¥47.6 billion year on year, as a result of decreases in current
assets of ¥21.0 billion and non-current assets of ¥26.6 billion.
Major increasing factors included a ¥12.8 billion year-on-year
increase in inventories. Major decreasing factors included the
application of impairment accounting to goodwill and other
intangible assets related to Permasteelisa (a ¥24.8 billion impact on
the consolidated statement of financial position), and the effect of
foreign exchange translation.
Liabilities
Total liabilities as of March 31, 2019, amounted to ¥1,492.4 billion,
up by ¥34.8 billion year on year, reflecting a ¥114.5 billion increase
in current liabilities and a ¥79.7 billion decrease in non-current
liabilities. Major increasing factors included year-on-year increases of
¥17.1 billion and ¥14.8 billion in trade and other payables and
interest-bearing debt, respectively.
Equity
Total equity as of March 31, 2019, stood at ¥567.2 billion (including
¥533.7 billion of equity attributable to owners of the parent), down
by ¥83.2 billion year on year. Major decreasing factors included
lower retained earnings due to a ¥52.2 billion loss for the year
attributable to owners of the parent, ¥20.3 billion in dividends paid,
and a ¥11.9 billion other comprehensive loss posted mainly due to
the remeasurements of defined benefit pension plans and the fair
value gain and loss on financial assets.
The ratio of equity attributable to owners of the parent (equity
ratio) was 25.9%, and the equity per share attributable to owners of
the parent (net assets per share, BPS) was ¥1,839.59.
Cash and cash equivalents as of March 31, 2019, amounted to
¥141.4 billion, up by ¥2.7 billion year on year, including the effects
of exchange rate changes.
Cash Flows from Operating Activities
Net cash provided by operating activities for FYE2019 amounted to
¥69.4 billion, down by ¥47.0 billion year on year. This decrease was
attributable mainly to the fluctuations of working capital, including
trade and other receivables, in addition to a significant decline in
profit before tax.
Cash Flows from Investing Activities
Net cash used for investing activities was ¥72.3 billion, a decrease of
¥19.7 billion year on year. This decrease was largely due to a
decrease in proceeds from sale of subsidiaries and disposal of
investment properties of ¥15.6 billion.
Cash Flows from Financing Activities
Net cash generated by financing activities was ¥1.6 billion, up by
¥45.4 billion year on year. While dividends paid (including those
paid to non-controlling interests) increased by ¥3.9 billion, the
proceeds from interest-bearing debt surpassed its repayment by
¥27.5 billion. The net proceeds from interest-bearing debt was
recorded as a result of financing by short- and long-term interest-
bearing debt to cover the decrease in operating cash flows during
FYE2019.
Cash flow status and cash balance
FYE2018
FYE2019
Profit before tax from continuing operations
Loss before tax from discontinued operations
Profit before tax
Depreciation and amortization
Income taxes paid
Working capital
Loss recognized on the measurement of the disposal group held
for sale to fair value / Profit recognized on the remeasurement
Others
Net cash flows from operating activities
Net cash flows from investing activities
(of which purchase of property, plant and equipment and intangible assets)
Free cash flows
Net cash flows from financing activities
Cash and cash equivalents (balance at the fiscal year-end)
90.0
-24.9
65.1
64.7
-31.9
-0.6
21.9
-2.8
116.4
-52.6
-70.0
63.8
-43.8
…
138.8
-18.0
—
-18.0
68.5
-29.3
-6.1
-2.0
56.4
69.4
-72.3
-67.6
-3.0
1.6
…
141.4
(¥ billion)
Increase /
decrease
-108.0
24.9 *1
-83.1
3.8
2.5
-5.5
-23.9 *1
59.2 *2
-47.0
-19.7
2.3
-66.7
45.4
…
2.7
*1 “Loss before tax from discontinued operations” is offset by “Loss recognized on the measurement of the disposal group held for sale to fair value /
Profit recognized on the remeasurement.”
*2 “Others” in FYE2019 operating cash flows mainly consists of an impairment loss of ¥30.2 billion and the impact of foreign exchange translation.
20
21
Capital expenditures
Depreciation
R&D expenses
LWT
BUSINESS STRATEGY AND RESULTS
Review and Analysis of Operating Results and Financial Position
Forecast for FYE2020
Capital expenditures, depreciation, and R&D expenses
(¥ billion)
For FYE2020, the Group projects capital expenditure of ¥85.0
billion, up by 25.7% year on year, and depreciation of ¥103.1 billion,
up by 50.5% year on year. The increase in capital expenditure is
mainly due to ¥11.5 billion in construction costs for a new
headquarters building. The increase in depreciation is attributable to
a revision in accounting standards for leases, which had an impact
of ¥33.0 billion, and a ¥2.0 billion increase in the depreciation of IT
systems. As for R&D expenses, the Group projects ¥29.0 billion in
FYE2020, maintaining the average yearly level of approximately 1.6%
of revenue.
120
90
60
30
0
FYE2018
FYE2019
FYE2020 (forecast)
New HQ building
+¥11.5 billion
85.0
103.1
Impact of accounting
standard revision
+¥33.0 billion
70.0 67.6
68.5
64.7
27.9 28.4 29.0
Impact of the Adoption of Revised Accounting Standard for Leases
IFRS 16 “Leases” has been revised and was adopted in April 2019.
Under the revised standard, lease contracts that had been accounted
for as operating leases should be recorded as assets and liabilities,
and the asset portions should be depreciated. In regards to the
liability portion, each lease payment should be divided into the
payments of the principle of liability and its interest.
Major financial indicators of FYE2020, projected as of March 31,
2019, are as shown in the table on the right although actual results
could be different due to changes in assumptions and conditions.
Total assets
¥121.0 billion increase
Interest-bearing debt
¥121.5 billion increase
EBITDA
Core earnings
SG&A expenses
SG&A expenses
Profit before tax
Finance costs
¥34.0 billion increase
¥1.0 billion increase
Rent expenses: ¥34.0 billion decrease
Depreciation: ¥33.0 billion increase
¥0.5 billion decrease
Interest expenses: ¥1.5 billion increase
Cash flows
from operating activities
Cash flows
from financing activities
¥32.5 billion increase
¥32.5 billion decrease
Note: Figures are estimated approximate amount as of march 31, 2019.
Forecast for FYE2020 by Segment
LIXIL Water Technology (LWT)
LWT is expected to post ¥860.0 billion in revenue, up by 3% year
on year, and ¥64.8 billion in core earnings, up by 8% year on year,
in FYE2020.
Regarding the Japan market, the effect of the consumption tax
increase planned for October 2019 is anticipated in the form of
preemptive demand in the first half of FYE2020 and a reactionary
fall in demand in the second half. With forecasts of the number of
new housing starts and demand for renovation taken into account,
LWT projects to post the same level of full-year revenue in FYE2020
as FYE2019.
Overseas, the global economy continues to experience
destabilizing factors such as the US-China trade conflict.
Nevertheless, LWT projects increases in both revenue and core
earnings in overseas markets, supported by the effects of price
revisions, sales promotion of synergistic products, and continuous
improvements in cost of sales and SG&A expenses.
LIXIL Housing Technology (LHT)
LHT is expected to post ¥535.0 billion in revenue, down by 1% year
22
on year, and ¥25.9 billion in core earnings, up by 25% year on year,
in FYE2020.
Regarding the Japan market, as with LWT, the effect of the
consumption tax increase planned for October 2019 is anticipated
in the form of preemptive demand in the first half of FYE2020 and a
reactionary fall in demand in the second half. In total, LHT expects
to post the same level of full-year revenue in FYE2020 as FYE2019.
LHT also anticipates an improvement in core earnings buoyed by
product price revisions in and after the second half of FYE2019, as
well as by the price decline of aluminum, a major raw material of
LHT’s products.
LIXIL Building Technology (LBT)
LBT is expected to post ¥263.0 billion in revenue, up by 3% year on
year, and a ¥9.7 billion loss in core earnings, up by ¥28.4 billion
year on year, in FYE2020. The improvement in core earnings is
largely due to the absence of construction costs and allowance for
doubtful accounts additionally recognized in FYE2019 as a result of
a close examination of Permasteelisa’s orders received.
Distribution and Retail Business (D&R)
D&R is expected to post ¥188.0 billion in revenue, up by 7% year
on year, and ¥6.2 billion in core earnings, down by 20% year on
year, in FYE2020. The decrease in core earnings is mainly
attributable to the acceleration of new store openings.
Housing and Services Business (H&S)
H&S is expected to post ¥57.0 billion in revenue, down by 1% year
on year, and ¥3.3 billion in core earnings, down by 4% year on year,
in FYE2020. These declines are primarily due to the absence of real
estate properties sold in FYE2019.
The forecast for the FYE2020 performance of the LIXIL Group by segment is as follows:
FYE2019 result
FYE2020 forecast
Japan
Overseas
Total
YoY (%)
Japan
Overseas
Total
YoY (%)
(¥ billion)
397.8
31.1
7.8%
10.8
-0.6
—
143.2
-41.7
—
435.3
29.2
6.7%
530.0
21.3
4.0%
112.8
3.6
3.2%
176.4
7.8
4.4%
57.9
3.5
6.0%
833.1
60.2
7.2%
540.8
20.7
3.8%
256.0
-38.1
—
176.4
7.8
4.4%
57.9
3.5
6.0%
-31.6
-41.2
1,312.4
65.2
5.0%
551.8
-11.2
—
1,832.6
12.8
0.7%
0.6%
-18.4%
-1.7pp
1.0%
-24.7%
-1.3pp
-5.7%
—
—
1.6%
11.7%
+0.4pp
10.6%
36.1%
+1.1pp
—
—
0.2%
-83.2%
-3.5pp
425.0
41.1
9.7%
7.0
-1.0
—
147.0
-12.0
—
435.0
23.7
5.4%
528.0
26.9
5.1%
116.0
2.3
2.0%
188.0
6.2
3.3%
57.0
3.3
5.8%
860.0
64.8
7.5%
535.0
25.9
4.8%
263.0
-9.7
—
188.0
6.2
3.3%
57.0
3.3
5.8%
-53.0
-43.5
1,324.0
62.4
4.7%
579.0
28.1
4.9%
1,850.0
47.0
2.5%
3.2%
7.5%
+0.3pp
-1.1%
25.2%
+1.0pp
2.7%
-74.6%
+11.2pp
6.6%
-19.7%
-1.1pp
-1.4%
-4.5%
-0.2pp
—
—
0.9%
267.2%
+1.8pp
Revenue
Core earnings
CE margin
Revenue
LHT
Core earnings
CE margin
Revenue
LBT
Core earnings
CE margin
Revenue
D&R
Core earnings
CE margin
Revenue
H&S
Core earnings
Consolidation
adjustments
and other
CE margin
Revenue
Core earnings
Revenue
LIXIL Group
Core earnings
CE margin
Financial Policy
The Group’s dividend policy is to maintain a dividend payout ratio
of at least 30% on a consolidated basis. Setting investment
efficiency and safety indices as Key Goal Indicators (KGIs), the
Group is aiming to improve both investment profitability and
financial strength, and endeavoring to enhance corporate value as
well as provide stable returns to shareholders.
LIXIL Group plans to issue dividends in FYE2020 of ¥70.0 per
share, which is the same as in FYE2019.
Dividends per share / Dividend payout ratio / Dividend payout ratio
after adjustment for amortization of goodwill
(¥)
Dividends per share
Dividend payout ratio
Dividend payout ratio after adjustment
for amortization of goodwill
100
75
50
25
0
136%
70
70
65
55
76%
61%
60
60
60
80%
53%
41%
34%
2014/3
2015/3
2016/3
2017/3
2018/3
2019/3
2020/3
(forecast)
23
BUSINESS STRATEGY AND RESULTS
Review of Operations
(Fiscal Year Ended March 31, 2019)
LWT
LHT
LBT
D& R
H& S
LIXIL Water Technology
LIXIL Housing Technology
LIXIL Building Technology
Distribution & Retail Business
Housing & Services Business
Global Manufacturing and
Sales Sites
Revenue
Revenue
Revenue
Revenue
Revenue
Number of factories
¥ 833.1
billion
44.7%
¥ 540.8
billion
29.0%
¥ 256.0
billion
13.7%
¥ 176.4
billion
9.5%
¥ 57.9
billion
3.1%
¥60.2 billion
Core earnings
¥20.7 billion
Core earnings
– ¥38.1 billion
32,868 people
Employees
18,820 people
Employees
7,461 people
Core earnings
Employees
¥7.8 billion
Core earnings
1,357 people
Employees
¥3.5 billion
1,374 people
103
sites
Japan
43
Overseas
60
Americas Europe
Africa
Asia
Pacific
Japan
LWT
LHT
LBT
11
̶
2
4
̶
5
4
̶
̶
22
8
4
20
23*
̶
* Seven of the LHT factories also manufacture commodities
for LBT.
¥19.7 billion
¥36.9 billion
R&D
CAPEX
¥7.3 billion
¥20.0 billion
R&D
CAPEX
¥1.5 billion
¥3.7 billion
CAPEX
¥11.2 billion
CAPEX
¥1.1 billion
Number of showrooms
Core earnings
Employees
R&D
CAPEX
Direct customers
Dealers
Sales agencies
Building materials
wholesalers
Homebuilders
Competitors
YKK AP
Sankyo Tateyama
House manufacturers
Construction companies
Architectural firms
Developers
Direct customers
Construction companies
Architectural firms
Competitors
YKK AP
Yuanda
Local companies
Direct customers
Direct customers
Housing franchise business:
Homebuilding franchise members
Housing site ground inspection business:
Construction companies and
real estate transaction agents
Real estate brokerage franchise business:
General consumers
General consumers
Construction professionals
Competitors
DCM Japan Holdings
Cainz
Komeri
Kohnan Shoji
Direct customers
Dealers
Sales agencies
Construction companies
Architectural firms
Developers
Wholesalers
Building material
trading companies
Volume retailers
General consumers
Competitors
Kohler
Roca
Hansgrohe
Masco (Delta)
Fortune Brands (Moen)
Geberit
TOTO
Takara Standard
Cleanup
Panasonic
24
127
sites
Japan
103
Overseas
24
Americas
Europe
Asia Pacific
Japan
1
9
14
103
Domestic home reform shops
and reform network members 12,354 stores
Domestic home center
stores (D&R)
Domestic homebuilding
franchise members (H&S)
96 stores
194 stores
25
BUSINESS STRATEGY AND RESULTS
Review of Operations by Segment
LIXIL Water
Technology
(LWT)
Market Conditions
The global plumbing fixtures and fittings market is
worth ¥5 trillion today and forecast to keep growing.
Overseas, European and North American markets
have been buoyant recently against a backdrop of
monetary easing, while the world’s growing population,
which is expected to reach 8.5 billion people in 2030,
is driving new growth. In particular, the growing middle
class in China and increasing need for energy and
water conservation technology in Europe are among
trends expected to increase demand for water
technology products in the future.
In Japan, the number of new housing starts has
been decreasing over the long term. However, the
renovation market, while small, shows potential for
significant growth. Considering both new housing starts
and the renovation market, demand for plumbing
fixtures and fittings in Japan is expected to remain stable
in the medium term.
Key Strengths
Among LIXIL Water Technology’s (LWT) core strengths
is its portfolio of powerful, industry-leading brands
which include GROHE, American Standard, INAX, and
SATO. LWT’s brands are highly recognized, culturally
relevant and distinctive, and leaders of the water
technology and sanitaryware markets. Combined,
these brands cover all bathroom product categories
and all market segments, from the luxurious to the
basic ends of the spectrum, while catering to different
lifestyle preferences and local tastes.
Leveraging this unique strength, LWT is now
developing its business in emerging markets in
particular, where the middle class is expected to grow. It
is also honing its competitive edge by enhancing cross-
regional and cross-brand synergies, which combined
with improved production efficiency, will enable LWT to
GROHE
Bathroom Collections
Full bathroom solution
SWOT analysis
Strengths
Highly regarded brands across all regions
A product portfolio spanning all market segments, from the luxurious
to the basic ends of the spectrum
Sales network in more than 150 countries
Global supply chain network
Opportunities
Higher demand from population growth and increasing income levels
around the world
Development of differentiated products for the global market by
transferring and consolidating technology and design within LWT,
based on development of product platforms using Japanese technology
Increasing demand for products catering to increased environmental
and health awareness
Growing renovation market in Japan
Weaknesses
Threats
Downward pricing pressure
Business structure not fit for future growth
Underinvesting in marketing and brand management
respond more flexibly to global demand. In this context,
the core growth driver will be transferring advanced
technology developed in Japan to overseas markets, and
creating attractive products that harness designs
representative of each brand and local tastes.
Key Highlights for FYE2019
In April, LIXIL’s Japan business changed its
organization structure to integrate product
development, production, and sales functions. This
will enable it to accelerate its business cycle and more
effectively reflect market needs. The Japan business
also introduced a new trading framework, a
mechanism to clarify pricing structures and definitions
of roles between LIXIL and its business partners,
which helps to specify the responsibilities of each
business, enhance information sharing, and improve
overall operational efficiency.
Sales of products that have resulted from synergies
within LIXIL Group, consisting mostly of products that
use technology developed in Japan but with regionally
customized designs, and new businesses accounted
for 74% of LWT’s overseas sales growth.
LWT opened new flagship showrooms in major cities
in China and Vietnam to capture strong demand in
economically developing markets in Asia.
In order to strengthen consumer-centric product
development, LIXIL opened a new R&D hub in
Shanghai. This R&D hub will deal with all of LIXIL’s
bathroom and kitchen brands present in Asia.
Disruption of sales channel due to changes in distribution model
Decreasing new housing starts in Japan
Increase in labor cost and material prices
Shortage of skilled labor
Economic deterioration
Rapid commoditization due to new business models
Rise of highly cost-competitive manufacturers from developing
countries
LWT introduced business models such as “digital
water management,” which has enabled tie-ups with
multiple insurance companies in Europe, establishing
a new growth market.
Key Initiatives in FYE2020
Accelerate product development process for synergized
products and launch in markets outside Japan
Foster cross-regional collaboration by empowering each
region with access to LIXIL’s combined tangible and
intangible resources in order to improve capital
investment efficiency and strengthen cost competitiveness
Transform business structure in Japan market to suit its
mature economy, strengthening cost competitiveness
Revenue
(¥ billion)
1,000
(¥ billion)
1,000
Japan
Japan
Overseas
Overseas
827.9
827.9
833.1
833.1
860.0
860.0
800
800
600
600
400
400
200
200
Japan
Japan
Overseas
Overseas
64.8
64.8
60.2
60.2
Core earnings
(¥ billion)
100
(¥ billion)
100
80
80
73.8
73.8
60
60
40
40
20
20
0
0
2018/3
2018/3
2019/3
2019/3
2020/3
(Forecast)
2020/3
(Forecast)
0
0
2018/3
2018/3
2019/3
2019/3
2020/3
(Forecast)
2020/3
(Forecast)
26
27
BUSINESS STRATEGY AND RESULTS
Review of Operations by Segment
LIXIL Housing
Technology
(LHT)
SWOT analysis
Strengths
Opportunities
Top market share in residential window sashes and exterior products
in Japan
Extensive nationwide sales and distribution network in Japan
Technologies and production facilities in Japan and Asian countries
covering a wide spectrum of capabilities, from aluminum smelting
and casting to manufacturing end products
Wide range of products and product categories enabling coordination
for the entire home
Increasing need for highly functional products due to increasing
awareness of environmental and health factors among consumers in
Japan
Growing demand for new products and services suitable for Japan’s
aging society
Increasing need for differentiated products due to population growth
and rising income levels in Asian markets
Expansion of renovation market in Japan
Weaknesses
Threats
Difficulty in developing differentiated products
Commoditization of products
Profit and loss structure vulnerable to change in external factors such
as material price / demand fluctuations
Decreasing new housing starts in Japan
Increase in labor cost and material prices
Decrease in housing-related spending due to stagnant income levels
in Japan
TOSTEM LW
Market Conditions
Key Highlights for FYE2019
In Japan, the number of new housing starts has been
decreasing over the long term as a result of the
country’s aging and shrinking population. However, the
size of the housing components market is expected to
remain the same in the medium term. In addition to
government initiatives aimed at stabilizing demand
around the consumption tax hike scheduled for
October 2019, measures are also being taken by
housing material manufacturers to stimulate demand
for home renovation.
Overseas, we anticipate demand for housing
products to grow in the Asia region, which enjoys more
stable and positive economic growth, an increasing
population, and rising income levels.
Key Strengths
The core commercial strengths of LIXIL Housing
Technology (LHT) are its wide variety of products, the
ability to coordinate these products, its high market
share in each product category, and its robust
nationwide sales network. Leveraging these well-
established strengths, LHT provides differentiated and
high value-added products. It is now strengthening its
competitiveness by innovating new designs and
technologies, enhancing efficiencies in product
development and manufacturing processes, and
establishing business alliances with other companies.
In April, LIXIL’s Japan business changed its organization
structure to integrate product development, production,
and sales functions. The Japan business also introduced
a new trading framework, a mechanism to clarify pricing
structures and definitions of roles between LIXIL and its
business partners, which helps to specify the
responsibilities of each business, enhance information
sharing, and improve overall operational efficiency.
In production, LHT proceeded to reduce stock keeping
units (SKUs), standardize parts, and unify core
product platforms, further enabling the generalization
of production lines.
In terms of sales, LHT accelerated preparations to
launch high value-added products as part of its
medium- to long-term strategy. In FYE2019, LHT
launched TOSTEM LW, a new design concept where
the window’s frame cannot be seen from inside the
house. In addition, we formed a business alliance with
SKY-FRAME AG (Switzerland), the world’s leading
brand of luxury windows.
LHT launched TOSTEM GRANTS, an innovatively
designed, high-performance window in Southeast Asia.
In terms of new businesses, we established a joint
venture with a subsidiary of TEPCO to offer solar
power systems with little upfront financial burden for
consumers, leading to a reduction in their monthly
electricity bills. In addition, LHT launched Life Assist,
a combination of IoT housing products and services.
This enables building components such as doors as
well as electrical appliances to be operated with smart
speakers and smartphone apps.
Key Initiatives in FYE2020
Transform business structure in Japan to suit its mature
economy, enabling it to be more resistant to changes in
the external business environment
Reduce SKUs, adopt platform approach for new
product development, and optimize production lines
to improve capital investment efficiency and
strengthen cost competitiveness
Optimize supply chains to strengthen cost competitiveness
Develop new markets, businesses, and products for
the renovation market and highly affluent consumers
inside and outside of Japan
LIXIL Carport SC
Revenue
(¥ billion)
(¥ billion)
1,000
1,000
Japan
Japan
Overseas
Overseas
535.2
535.2
540.8
540.8
535.0
535.0
800
800
600
600
400
400
200
200
0
0
Core earnings
(¥ billion)
(¥ billion)
40
40
Japan
Japan
Overseas
Overseas
30
30
27.5
27.5
25.9
25.9
20.7
20.7
20
20
10
10
0
0
-10
-10
2018/3
2018/3
2019/3
2019/3
2020/3
2020/3
(Forecast)
(Forecast)
2018/3
2018/3
2019/3
2019/3
2020/3
2020/3
(Forecast)
(Forecast)
28
29
BUSINESS STRATEGY AND RESULTS
Review of Operations by Segment
LIXIL Building
Technology
(LBT)
Market Conditions
Market conditions for building construction in Japan
are expected to remain stable in the medium term,
even after the Tokyo 2020 Olympic & Paralympic
Games. This is due to regional revitalization initiatives
led by the Government of Japan, the renewal of
metropolitan areas and train stations, and the upcoming
World Expo to be held in Osaka in 2025. In addition,
products that satisfy the criteria for Net Zero Energy
Buildings (ZEB)* will provide new added value for
energy conservation and climate change mitigation
going forward.
Overseas, the increase in urban populations and
greater demand for energy conservation are driving
growth. The value of the global curtain wall market,
estimated at 18.4 billion in 2017, is projected to grow
to 28 billion by 2021. The majority of this growth is
anticipated to come from the APAC region, which
currently represents 39% of the market, followed by
North America with 28%, Europe with 24%, and the
rest of the world representing 9%.
*A building that aims to generate the energy it consumes
Key Strengths
LIXIL Building Technology Japan (LBT-J) has the largest
market share in high-rise building curtain walls, and
high market share in window sashes for low-rise stores,
condominiums, and buildings with environmental
considerations.
As a worldwide leader of curtain wall solutions,
recognized for some of the most iconic buildings in the
world, Permasteelisa Group brings its extensive know-
how, expertise, and unique engineering capabilities to all
projects, in particular when dealing with special features
buildings. By working closely with architects and
designers from the earliest planning phase and
leveraging a rigorous quality control system,
Permasteelisa provides design and construction solutions
to match the special requirements of each project.
Key Highlights for FYE2019
In August 2017, LIXIL Group decided to transfer all
shares of Permasteelisa, which comprises LBT’s
overseas business, to a Chinese company that was
deemed to have high affinity with Permasteelisa.
However, in October 2018, the Committee on Foreign
Tokyo Midtown Hibiya
SWOT analysis
Strengths
Technical competences and know-how
Global presence and organization
Strong relationships with customers backed by historical performance
Flexible on-site response, engineering skills, and technology
Cost competitiveness realized by leveraging overseas factories
Opportunities
Increasing need for high insulation and earthquake-resistant products
in Japan
Government initiatives for revitalization of local areas in Japan
Intercompany collaboration for better performance
Weaknesses
Threats
Lower production efficiency due to build-to-order manufacturing
Difficulty differentiating popular building products from competitors
in Japan
Overseas projects typically have a 3- to 5-year construction period,
making them vulnerable to changing economic conditions and property-
related developments, and are therefore challenging to manage
Increase in labor cost and material prices
Labor shortage in the construction industry
Financial stability of upstream and downstream business partners
overseas
Economic slowdown due to trade conflicts or political changes
(e.g. Brexit)
Investment in the United States (CFIUS) notified us that
we are unable to secure approval on the transfer of
shares. As a result, we were unable to sell the company.
For Permasteelisa, the profitability of projects centered
on its North American business has been deteriorating.
Subsequently, all of Permasteelisa’s projects were
reviewed in detail to determine estimated total
construction costs. Reviewing this estimate, LIXIL Group
recorded allowance for losses, etc., expected to occur in
the future. Based on the review process, we developed
and are now executing a plan to recover the profitability
of Permasteelisa’s business.
In Japan, we developed and launched new window
sashes for buildings such as PRO-SE BFG, which has
been certified as fire-resistant equipment.
LBT strengthened sales activities for PRESEA-H, an
environmentally friendly window sash for ZEB.
Key Initiatives in FYE2020
Focus on improving cash flows and profitability by
steadily executing plan to recover the profitability of
Permasteelisa
Expand lineup of high-performance window frames
with environmentally friendly functions
Strengthen production controls for larger projects to
stabilize daily production level
Enhance productivity through automation and
consolidation of production lines in factories
Japan
Japan
Overseas
Overseas
Core earnings
(¥ billion)
(¥ billion)
50.0
50.0
Japan
Japan
Overseas
Overseas
Revenue
(¥ billion)
(¥ billion)
500
500
400
400
300
300
271.5
271.5
256.0
256.0
263.0
263.0
200
200
100
100
0
0
2018/3
2018/3
2019/3
2019/3
2020/3
2020/3
(Forecast)
(Forecast)
37.5
37.5
25.0
25.0
12.5
12.5
0
0
-12.5
-12.5
-25.0
-25.0
-37.5
-37.5
-50.0
-50.0
(+4.7)
(+4.7)
(+3.6)
(+3.6)
(+2.3)
(+2.3)
(-0.1)
(-0.1)
(-12.0)
(-12.0)
(-41.7)
(-41.7)
2018/3
2018/3
2019/3
2019/3
2020/3
2020/3
(Forecast)
(Forecast)
30
31
BUSINESS STRATEGY AND RESULTS
Review of Operations by Segment
Distribution &
Retail Business
(D&R)
The first SUPER VIVA HOME in Fukuoka opened in November 2018 (Okagaki town)
GL HOME WoodsHill
Housing &
Services Business
(H&S)
SWOT analysis
Strengths
High ratio of revenue from renovation-
related goods
High ratio of revenue from large
metropolitan areas where population is
concentrated and customers can be
expected
Business development leveraging
synergies with renovation business and
developer business
Opportunities
Decrease in local distributors of building
materials
Increase in installers with multiple trade
skills for renovation work
Growing market for distribution and
renovation services for existing housing
stock in Japan
Weaknesses
Threats
Longer time for hiring and training
people compared to time required to
open stores
Decrease in customers due to shrinking
population in Japan
Changes in consumers’ purchasing
behavior due to rise of e-commerce
Revenue
(¥ billion)
(¥ billion)
250
250
Core earnings
(¥ billion)
(¥ billion)
10
10
173.5
173.5
176.4
176.4
188.0
188.0
7.8
7.8
6.9
6.9
6.2
6.2
8
8
6
6
4
4
2
2
0
0
2018/3
2018/3
2019/3
2019/3
2020/3
2020/3
(Forecast)
(Forecast)
2018/3
2018/3
2019/3
2019/3
2020/3
2020/3
(Forecast)
(Forecast)
200
200
150
150
100
100
50
50
0
0
32
Key Strengths
The Distribution & Retail Business (D&R) is unique
within the LIXIL Group; it is the only business with
general consumers as its core customer base. Catering
to their needs, D&R offers a wide array of housing- and
lifestyle-related products and materials, as well as
construction and other services, through its home
center business, LIXIL VIVA Corporation.
In recent years, the number of specialized local
distributors and small wholesalers has continued to
decrease due to business succession challenges, etc. In
parallel, the number of workers skilled in multiple trades
is increasing, especially in renovation work. Under these
changing circumstances, the core strengths of D&R lies
in offering a wide range of goods at its large stores,
including materials and equipment for renovation work,
enabling professionals to procure all the necessary
materials in one place.
Key Highlights for FYE2019
Since LIXIL VIVA Corporation’s initial public offering in
April 2017, it has accelerated opening new stores. D&R
newly opened seven stores, achieving its FYE2019 target.
D&R now operates 96 stores as of March 31, 2019.
Revenue from sales of goods for renovation reached
39.6%, which was an improvement of 1.8 percentage
points from the previous year. D&R aims to increase
this ratio to 50% in the medium to long term as the
renovation market in Japan grows.
Key Initiatives in FYE2020
Continue to drive initiatives aimed at increasing the ratio
of renovation goods to 50% in the medium to long term
Accelerate opening of new stores to gain professional
customers in new regional areas (target of seven new
stores in a year)
SWOT analysis
Strengths
Complementary synergies with other
businesses in the LIXIL Group
Nationwide franchise network for housing
and real estate in Japan
Opportunities
Increasing need for management support
and support services due to labor
shortage in the housing industry
Growing market for house distribution
and renovation services for existing
housing stock in Japan
Weaknesses
Threats
High ratio of revenue for new housing-
related services
Decreasing new housing starts in Japan
Revenue
(¥ billion)
(¥ billion)
100
100
80
80
60
60
40
40
20
20
0
0
57.9
57.9
57.0
57.0
52.3
52.3
Core earnings
(¥ billion)
(¥ billion)
5
5
2.5
2.5
4
4
3
3
2
2
1
1
0
0
2018/3
2018/3
2019/3
2019/3
2020/3
2020/3
(Forecast)
(Forecast)
2018/3
2018/3
2019/3
2019/3
2020/3
2020/3
(Forecast)
(Forecast)
3.5
3.5
3.3
3.3
Key Initiatives in FYE2020
Key Strengths
The Housing & Service Business (H&S) offers a wide
variety of services that complement the LIXIL Group’s
core product businesses, including the development of
franchise chains for homebuilders and real estate
businesses, ground inspection and improvement
services, financial services, business management
support services, etc. By collaborating with other
businesses in the LIXIL Group, H&S enables the LIXIL
Group to provide its consumers with added value
throughout every stage of their lives.
Key Highlights for FYE2019
H&S drove initiatives to expand its existing businesses
and new businesses (such as in the secondhand and
renovation market) in response to the decreasing
number of new housing starts over the medium and
long term in Japan. As a result, the revenue
composition for businesses not related to new housing
starts reached 38.7% in FYE2019, which was an
improvement of 4.0 percentage points from the
previous year.
Continue to drive initiatives to expand its businesses
in new fields (such as the secondhand and renovation
markets) in order to achieve the medium-term target
of 50% revenue composition from existing housing-
related business
Due to the growing labor shortage in the housing
industry, strengthen synergies with manufacturing
businesses in the Group, especially in order to expand
support businesses, while enhancing cross-selling to
enrich proposals for customers
33
CR STRATEGY AND RESULTS
Corporate Responsibility Chairperson Message
Corporate Responsibility Strategy
Bangladesh, providing us with the
confidence that social enterprises
can be viable and self-sustaining. We
also entered into a new partnership
with UNICEF called “Make a Splash!
Toilets for All,” aiming to transform
the lives of children around the world
by providing them with access to
basic sanitation services. On top of
this, we launched a new partnership
with the Bill & Melinda Gates
Foundation to pilot a new technology
in two markets that could become
the world’s first “reinvented toilet” for
household use.
As for Water Conservation &
Environmental Sustainability, we
made progress in our contribution to
the environment by switching to
100% renewable energy in our
showroom in Kyoto and at INAX
MUSEUMS, the first step in our
journey to achieve zero CO2 emissions
from the use of electricity. In our
TOSTEM plant in Thailand, we also
succeeded in eliminating landfill
waste by collaborating with local
industrial waste disposal operators.
On the topic of Diversity &
Inclusion, FYE2019 marked the
launch of a fully remodeled universal
kitchen system in Japan called
Well Life, designed for people in
wheelchairs and those who prefer to
sit when cooking. LIXIL’s Universal
Design concept is a core part of our
diversity agenda, and we continue to
focus on making things that matter to
the people who use our products,
while promoting it through our
advocacy initiatives.
I am pleased to report that the
consistent progress we have made
over the last three years to deliver on
our new CR strategy is gaining global
recognition. LIXIL won “Innovation of
the Year” at the Ethical Corporation’s
Responsible Business Awards for our
innovative SATO line of products and
sanitation initiatives. Similarly, our
work to provide innovative, safe, and
affordable access to sanitation to
communities around the world was
recognized at the second Japan SDGs
Awards, where LIXIL was awarded
the Deputy-Chief’s Award from the
Minister of Foreign Affairs.
Furthermore, we earned a place
in CDP’s prestigious Water Security A
List, reflecting our leadership in
sustainable water management.
We also continued to be listed on
the Dow Jones Sustainability Asia
Pacific Index, FTSE4Good Index, and
MSCI Japan Empowering Women
Select Index.
Alongside this recognition, how
LIXIL makes a difference to people
around the world continues to be a
source of growing pride among our
employees. We are pleased to see
this pride propel our colleagues’
desire to participate however they
can, demonstrated by close to one
thousand employees signing up for
the “Team Splash!” initiative, which
invites employees to make donations
to the “Make a Splash! Toilets for All”
partnership. Also accelerating in
momentum is LIXIL Community Day,
inaugurated in FYE2018, which
doubled participation in FYE2019 to
6,900 employees across 23
countries. This underscores the
strong purpose-driven culture we are
building at LIXIL.
Looking ahead, LIXIL has
declared its support for the Task
Force on Climate-related Financial
Disclosures. We are also in the
process of updating LIXIL’s
environmental vision to contribute to
a sustainable global environment in
the long term. We look forward to
sharing in the coming months how
we plan to further our commitments
to help protect our planet and
contribute to society, including
strengthening our disclosure of
climate-related financial information
as well as our broader efforts to
deliver on our CR commitments.
Jin Song Montesano
Executive Officer and Senior Managing Director, Public Affairs,
Investor Relations, External Affairs, Corporate Responsibility, and
Human Resources, Chief Public Affairs Officer, and
Chief People Officer
Progressively
Achieving
the Goals of
LIXIL’s CR Strategy
LIXIL’s higher purpose as a company
is to make better homes a reality for
everyone, everywhere, and Corporate
Responsibility (CR) is at the core of
this endeavor. We are delighted to
report that we have continued to
reach new heights through our CR
activities in FYE2019, making
progress in all three strategic pillars
as well as enhancing global
recognition of our initiatives.
With regard to improving Global
Sanitation & Hygiene, we were
excited to see that our SATO social
business turned profitable in
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.
Leading with three strategic pillars
Global Sanitation &
Hygiene
Water Conservation &
Environmental
Sustainability
Diversity &
Inclusion
“100 Million People”
“Net Zero”
“Inclusive for All”
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
By 2020, establish the culture of
diversity and inclusion within our
organization and with all employees
By 2030, ensure all products and
services* are based on LIXIL’s Universal
Design concept
*Scope: Products and services in Japan (as of August 2019)
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
Our Approach to CR
In order to realize LIXIL CORE (“The Group’s superior
products and services contribute to improving people’s
comfort and lifestyles”), we recognize the need to pursue
sustainable innovation, achieve profit growth that
contributes to the quality of people’s lives, and meet the
evolving expectations of our stakeholders.
In markets around the world, Environmental, Social
and Governance (ESG) investing is becoming more
mainstream, as is the understanding that ESG factors
impact corporate value in the medium and long term.
For companies, it is essential that corporate strategies
are connected to environmental and social initiatives.
Within this context, LIXIL aims to meet its social
responsibilities and increase the trust of its stakeholders.
We conduct CR activities based on 16 identified material
issues (see pages 36-37) to build the foundations of
sustainable corporate growth. Governance, Fair Business
Practices, Human Rights, Labor Practices, Quality and
Satisfaction, Supply Chain, and Stakeholder Engagement
form the foundations of our CR activities. Tackling these
material issues helps us to meet our social responsibility,
build credibility with stakeholders, and strengthen the
LIXIL brand. At the same time, addressing these material
issues contributes to risk management by helping to
reduce reputational risk.
We consider three social material issues as our
highest priorities and will invest our core Group strengths
to help solve these challenges. We call these our three
strategic pillars: Global Sanitation & Hygiene; Water
Conservation & Environmental Sustainability; and
Diversity & Inclusion. We believe these three fields offer
the greatest opportunities for long-term growth, and will
form the foundation for sustainable growth.
34
35
CR STRATEGY AND RESULTS
LIXIL’s Material Issues
For further details regarding the Group’s material issues, and CR activities and
outcomes, please refer to the Sustainability section of our corporate website.
https://www.lixil.com/en/sustainability/
CR Management Process and Materiality Selection Process
Management needs to show leadership and collaborate with our core technology units to swiftly and appropriately tackle material issues.
That is why the Corporate Responsibility Committee, which takes the lead in CR initiatives, is made up of officers from each functional division at
LIXIL Group’s head office and representatives from each technology business unit. The results of CR Committee discussions are, as necessary,
approved by the LIXIL Group’s Board of Directors and Executive Officers Committee. The initiatives, once adopted, are then implemented by each
functional division at the direction of the officer responsible for each initiative. The materiality selection process, as per the diagram on the right,
enabled us to identify the material issues that matter the most to our stakeholders and our Group.
Selection process of material issue
Selection
Assessment
Validation and approval
Social issues were selected by considering
global trends, issues particular to LIXIL Group’s
industrial fields, and the expectations of LIXIL’s
stakeholders – such as NGOs, business
partners, clients, shareholders, and suppliers.
The level of impact of each selected issue was
assessed by considering both the Group’s
medium- to long-term business opportunities
and the viewpoints of our stakeholders.
The validity of selected material issues were
confirmed by officers in relevant business
functions, and the CR Committee approved
the final list of material issues.
LIXIL Group’s
material issues
Action plan and progress for each material issue
Material issues
Target
FYE2021 targets
FYE2019 progress
Corporate governance
Establish governance structure that meets global
standards
Reorganize and implement the Group’s governance rules and procedures,
and clarify rules, approval processes, etc.
Promoted policies to strengthen governance and compliance at Group companies (executive officer-related policies, training of Presidents, etc.)
based on the findings of a third-party investigation into incidents at Group companies
Governance
Compliance
Develop a comprehensive and effective
compliance system across the Group
Group-wide ratio of basic training and acknowledgment of Group Code of
Conduct completed: 100%
Establish a system to operate and improve compliance structure,
and ensure appropriate allocation and effective use of resources
Utilize the same whistle-blowing system in Japan and overseas, and
publicize important compliance indicators such as the number and
summary of reported concerns
Ratio of basic training completion and Code of Conduct acknowledgement across the Group: 96.1% (96% Japan, 96.3% overseas)
Target was unachieved due to variations in completion of training by region and rank. Training to be continued in FYE2020
Awareness of the whistle-blowing systems in Japan: 63.3%; education and awareness-raising activities are ongoing
Regional compliance events were held from October to November; educational and awareness-raising activities were implemented
On track
Needs attention
Progress
Risk management
Establish and operate a Group-wide enterprise risk
management system
Adoption rate of crisis management system in Group companies: 100%
Adoption rate of crisis management system in Group companies: 100%
Achieved timely escalation to Group HQ for crisis events that occurred outside of Japan; created a handbook to disseminate initial response and escalation rules for work sites
Fair Business
Practices
Anti-corruption
Develop an effective anti-corruption system across
the Group
Human
Rights
Human rights due
diligence
Appropriately manage human rights considerations
that fall within the scope of the Group’s operational
influence across the entire value chain
Adoption rate of global policies in Group companies: 100%
Completion ratio of compliance-related education and training across the
Group: 100%
Establish a plan to implement human rights due diligence in Japan and
expand it globally
Diversity and
equal opportunity
Secure highly competent people by respecting
diversity across the Group
Ratio of women among recent graduate recruits (LIXIL Corporation, Japan):
30% or greater
Number of female participants in stage 3 of the Talent Acceleration Program
(TAP) for next-generation leaders (LIXIL Corporation, Japan): 20% or greater
Labor
Practices
Occupational
health and safety
Establish the foundation of an Environment, Health
and Safety (EHS) management system across the
Group
Operational coverage of the Environment, Health and Safety (EHS)
management system across the Group: 100%
Working environment
Build a worker-friendly environment for all
employees
Ratio of employees who rate their work-life balance as favorable in the
Group-wide employee awareness survey: 46% (10% increase from the
previous survey)
Talent development
Promote more employee-driven human resource
developments to encourage a bottom-up corporate
culture
Cumulative total number of participants in the Talent Acceleration Program
(TAP) for next-generation leaders: 1,300 (LIXIL Corporation, Japan)
Coverage ratio of the basic training program for third-year employees:
100% (LIXIL Corporation, Japan)
Quality and
Satisfaction
Environment
Product safety
Eliminate product accidents
The number of serious product accidents in the entire Group: 0
Climate change
mitigation and
response
Water conservation
Promote efficient use of energy in business
activities and the provision of products and
services that contribute to climate change
initiatives
Promote efficient use of water in business activities
and the provision of products and services that
contribute to water conservation
Expand CO2 emissions reduction attributable to Group products and services
by 1.36 times compared to FYE2016
Reduce CO2 emissions from Group activities by 8% compared to FYE2016
Reduce CO2 emissions intensity for LIXIL transportation
by 5% compared to FYE2016
Adoption rate of global policies at Group companies: 100% (adoption rate at each company is unconfirmed)
Completion ratio of compliance-related education and training across the Group: target unachieved (varies by region and policy)
Compliance violations: 0
Reconsidered the Human Rights Due Diligence Task Force’s global development plan; starting from next fiscal year, gradually expand from Japan to overseas regions
Ratio of female university undergraduate and graduate students recruited: 33.2%
Ratio of female managers: 5.72%
Implementing measures to increase the number of prospective female managers
(register 30% or more general employees with upper level qualifications to the manager candidate training plan and other plans)
Female participation rate in stage 3 of the Talent Acceleration Program (TAP) for next-generation leaders: 29.2%
Coverage of occupational health and safety performance data (based on number of employees): 100%
Regular internal audits of the occupational health and safety management system and its operational status at each business
Employee awareness survey only completed by some LIXIL businesses (such as LTW EMENA and Housing and Services in Japan) in FYE2018.
No questions on this topic in EMENA’s FYE2018 survey
N / A
Participants in the Talent Acceleration Program (TAP) for next-generation leaders: 117; cumulative participants: 1,195 (LIXIL Corporation, Japan)
Coverage ratio of the basic training program for third-year employees: 100%
First-year follow-up training: 218
Second-year communications training: 183
Third-year communications training: 139
Serious product accidents across the Group: 8
Product accident meetings were held for serious product accidents. The necessity of countermeasures was decided on a case-by-case basis
Implemented product improvements and raised awareness of correct product use
CO2 reduction of all LIXIL products and services: 1.21 times FYE2016 (61,577 million tons)
CO2 emissions Group-wide: 3.2% increase compared to FYE2016 (4.5% reduction of carbon intensity per economic output)
CO2 emission intensity of transportation of LIXIL products in Japan: 1.1% improvement compared to FYE2016
Improved water-use efficiency at key water-risk management sites
Promoted initiative aimed at reducing water use, reducing wastewater, and expanding water reuse at six key bases
Sustainable use of
resources
Promote the sustainable use of raw materials from
procurement to disposal
Recycling rate of waste products from LIXIL facilities:
95% (Japan, Europe), 66% (Asia), 40% (North America)
Waste product recycling rate: 95% (Japan, Europe), 62% (Asia), 34% (North America)
Supply Chain
Supply chain management
Identify suppliers’ CR risks and establish
mechanisms to respond accordingly
Increase the coverage (based on purchase price) of the Group-wide supplier
CR survey to 90% in Japan, 60% overseas; and the compliance rate to 90%
Coverage rate (based on purchase price) of Group-wide supplier survey: 90% (483 highest purchasing suppliers). Average compliance rate 93.5% (Japan)
Improvement rate after a follow-up visit to low-performing suppliers was 100%
Stakeholder
Engagement
36
Contribute to global
sanitation and hygiene
Help improve global sanitation and hygiene
through our business
Cumulative beneficiaries: 100 million
Cumulative shipments of more than 2.5 million units of SATO toilets (12.5 million cumulative beneficiaries).
In the past year, shipped SATO toilets to 10 new countries, increasing the total to more than 25 countries
R&D to solve
social problems
Help solve the issues experienced by the elderly
and people with disabilities through our products
Research surveys via digital and other means: 10
Research surveys via digital and other means: 5
Academic presentations on elderly people’s bathing accidents (presented in conjunction with a university at the Japanese Society of Biometeorology conference and at other events)
Verification of overnight observations at elderly facilities using sensors in collaboration with Z-Works Accelerator Programs from January 2019
37
CR STRATEGY AND RESULTS
Global Sanitation & Hygiene
Connection to
UN Sustainable
Development Goals
Global Sanitation &
Hygiene
Critical Social Issues
LIXIL’s Response
An estimated 2 billion people around the world do not
have access to basic sanitation. Poor hygiene and
sanitation puts lives at risk, and every day an estimated
800 children under the age of five die from diarrheal
diseases caused by lack of clean water and unsanitary
living conditions. The lack of toilets at school can be a
barrier for girls continuing with their schooling after
reaching puberty, and open defecation can expose them
to serious threats such as violence or harassment.
In total, global economic losses caused by poor
sanitation are estimated to have reached US$223 billion
in 2015*1.
The second target of UN Sustainable Development
Goal 6 aims to solve this global challenge: “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.” Overcoming the global sanitation
challenge, however, will require the collaboration of a
range of stakeholders from various sectors such as
governments, NGOs, and private companies.
LIXIL has pledged to improve the livelihood of 100
million people through sanitation and hygiene solutions
by FYE2021. To reach this goal, LIXIL will continue to roll
out its SATO Toilet Systems in developing countries,
while conducting further research and development in
its Micro Flush Toilet System, which saves water in urban
environments, and the Portable Toilet System, which can
efficiently and hygienically facilitate the collection and
treatment of human waste in informal urban settlements.
In July 2018, LIXIL and UNICEF also formed an
innovative global partnership called “Make a Splash!
Toilets for All.” This partnership aims to utilize our
combined expertise in developing sanitation markets
globally. LIXIL is developing and marketing products to
tackle the global sanitation challenge, while UNICEF is
working to expand demand for toilets in target countries
by raising awareness and leading publicity activities.
Additionally, LIXIL formed a partnership with the Bill
& Melinda Gates Foundation in November 2018, aiming
to develop a “reinvented toilet” that does not require
connection to sewers or water lines.
Achievements and Challenges
The global sanitation challenge will require a multi-
stakeholder approach to solve. That is why LIXIL has
been working together with numerous specialist
organizations, NGOs, and business partners to make the
most of our various strengths.
The SATO business is based on a grassroots social
enterprise concept. Its products are being produced in
six Asian and African countries, and approximately 2.5
million have been delivered to more than 25 countries
so far. This equates to improving the sanitation and
hygiene of approximately 12.5 million people*2.
For the first time, the SATO business also became
profitable in Bangladesh in FYE2019. SATO Toilet
Systems are designed to be affordable and, therefore,
require a certain volume of sales to break even. The
SATO business turned profitable in Bangladesh in
FYE2019 because of growing local awareness of
sanitation issues and toilet solutions. This was due to the
support of the Bangladesh Rural Advancement
Committee (BRAC), an international development
organization, and a campaign by the government of
Bangladesh to end open defecation. Moreover, a
partnership with local plastic manufacturing industry
leader, RFL, enabled the business to reach the volume
necessary to become profitable. We believe this
demonstration that the SATO business can be financially
viable and sustainable is immensely significant.
Additionally, LIXIL is now improving sanitation and
hygiene through its “Make a Splash! Toilets for All”
initiative in cooperation with the governments of Ethiopia,
Kenya, Tanzania, and local partners.
SATO, our first commercial solution for base-of-
pyramid consumers, took several years to establish itself
in local communities, including raising awareness about
sanitation and hygiene. LIXIL values the social impact
that SATO has had as much as it does profitability and
sales volume. In addition, SATO and our partnership
with UNICEF have also served as a source of pride and
motivation for LIXIL employees.
LIXIL believes expanding the reach of SATO,
particularly in India and Africa, is the most significant of
its initiatives to overcome global sanitation challenges.
This makes it vital to accurately understand local
challenges, develop local solutions, and build a business
model to effectively deliver those solutions.
Countries using SATO Toilet Systems
FYE2021 targets
Beneficiaries:
100 million
SATO
in more than
25 countries
Cumulative total of
SATO units
produced:
approximately 2.5 million
Number of people whose
sanitary environment has been
improved*2:
approximately 12.5 million
*1 Source: “The True Cost of Poor Sanitation,” published in 2016, is the result of collaborative research by international NGO WaterAid, Oxford Economics and LIXIL.
*2 This is calculated by assuming that there is an average of five users for every SATO unit produced (as of March 2019).
38
39
CR STRATEGY AND RESULTS
Water Conservation & Environmental Sustainability
Connection to
UN Sustainable
Development Goals
Water Conservation &
Environmental Sustainability
Critical Social Issues
LIXIL’s Response
With the world experiencing more frequent and intense
extreme weather conditions and natural disasters, the
Paris Agreement, a global climate change framework,
and the Sustainable Development Goals (SDGs), a
universal call to action to solve global social and
environmental issues, were adopted in 2015. Under the
Paris Agreement, countries have come together in a
movement aimed at achieving a carbon-neutral future by
reaching a balance between anthropogenic emissions
and the absorption of greenhouse gases in the second
half of the twenty-first century.
Instances of drought and water stress related to
climate change are also increasing. By 2050,
approximately 4 billion people (about 40% of the world’s
population) are expected to live in areas of water stress,
facing potentially disrupted access to water.
In addition, ensuring the sustainable use of natural
resources, such as metals, wood, rubber, and raw
materials for ceramics, is another major challenge for
future generations.
LIXIL has identified opportunities and risks associated with
climate change and is promoting an environmental strategy
in line with its business strategy. LIXIL’s Environmental Vision
2030, which was announced in FYE2017, aims to ensure
that by 2030, the positive environmental contribution of its
products and services will surpass the environmental footprint
from its entire business process, thus achieving a Net Zero
environmental footprint. Moreover, under this vision we have
identified three core environmental challenges to tackle:
climate change mitigation and response, water conservation,
and sustainable use of resources. We have developed mid-
term targets and action plans within our global environment
management system to address these and mitigate the
environmental impacts of our entire value chain.
With the 2017 recommendations of the Task Force on
Climate-related Financial Disclosures (TCFD), established
by the Financial Stability Board (FSB), there is more
demand for corporations to disclose climate change-
related information. At LIXIL, we will continue to leverage
opportunities to improve sustainability and increase
corporate value by communicating with stakeholders and
through environment-related disclosures.
40
Achievements and Challenges
Regarding climate change mitigation and adaptation, we
are promoting the building of environmentally friendly
homes by developing and providing products and
services that contribute to reduced greenhouse gas
emissions and energy usage in homes and buildings.
Many LIXIL products and services have received
awards, such as the highest Japanese insulation
standard, House of the Year in Energy 2018, for our
high-thermal-insulation panels, Super Wall Dual. Other
awards include the Environment and Equipment Design
Award for our automated heating faucet, and the Grand
Prize for Excellence in Energy Efficiency and
Conservation for LIXIL TEPCO Smart Partners’ net-zero
energy housing solution.
Moreover, we have started an initiative to power LIXIL
facilities with 100% renewable energy. In February 2019,
the LIXIL showroom in Kyoto was the first location to
achieve this, followed by the INAX MUSEUMS in June
2019. We will continue to roll out this initiative.
Regarding water conservation, LIXIL has established
various targets and advanced initiatives. This includes
increasing the reuse of water and reducing the volume of
water intake and wastewater in production bases deemed
high risk in our water-risk evaluations and analyses.
Regarding the sustainable use of resources, we are
promoting the reuse of resources throughout the entire
lifecycle of our products, including procurement,
production, use, and disposal. LIXIL Housing Technology’s
TOSTEM Thailand has been awarded the 3Rs Award and
the Zero Landfill Waste Achievement Award from the
Ministry of Industry in Thailand for eliminating all landfill
waste. It achieved this by collaborating with local industrial
waste disposal operators.
Changes to the global environment have a massive
impact on peoples’ homes and lifestyles. As a
comprehensive living and housing solutions company,
LIXIL aims to achieve a balance between global
environmental sustainability and business growth by
working to provide solutions that are healthy,
comfortable, and environmentally conscious. We are
also striving to reduce the environmental footprint of
our business activities.
FYE2021 targets
Contribute to realizing a sustainable society through innovative products and services, and improving environmental
efficiencies of all operational processes.
Climate Change
Mitigation and
Adaptation /
Water Conservation /
Sustainable Use of
Resources
Expand CO2 emissions reduction attributable to Group products and services by 1.36 times compared to FYE2016
*Includes data on water resource protection (indirect CO2 emissions reductions relating to water use)
Reduce CO2 emissions from Group activities by 8% compared to FYE2016
Reduce distribution-linked CO2 emissions by 5% compared to FYE2016
Complete water-risk evaluation across all production sites, determine and implement KPI and targets for high-priority sites
Recycling rate of waste products from LIXIL facilities: 95% (Japan, Europe), 66% (Asia), 40% (North America)
CO2 emissions from Group activities
(Scope 1 and 2)
Japan & Europe
(Thousand t-CO2)
1,500
Scope 1
Scope 2
(Million m3)
30
Japan & Europe
Water intake volume
Water discharge volume
Water intake / Water discharge
Waste recycling rate*
1,200
1,179
1,201
1,185
610
618
616
569
583
569
900
600
300
0
25
20
15
10
5
0
18.06
18.03
16.79
16.86
16.68
13.91
Japan & Europe
Rest of Asia
North America
94
94
63
25
61
19
95
62
34
(%)
100
80
60
40
20
0
2017/3
2018/3
2019/3
2017/3
2018/3
2019/3
2017/3
2018/3
2019/3
* The recycling rate of waste resulting from all
production and sales processes
41
CR STRATEGY AND RESULTS
Diversity & Inclusion
Connection to
UN Sustainable
Development Goals
Achievements and Challenges
The new Resilience Toilet can be used normally even
during and after a natural disaster, regardless of age and
gender, and including by those who may require special
care. Under normal circumstances, each flush uses five
liters of water. In the event of a disaster, it can be
switched to a mode that maintains all of its functionality
but only uses one liter of water to flush. The Resilience
Toilet is a product designed for convenience, cleanliness,
and safety. We are promoting its adoption at disaster
evacuation centers, such as schools and gymnasiums,
and at disaster coordination centers, such as municipal
buildings. We will continue to develop new products and
services that meet the diverse needs of our end users.
The level of diversity and inclusion that LIXIL aims
for must take into account the cultural and social norms
of each region. We believe the benefits of diversity can
be maximized by leveraging a variety of characteristics.
We will continue our diversity efforts in each region,
will consider cross-regional initiatives relating to human
resource development and deployment, and endeavor to
make diversity and inclusion a core part of LIXIL’s culture.
LIXIL Diversity & Inclusion Declaration
four focus areas
Gender & Age
We will drive business performance by embracing diversity and
ensuring that all employees 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 communication in
order to fully embrace the diversity in race, religion, culture, gender
identity, and sexual orientation of everyone at LIXIL.
LIXIL’s Response
FYE2021 targets
Diversity & Inclusion
Critical Social Issues
With major demographical changes predicted over the
next several decades, understanding and embracing
diversity is crucial. By 2050, more than one in every
five people around the world is projected to be over the
age of 60, with many people living either alone or with
their spouse only. Approximately 15% of the world’s
population today live with some degree of disability, and
this rate is increasing every year.
Designing products, buildings, and living spaces
that can be used by as many people as possible,
including the elderly and people with disabilities, is
vital. LIXIL can improve peoples’ lives through its
products and services, while promoting the active
participation of women in the workplace in support of
SDG 5, helping to create a society in which everyone
can succeed.
LIXIL is investing in developing its Universal Design
(UD) solutions, aiming to help anyone and everyone
to live comfortably. To further promote our activities,
we launched the UD Committee led by senior
managers in FYE2018. Moreover, we are holding
workshops with a diverse group of participants from
all areas of the Group, including design, R&D,
marketing, and corporate communications. In these
workshops, we focused our UD concept on four
themes: easy to understand; easy to use; safety for
peace of mind; and designs that people love. Based
on these concepts, LIXIL is developing products and
services from a wide variety of perspectives so that
everyone, from young to old, can live comfortable and
fulfilling lives.
In FYE2018, we established our LIXIL Diversity &
Inclusion Declaration (see page to the right), which
states, “We leverage our differences to create new
energy and engagement in the workplace generated
by open and honest dialogue across our organization.
These efforts will enable our employees to build an
entrepreneurial mindset that will drive growth and
sustainable innovation.” In addition, LIXIL has set four
focus areas to uphold its Diversity & Inclusion
Declaration, and each country and region is promoting
initiatives to address and improve the focus areas that
are the most relevant to them.
42
Build a strong corporation and workplace where all employees can achieve their full potential.
Working
Environment
Diversity and
Equal Opportunity
Occupational Health and
Safety
Human Resource
Development
Increase favorable response rate by 10% in the work-life balance category of the Group-wide employee
engagement survey* compared to the previous survey
*The survey is carried out once every two years. The previous survey was conducted in 2017 and the next survey will be in 2019.
Establish a culture of diversity and inclusion within our organization and among all employees
Achieve 100% operational coverage of Group-wide EHS management system
Provide common learning opportunities for 800 next-generation leaders across the Group
Aim to expand the number of employees participating in the Talent Acceleration Program (TAP) for
next-generation leaders to 1,300 cumulatively (in Japan)
Ratio of women among recent graduate
recruits (university undergraduate and
graduate students)
(LIXIL Corporation, Japan)
Cumulative number of participants
in the Talent Acceleration Program (TAP)
for next-generation leaders
(LIXIL Corporation, Japan)
Female participation ratio
in leadership training
(LIXIL Corporation, Japan)
Target
Progress
30.8
30
31.5
30
33.2
30
(%)
100
80
60
40
20
0
(Persons)
1,500
1,200
900
600
300
0
Target
Progress
(%)
100
Target
Progress
1,300
1,195
1,078
963
80
60
40
20
0
37.5
29.2
20
20
20.8
20
2017/3
2018/3
2019/3
2017/3
2018/3 2019/3
2018/3
2021/3
2019/3
2017/3
2018/3
2019/3
Change in the participation ratio since FYE2018 in
Stage 3 of the Talent Acceleration Program (TAP) for
next-generation leaders
43
CORPORATE GOVERNANCE
Board of Directors of LIXIL Group Corporation
As of June 25, 2019
Profiles of LIXIL Group Board & Executive Officers are available on our corporate website.
https://www.lixil.com/en/about/governance/board/
Kazuhiko Ootsubo
Director, Representative
Executive Officer and Executive
Vice President
Representative Director,
President and CEO, and LIXIL
Japan Company CEO of LIXIL
Corporation
Ryuichi Kawamoto
Director, Member of Audit
Committee
Masatoshi Matsuzaki
Outside Director, Chairperson of
the Board, Member of
Nomination Committee
Director and Chairman of the
Board of Directors of Konica
Minolta, Inc. (incumbent)
Kinya Seto
Director, Representative Executive
Officer, President and CEO
Representative Director, Chairman,
and Chairperson of the Board of
LIXIL Corporation
Satoshi Yoshida
Director, Executive Officer and
Senior Managing Director
Director, Senior Managing Director
of LIXIL Corporation
Keiichiro Ina
Director, Member of Nomination
Committee
Tamio Uchibori
Outside Director, Member of Audit
Committee
Licensed tax accountant
Director and Senior Managing
Executive Officer of
MinebeaMitsumi Inc. (former)
Haruo Kawahara
Outside Director, Member of
Nomination Committee, Member
of Compensation Committee
Chair, Representative Director of
the Board and Executive Officer
CEO of JVC KENWOOD
Corporation (former)
Teruo Suzuki
Outside Director, Member of
Audit Committee
Certified public accountant
Deputy Chair of KPMG AZSA
LLC (former)
Daisuke Hamaguchi
Outside Director, Chairperson of
Compensation Committee,
Member of Audit Committee
Management Execution Director
and Chief Investment Officer,
Pension Fund Association
(former)
Kaoru Onimaru
Outside Director, Member of
Nomination Committee
Justice of the Supreme Court of
Japan (former)
Kurt M. Campbell
Outside Director
Assistant Secretary of State for
East Asian and Pacific Affairs,
US Department of State (former)
Yuji Nishiura
Outside Director, Chairperson of
the Nomination Committee,
Member of Compensation
Committee
Chair and CEO, Sumitomo Mitsui
Trust Club Co., Ltd. (former)
Zenji Miura
Outside Director, Chairperson of
Audit Committee, Member of
Compensation Committee
Representative Director,
President and CEO of
Ricoh Co., Ltd. (former)
44
45
CORPORATE GOVERNANCE
Executive Officers of LIXIL Group Corporation
As of July 22, 2019
Profiles of LIXIL Group Board & Executive Officers are available on our corporate website.
https://www.lixil.com/en/about/governance/board/
Kinya Seto
Director, Representative Executive
Officer, President and CEO
Ryo Nihei
Executive Officer and
Senior Managing Director,
Technology, Chief Technology
Officer
Kazuhiko Ootsubo
Director, Representative Executive Officer
and Executive Vice President, Sales and
management of domestic subsidiaries
Sachio Matsumoto
Representative Executive Officer and
Executive Vice President,
Finance, Treasury, and M&A, and Legal,
Chief Financial Officer and Chief Legal Officer
Jin Song Montesano
Executive Officer and Senior Managing Director,
Public Affairs, Investor Relations, External Affairs,
Corporate Responsibility, and Human Resources,
Chief Public Affairs Officer, and Chief People Officer
Bijoy Mohan
Executive Officer and
Senior Managing Director, CEO of LIXIL International
Yugo Kanazawa
Executive Officer and Senior
Managing Director, Marketing,
Digital, and IT, Chief Digital Officer,
and Chief Information Officer
Hiroyuki Oonishi
Executive Officer and
Senior Managing Director,
LWT Japan
Satoshi Yoshida
Director, Executive Officer and
Senior Managing Director, LHT Japan
46
47
CORPORATE GOVERNANCE
Messages from the Chairperson of the Board and Committee Chairpersons
executives must be sufficiently accountable and transparent so that
outside directors who are not directly engaged in the business can
grasp the situation accurately and make rational decisions.
On the other hand, as a supervisory function, the Board of
Directors needs to consciously maintain an appropriate distance
from the executive side. The phrase “nose in and fingers out”
expresses the proper stance of the Board. We should maintain an
interest in daily operations in order to understand the current
situation. However, we must keep our distance so as not to step into
the executive’s role and slow down the speed of business.
Outside directors are expected to provide oversight, maximizing
their objective perspective and unique position as outsiders. The
outside directors appointed as a result of the recent Annual General
Meeting of Shareholders bring a wealth of experience, ranging from
experts in accounting and law to those who have managed
corporations as CEOs. Thus, the Board is diverse in terms of skills
and backgrounds. As the Chairperson of the Board, I intend to
ensure that the Board effectively fulfills its function by maximizing on
the skills and experiences of its outside directors and by facilitating
active discussions.
As of now, my understanding of LIXIL Group is that it needs to
improve its balance sheet and simplify its organization structure,
which are both consequences of previous M&A. Therefore, the
Board needs to pay attention to the situation of overseas
subsidiaries. On the other hand, I believe that the market share and
the strength of its brands both in Japan and overseas are LIXIL
Group’s assets. I also think that the Group has the ability to create
innovative products, which is essential for enhancing the profitability
of the business.
As the Chairperson of the Board, I shall make every endeavor
this year to manage Board meetings and help LIXIL Group maximize
its potential in order to achieve sustainable growth.
Chairperson of the Board
Masatoshi Matsuzaki
What is the purpose of corporate governance? I believe it is to ensure
sustainable growth and achieve higher medium- and long-term
corporate value. Accordingly, the essential role of the Board is to
listen to the CEO and other executive officers on how to sustainably
increase corporate value, discuss and approve the long-term vision
and medium-term plan, and monitor the implementation of these.
The fundamental principle of governance is to also prevent the
concentration of power in specific individuals. In this regard, LIXIL
Group has adopted the appropriate governance model, a “Company
with Nominating Committee, etc.” This structure requires the
separation of management execution by executive officers and the
supervisory function by the Board of Directors, which includes
outside directors. In order for this model to work effectively, however,
Composition of the Board of Directors (As of June 25, 2019)
Directors / Executive officers
3
11
Directors who are concurrently
serving as executive officers
Directors who are
not executive officers
Internal directors / Outside directors
5
9
Internal directors
Outside directors
Gender diversity
Male
Female
Nationality
Japanese
Other
48
13
13
Kinya Seto
Kazuhiko Ootsubo
Satoshi Yoshida
Ryuichi Kawamoto
Keiichiro Ina
Masatoshi Matsuzaki
Tamio Uchibori
Kaoru Onimaru
Haruo Kawahara
Kurt M. Campbell
Teruo Suzuki
Yuji Nishiura
Daisuke Hamaguchi
Zenji Miura
1
1
Independent
Directors
Nomination
Committee
Audit
Committee
Compensation
Committee
Chairperson
Chairperson
Chairperson
The management turmoil that began last
October originated from the Nomination
Committee. The function of the Nomination
Committee will, therefore, be one of the critical
points of discussion on LIXIL’s governance
reform going forward, and I am acutely aware of
the level of our responsibility.
We will reexamine the root cause of the
problem and how it should be addressed from a
new viewpoint. In doing so, we aim to establish a
system that eliminates arbitrary decisions and
leads to logical, objective, and impartial
conclusions, regardless of who the CEO or the
members of the Nomination Committee are.
Regarding the scope of the Nomination
Committee, in addition to the nomination of
director candidates and removal of directors as
specified under Japanese Corporation Law, we
plan to broaden our view in order to contribute
to the sustainable development of the LIXIL
Group, including considering medium- to long-
term succession planning. When approaching
each issue, our basic stance will be to create an
organization that makes the most of diversity of
thought, while securing the utmost transparency.
The Nomination Committee will proceed
with the reform of governance with strong
determination. Utilizing and learning from recent
issues, we hope to reach, as quickly as possible,
a level at which our stakeholders consider the
Group’s corporate governance to be advanced.
I believe that the single most important quality
required in any corporation is integrity. The role
of the Audit Committee is to examine and
develop functioning internal structures, in which
management and all employees are on the same
page, driving the business forward with integrity
in order to achieve sustainable growth.
The five appointed members of the Audit
Committee bring a wealth of experience in
different fields, including accounting, M&A, and
supply chain management. Maximizing our
combined knowledge and expertise, we will
engage in a thorough review of the Company.
Through internal audits and other measures, we
intend to build a solid understanding of the
audited areas in order to prevent fraud and put
in place a system that enables us to make
improvements as necessary. In doing so, we
hope to contribute to building a structure that is
more rewarding for hard-working employees,
making it easier to work and making results
more visible.
When reforming governance, it is also
necessary to reflect on past problems, analyze
the factors involved, and develop internal
processes and systems to ensure that the same
issues never occur again. I will engage in my
role as the Chairperson of the Audit Committee
with a firm sense of mission over the course of
this year, to enable LIXIL Group to leverage its
potential and grow into a highly regarded
company that Japan can take pride in.
The Compensation Committee’s role in enhancing
corporate value is to contribute to achieving the
Company’s business objectives. It does so by
aligning the Company’s compensation system with
its business strategy. LIXIL Group is now moving
away from the direction of its previous strategy,
which focused on expanding in size, to restarting
its efforts to achieve its new business strategy. The
mission of the Compensation Committee is,
therefore, to change the compensation system so
it matches the new strategy.
LIXIL Group’s current compensation system
can be appraised as advanced in form. The
Company proactively adopted a performance-
based structure and introduced stock-based
compensation at an early stage. However, many
detailed improvements can still be made.
Embracing the spirit that the strategy is in the
details, I hope to start making changes swiftly.
In doing so, I would particularly like to ensure
open communication. In an organization that has
adopted a “Company with Nominating Committee,
etc.” governance model, the Compensation
Committee has significant authority. However, rather
than taking that for granted, we will collaborate
closely with the Board of Directors, which is
responsible for making decisions on essential
business strategies, the Nomination Committee,
which is involved in the nomination of the
management team, and the executive management
team, which executes the business strategy.
It is my firm belief that such collaboration is
critical in order to make the most of the
compensation system.
49
Chairperson of
the Nomination Committee
Yuji Nishiura
Chairperson of
the Audit Committee
Zenji Miura
Chairperson of
the Compensation Committee
Daisuke Hamaguchi
CORPORATE GOVERNANCE
Corporate Governance at the LIXIL Group
LIXIL Group Corporation (the “Company”) has adopted
the governance model of a “Company with Nominating
Committee, etc.” as specified under Japanese
Corporation Law. Under this governance system, the
Company clearly separates management execution from
management supervision, aiming to establish a system
where executive officers can make management
decisions quickly and decisively while securing
management transparency.
In addition, as a pure holding company, the
Company has formed the following meetings and
committees to strengthen governance over Group
companies: Internal Audit Committee, Compliance
Committee, Risk Management Meetings, M&A
Committee, Investment Review Committee, and
Corporate Responsibility Committee. These meetings
and 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, 2019)
LIXIL Group Corporation
Chairman of the Board
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
(Outside directors
form the majority)
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Compliance audit
Validation audit
Compliance audit
Validation audit
Audit
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 Meetings, M&A Committee,
Investment Review Committee, and Corporate Responsibility Committee
Operating Companies
Management
Supervision
General Meeting of Shareholders
Audit and Supervisory Committee / Company Auditors
Audit
Board of Directors
Management Meeting
Divisions
Note: This structure applies only to operating companies
(LIXIL Corporation and other subsidiaries) in Japan.
Group Governance System
The Company, while respecting the independence of
each Group company (including LIXIL Corporation)
regarding its business management, receives periodic
reports on the status of its businesses and provides
approval for important matters. In addition, the Audit
Committee periodically receives audit reports from the
Company’s accounting auditors and the Company’s
internal audit divisions, while regularly convening the
Group’s Board of Auditors with the auditors of each
Group company to ensure Group-wide cooperation.
Governance of LIXIL Group Corporation, LIXIL Corporation, and Significant Operating Companies (As of June 21, 2019)
LIXIL Group Corporation
Board of Directors
Nomination Committee
Compensation Committee
Audit Committee
Appointment
and dismissal
Supervision
Compliance audit
Validation audit
Compliance audit
Validation audit
s
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LIXIL Corporation
Management
Supervision
Board of Directors
Compliance audit
Validation audit
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Management
Supervision
Management
Supervision
LIXIL Group Corporation’s significant subsidiaries
LIXIL Corporation’s significant subsidiaries
GROHE Group
ASD Holding Corp. (ASB)
LIXIL INTERNATIONAL Pte. Ltd.
LIXIL VIVA CORPORATION
LIXIL Living Solution Corporation
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 August 26, 2019)
LIXIL Group Corporation
Board of Directors
Kinya Seto
Kazuhiko Ootsubo
Satoshi Yoshida
Ryuichi Kawamoto
Keiichiro Ina
Masatoshi Matsuzaki
Executive Officers
Kinya Seto
Kazuhiko Ootsubo
Sachio Matsumoto
Jin Song Montesano
Ryo Nihei
Yugo Kanazawa
LIXIL Corporation
Board of Directors
Kinya Seto
Kazuhiko Ootsubo
Sachio Matsumoto
Jin Song Montesano
Ryo Nihei
Yugo Kanazawa
Tamio Uchibori
Appointment
Bijoy Mohan
Kaoru Onimaru
Haruo Kawahara
Kurt M. Campbell
and removal
Satoshi Yoshida
Hiroyuki Oonishi
Management
Supervision
Satoshi Yoshida
Compliance audit
Hiroyuki Oonishi
Tokunori Nozawa
Yuji Tobita
Validation audit
Company Auditors
Yuji Tsuboi
Tamio Uchibori
Teruo Suzuki
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For further details regarding the Company's corporate governance system, internal
control systems, and other related matters, please refer to our corporate website.
https://www.lixil.com/en/about/governance/
50
Appointment and removal / Determination of compensation
Directors and Executive Officers of LIXIL Group Corporation who are concurrently serving as Directors of LIXIL Corporation
Internal Directors who are not Executive Officers
Outside Directors
51
Teruo SuzukiYuji NishiuraDaisuke HamaguchiZenji Miura
CORPORATE GOVERNANCE
Activities of the Board of Directors and Board Committees
Board of Directors’ Effectiveness Evaluation
Number of Meetings Held During FYE2019
Board of Directors
16 Made decisions on matters specified by law, basic management policies, and important management
matters, while monitoring the conduct of duties of directors and executive officers
Nomination Committee
14 Made decisions on the content of proposals to be submitted to the General Meeting of Shareholders regarding
the election and dismissal of directors. Reported its opinion to the Board of Directors when requested, such
as on the appointment, election, removal, and dismissal of candidates for executive officer and Representative
Executive Officer (CEO), and on the appointment and removal of the members and chairpersons of each
committee, etc.
Compensation Committee
12 Discussed and made decisions regarding the compensation of individual directors and executive officers
Audit Committee
18
In addition to auditing the conduct of duties by 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 financial auditors
Executive Officers Meeting
22 As the decision-making body responsible for the execution of business activities in accordance with the basic
policies approved by the Board of Directors, this committee decided on important matters relating to the
execution of business in the Company and the Group as a whole
Internal Audit Committee
4 Undertook inspections and checks of legal compliance and appropriateness of corporate activity and of
management conformity, not only within legal requirements, but also in view of standards determined by the
Company
Compliance Committee
4 Provided guidance for the structuring and operational management of compliance systems in Group
companies and monitored status of compliance with laws and regulations
Risk Management Meeting
Corporate Responsibility
Committee
4
3
In addition to holding risk management meetings in the Company, also held risk management meetings in
Group companies mainly in Japan, and confirmed the status of risk management
Selected and reviewed material issues for the overall Group, formulated the targets as well as the initiatives of
the CR strategy, and provided oversight and guidance for the implementation of priority themes and activities
M&A Committee*
19 Deliberated and made decisions on matters relating to M&A (including divestment of business) conducted by
the Company and its subsidiaries, within the authority delegated by the executive officers
Investment Review Committee*
27 Deliberated and made decisions on material investments (excluding those relating to M&A), financing, and
matters relating to the establishment, reorganization, and restructuring of subsidiaries (conducted by the
Company and its subsidiaries) within the authority delegated by the executive officers
* 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 in order to enhance the effectiveness of corporate governance.
Attendance at Meetings of the Board of Directors and Committees in FYE2019
Name
Board of Directors
Nomination Committee
Compensation Committee
Audit Committee
Yoichiro Ushioda
Hirokazu Yamanashi
Kinya Seto
Yoshizumi Kanamori
Yoshinobu Kikuchi
Keiichiro Ina
Haruo Shirai
Ryuichi Kawamoto
Tsutomu Kawaguchi
Main Kohda
Barbara Judge
Hiroto Yoshimura
100%
100%
100%
100%
100%
100%
100%*3
100%*3
100%
100%
100%
100%
100%*1
100%*1
—
—
100%*2
—
—
—
100%*2
100%*3
100%*3
100%
—
100%*1
—
—
100%
100%*1
—
—
—
100%
100%
—
—
—
—
100%*4
—
—
100%*3
—
100%
—
—
100%
*1 Attendance from April 1, 2018 to October 31, 2018
*2 Attendance from November 1, 2018 to March 31, 2019
*3 Attendance from June 21, 2018 to March 31, 2019
*4 Attendance from April 1, 2018 to June 21, 2018
52
In order to implement and maintain the corporate
governance systems needed to support sustainable
growth and creation of medium- and long-term
corporate value by the LIXIL Group as a whole, the
Company analyzes and evaluates the effectiveness 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 implementation of an annual self-evaluation of the
Board’s effectiveness, which is conducted by every
member of the Board.
Effectiveness
Evaluation Process
Summary of
the Evaluation Results
The Board of Directors, composed of the directors appointed at the Annual General Meeting of Shareholders
held in June 2018, implemented an evaluation of the effectiveness of the Board of Directors and of each
Board Committee using the following process, with the Chairman of the Board playing a central role. Starting
from January 2019, questionnaire surveys were administered to each of the 12 members of the Board
regarding the composition, operation, agendas, supporting systems of the Board, and director training. All
Board members subsequently discussed the analysis and evaluation of the collected results at a Board
meeting held in March 2019.
In light of the results from the questionnaire mentioned above, the Company has worked to improve the
supervisory function of the Board of Directors by implementing measures such as (1) sharing of results and
opinions on the composition of the Board of Directors to the Nomination Committee; (2) provision of an
agenda sheet to predetermine annual schedule and agenda of the Board of Directors; (3) revision of
reporting format from executive officers and others for the purpose of effective discussions at Board of
Directors’ meetings.
Measures to Be
Implemented Based on
the Evaluation Results
In order to implement and maintain the corporate governance systems needed to support the sustainable
growth and the creation of medium- and long-term corporate value of the LIXIL Group as a whole, measures
will be taken on an ongoing basis to enhance the function of the Board of Directors. This is based on the
most recent Board effectiveness evaluation results and of the diverse range of views put forward by
individual directors during the related processes.
Status of items to be evaluated based on the results of the questionnaire conducted January 2019
Items to be evaluated
Status of improvement
Role and operation of the Nomination
Committee in the process of electing
the CEO
In February 2019, the Company revisited its Corporate Governance Guidelines
and rules for the Nomination Committee to clarify both its role and authority.
Composition of
the Board of Directors
System that enables the Board of
Directors to discuss matters
more efficiently
At the 77th Annual General Meeting of Shareholders, the percentage of
outside director candidates was increased and several individuals with
global management experience in manufacturing were selected as outside
director candidates.
The annual schedule and agenda were clarified, rules relating to the
distribution of materials to the Board of Directors as well as preparation of
materials to enhance the understanding of directors were established, and a
forum was established for the discussion of important issues from a long-
term perspective.
The Company has implemented each principle of the Corporate Governance Code. For details, please refer to the Corporate Governance Report.
https://www.lixil.com/en/investor/library/governance_guidelines.html
53
CORPORATE GOVERNANCE
Corporate Officer Compensation
Basic Policy Regarding Compensation
Compensation Scheme
Compensation for FYE2019
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 order to meet
shareholders’ expectations and fulfill the Company’s
management policy.
The compensation scheme is separate for directors, who
are responsible for supervising the Company’s
management, and executive officers, who are responsible
for the execution of business. When a director serves as
an executive officer, the compensation scheme of an
executive officer shall be applied in principle.
Performance-related compensation in order to
provide effective incentives designed to optimize
short-, medium-, and long-term business results and
corporate value.
Attract and retain the best global talent necessary to
maintain sustainable growth.
Fair and reasonable decision-making process with
regard to compensation that will provide accountability
to shareholders, employees, and all stakeholders.
Conduct comparative evaluation with domestic and
foreign companies in order to ensure transparency
and objectivity.
Individual compensation shall be determined in
accordance with role and responsibility, performance
contribution, and company performance.
Decision Process
The Company shall structure the Compensation
Committee with the chairperson and the majority of the
members being independent outside directors, so it will
be able to effectively fulfill the role and duties required
by law. The Compensation Committee decides basic
policy regarding the compensation of directors and
executive officers, the compensation scheme (including
KPIs), guidelines for compensation levels, and various
kinds of compensation based on these. The details of
the deliberated content and the resolutions of those
matters made by the Compensation Committee are
reported at the meeting of Board of Directors, which is
held immediately after.
Compensation Structure and Component
Types of
compensation
Fixed-amount
compensation
(base pay)
Weight (median)*
Directors
Executive
officers
Compensation component
71%
68%
Examined and determined by role using data from outside compensation consultant.
Performance-based
compensation
—
15%
Determined based on the Company’s financial results and individual performance on
an annual basis. The target payment amount shall be set at a fixed percentage of the
base pay. The amount paid shall fluctuate within a range from 0 to 200%.
Stock-based
compensation
29%
17%
Restricted stock shall be awarded to incentivize directors and executive officers to
share corporate value with shareholders and to provide greater incentive to contribute
to enhancing the Company’s stock price and sustainable growth of corporate value. A
fixed percentage of the base pay shall be issued as restricted stock. Half of the shares
with restrictions on transfer allocated to the recipients of allocation will be subject to a
transfer restricted period of three years. The other half shall be subject to a transfer
restricted period of 30 years (or the period until completion of term).
Other compensation schemes may be applied after individual deliberation.
* These percentages are the median for each corporate officer title. Performance-based compensation is calculated based on the KPI achievement at 100%, and stock-based
compensation is calculated based on the allocation amount.
Fixed-amount compensation (base pay):
In view of the management responsibility of directors
and executive officers due to the sluggish business
results for the fiscal year ended March 31, 2019,
reduction measures from November 2018 to June 2019
were implemented. The reduction rate applies from 5%
to 20% depending on the job title.
Stock-based compensation:
The Board of Directors resolved to issue common shares
on June 25, 2018, and allotment was implemented on
July 17, 2018. The allocation for the next fiscal year will
not be granted as it did not meet the required conditions
(profit attributable to owners of the parent is positive and
core earnings margin is 2% or higher).
Performance-based compensation:
In the fiscal year ended March 31, 2019, no
performance-based compensation was applied because
the conditions for the payment (profit for the year
attributable to owners of the parent is positive and core
earnings margin exceeds 2%) were not met.
Company performance (70%):
Revenue 25%, core earnings 30%, profit for the year
attributable to owners of the parent 15%
Individual achievement (30%):
The achievement rate shall be decided after the
Compensation Committee reviews the individual
evaluation proposed by the CEO
Stock options:
Stock options are not granted in the fiscal year ended
March 2019. However, expenses associated with those
granted in the past were recorded.
Others:
An officer with foreign nationality had additional benefits
such as living assistance and medical insurance support.
Total Amount of Compensation by Corporate Officer Title, by Type of Compensation,
and Number of Officers Receiving
Corporate officer title
Directors
(excluding outside directors)
Executive officers
Outside directors
Total
Total
compensation
(¥ million)
216
1,186
90
1,492
Total compensation by type (¥ million)
Base pay
Performance-
based
Restricted
stock
Stock
options
Others
Number of
corporate officers
eligible for
compensation
160
717
70
947
—
36
—
36
56
355
20
431
—
34
—
34
—
44
—
44
6
14
5
25
The total compensation shown above, which are amount calculated under JGAAP, consists of both the compensation paid by the Company and the compensation paid by the
Company’s subsidiaries.
Guidelines Including: Deferred STI,
Clawback (Refund of Compensation) Clauses,
and Extension of Rights
Not established in the fiscal year ended March 31, 2019.
Compensation Scheme Applying ESG
Performance as the Direct Metric
Not established in the fiscal year ended March 31, 2019.
However, in regard to performance-based compensation
for executive officers, we have set Company-wide
management targets based on a sustainable business
strategy as KPIs for Company performance. In terms of
individual performance, we evaluate contribution to
enhance sustainable improvement of performance and
corporate value.
54
55
CORPORATE GOVERNANCE
Procedures and Policies Regarding the Nomination of Director Candidates,
the Removal of Directors, and the Appointment and the Removal of Executive Officers
As a “Company with Nominating Committee, etc.”, in deciding
upon the candidates for director seats, the Nomination Committee
will apply the Company’s own criteria, specified in Article 23 of the
LIXIL Group Corporate Governance Guidelines (the “Guidelines”),
while considering not only the individual qualities of director
candidates but also the appropriate composition of the Board of
Directors. Criteria regarding the appointment, election, removal,
and dismissal of executive officers and the Representative
Executive Officer (CEO) are set forth in Article 24 of the Guidelines.
When independent outside director candidates are decided, the
Company’s own independence criteria will be used, as set forth in
Article 28 of the Guidelines.
The LIXIL Group Corporate Governance Guidelines are available
on our corporate website.
https://www.lixil.com/en/about/governance/policies.html
Appointment and Removal Process for Directors and Executive Officers
Criteria for the nomination of director candidates
Criteria for the appointment of executive officers
(1) Director candidates must be of outstanding character, and have high ethical
(1) Executive officers must be of outstanding character, and have high
standards
(2) Director candidates must have attributes to adequately conduct his or her duty
of care as a prudent manager, have a sense of loyalty in executing his or her
duties, and contribute to the Company’s sustainable growth and improvement
of corporate value in the medium to long term
(3) Taking into consideration circumstances such as the status of the candidate’s
other concurrent positions, the candidate must be able to dedicate the time
and effort required in order to appropriately carry out his or her duties
(4) Outside director candidates must have considerable insight and extensive
experience in areas such as business, finance, financial accounting, and law,
and have attributes to supervise management’s execution of duties from an
independent objective standpoint, in addition to satisfying the Company’s
independent criteria
(5) One-third or more of the number of director candidates must be composed of
independent outside directors
ethical standards
(2) Executive officers must have a deep understanding of the Group’s
business and the capacity to appropriately carry out management
of the Group as an executive officer
(3) Taking into consideration circumstances such as the status of the
candidate’s other concurrent positions, the candidate must be able
to dedicate the time and effort required in order to appropriately
carry out his or her duties
Criteria for the election of the Representative Executive Officer (CEO)
Must fulfill the criteria for the executive officers, display strong leadership
skills, and be able to exert authority over the executive officers
Nomination of director candidates
Nomination Committee
Based on the criteria for the nomination of
directors, the Nomination Committee will
nominate the candidate directors and decide the
content of a proposal to a shareholders meeting
Board of Directors
Receive report from the
Nomination Committee and
resolve the convocation of the
General Meeting of Shareholders
Resolve at the General Meeting of
Shareholders
Removal of directors
Nomination Committee
Based on the criteria for the removal of directors,
the Committee will discuss the removal of the
director and decide the content of a proposal to
a shareholders meeting
Board of Directors
Receive report from the
Nomination Committee and
resolve the convocation of the
General Meeting of Shareholders
Resolve at the General Meeting of
Shareholders
Appointment, election, removal, and dismissal of executive officers and the Representative Executive Officer (CEO)
Board of Directors
The Board of Directors
will request an opinion to
the Nomination Committee
Nomination Committee
Based on the criteria for the appointment / removal of the
executive officers as well as the criteria for the election of
the Representative Executive Officer (CEO), the
Nomination Committee will report its opinion to the Board
Board of Directors
Resolve the appointment, election,
removal, and dismissal of an executive
officer or the Representative Executive
Officer (CEO)
Internal Control Systems
Risk Management
Internal Control Systems
LIXIL Group builds, operates, and evaluates internal control
systems to ensure the reliability of operations as well as the
accuracy and appropriateness of financial reporting in order to
increase corporate value. In addition, we are strengthening our
Group-wide operational management system with risk-
consciousness and building a system that complies with laws and
regulations as a Group that emphasizes compliance management.
LIXIL Group Enterprise Risk Management (ERM)
LIXIL Group ensures the continuity and stable development of its
business through the implementation and operation of ERM for
the entire Group. Risks related to crises that require immediate
response when they occur are controlled through crisis
management as part of ERM.
Risk Management (RM)
Risks to the Group’s Medium-Term Plan are identified and
assessed, then prioritized as material risks for focused
management. A risk owner is assigned to each risk and is
responsible for responding to and reporting on the assigned risks.
LIXIL Group aims to take both a top-down and bottom-up
approach in risk management in order to respond to various
risks. While the HQ management is actively involved in
managing Group-wide material risks, efficient coordination with
regional / local operations is sought by placing risk managers at
major overseas regions.
LIXIL Group is working to foster a corporate culture of Group
ERM that enables executive officers and employees to have a
consistent mindset in managing risks with the understanding of
the business characteristics of each region.
Crisis Management (CM)
In order to prepare for crises, a crisis management framework has
been established for the entire LIXIL Group. The Crisis
Management Basic Policy has been created to stipulate such
matters as basic principles, definitions, and structures related to
crisis management, and has been thoroughly implemented in the
Group companies. A Group-wide response framework has been
clarified and a crisis management handbook has been created and
distributed so that when an incident may possibly develop into a
crisis, damages and losses will be minimized through prompt initial
response, timely escalation and sharing of information among
relevant departments for management decision-making, and
proper external disclosure done consistently and sincerely.
Understanding the importance of cybersecurity, LIXIL Group
has established and operates the LIXIL Computer Security Incident
Response Team (LIXIL-CSIRT) to minimize impact from
cyberattacks. We constantly monitor computers and networks to
detect problems at an early stage and analyze the impact and
cause of the problems in order to respond quickly.
Information concerning “Business Risks” is available
on our corporate website.
https://www.lixil.com/en/investor/strategy/risks.html
Risk Management Initiatives (Years ended March 31)
RM
CM
Risk management for
each business unit
Appointed risk managers in major overseas regions to
strengthen collaboration
Implemented Group ERM to initiate top-down approach
Reviewed the Plan-Do-Check-
Act (PDCA) cycle for FYE2019
Identified material risks for
FYE2020 at the Executive
Officers Meeting
2017
2018
2019
Established a global
crisis management
framework
Established and
started operating
LIXIL-CSIRT
Developed and rolled
out crisis management
handbook
Efforts to optimize
Business Continuity
Plan (BCP) in Japan
56
57
CORPORATE GOVERNANCE
Internal Control Systems
Compliance
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
appropriately 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.
To integrate and clarify in detail the Code of Conduct across
the Group, as of December 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.
For further details regarding the Code of Conduct,
please refer to our corporate website.
https://www.lixil.com/en/about/governance/pdf/LIXIL_CoC_en.pdf
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. We also hold educational events such as quizzes and
contests in Japan and overseas every year so that all LIXIL Group
employees can voluntarily increase their compliance awareness in
a fun setting.
Compliance Committees
In addition to the compliance committees of the Group and
subsidiaries in Japan, LIXIL has established compliance committees
in each technology business unit. This is to strengthen compliance
measures globally and to improve the reporting system of business
units to the Group Compliance Committee. The Group is implementing
new initiatives to further enhance its compliance activities, such as
having each compliance committee conduct compliance assessments
as part of a regular review of the compliance system.
Education and Training Programs
LIXIL holds education and training programs for new employees,
new managers, and executives to develop its compliance culture.
LIXIL is also implementing education and training programs 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 that utilize e-learning and face-to-
face training and are 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 concern-raising system “Speak
Up!” to Japan in 2017, which had been already introduced for all
subsidiaries overseas in 2016. In January 2019, the former internal
reporting system was dissolved and its function was merged with that
of the “Speak Up!” system, which completed the creation of a global
management structure for compliance concerns and related matters.
Compliance Initiatives (Years ended March 31)
Established Chief Compliance Officer
Established the Code of Conduct and
a process to ensure employees’ commitment
Conducted a compliance review
Held Group-wide compliance events
Introduced “Speak Up!” in Japan
Introduced risk
countermeasures
in subsidiaries in Japan
Strengthened compliance
education and implemented
e-learning
Internal Audit
How LIXIL Group Sees Internal Audit
The LIXIL Group’s internal audit, including assessment of internal
controls, contributes to the accomplishment of the Group’s
objectives by evaluating and improving the effectiveness of risk
management, controls, and governance processes while
considering integrity and efficiency of the organization as a whole.
This is in line with the definition of internal audit (i.e., independent,
objective assurance and consulting activity designed to add value
and improve an organization’s operations) from the Institute of
Internal Auditors, an international, professional association.
Network-Type Organization
The internal audit division has been organized as a network
structure that spans LIXIL and its domestic and overseas
subsidiaries. It aims to achieve comprehensive and efficient
internal audits and internal control assessments, and to drive
synergies through collaborative work across LIXIL, as well as
adding further value through independent assurance and high
impact consulting.
The Quality Assurance (QA), J-SOX (Financial Instruments
and Exchange Law), and IT divisions have been established to
function as global axes within the Corporate Audit Group (CAG).
The QA division shall work across a wide spectrum to improve
the quality of work done by the CAG. This includes, but is not
limited to, global risk mapping, harmonization of audit
methodologies, education and training, and secretariat work for
the Internal Audit Committee. The J-SOX axis will serve as a
Center of Excellence, leading J-SOX work conducted by other
parts of the CAG. The IT division, in addition to IT audits, helps
strengthen governance and compliance by increasing the
effectiveness and efficiency of internal audits and the internal
control system through the use of IT and by performing
insightful audits through effective data analyses.
These axes will be overlaid with audit teams from each region, such
Internal Audit Initiatives (Years ended March 31)
Bankruptcy of
Chinese subsidiary
as Japan, Asia, Europe, and North America. These teams will focus on
assurance, consulting, and J-SOX work in their respective areas.
Through close collaboration among the audit units and the
cross-functional divisions, such as QA, J-SOX, and IT, we will
promote the optimization of the CAG as a whole, as well as more
comprehensive management, governance, and overall improvement.
Since the Group’s audit and assessment levels have been
enhanced, the Global Corporate Audit Staff (GCAS), which held
advanced audit and consulting functions, has been transferred to
an internal consulting department in order to enhance project
management operations.
Corporate Audit Group
QA
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Note: 60 members throughout the Group as of the end of March 2019
Internal Audit Committee
The Company has set up a voluntary Internal Audit Committee.
Periodic meetings between the Corporate Audit Group Officer and
the executive officers, who are 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 audits,
internal control assessments, risk management, governance, and
improvements thereof.
Inappropriate activities
by subsidiaries
in Japan
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
Established a Group Compliance Policy and
Group Compliance Guidelines
Introduced “Speak Up!” in overseas subsidiaries
Strengthened cooperation
with the audit divisions
CAG
Launch of the
CAG, LCAS,
and GCAS
Increased
global talent
Strengthened
audit reporting
lines for domestic
and overseas
subsidiaries
Reorganization
of CAG into a
network-based
organization
Standardization
of internal audit
evaluations
Transfer of GCAS
to internal control
Expanded the
scope of domestic
subsidiaries for
internal audit
58
Enhancement
of internal audit
functions
59
CORPORATE INFORMATION / DATA
Consolidated 10-Year Summary
LIXIL Group Corporation and Consolidated Subsidiaries
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 (loss) (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 (loss) per share*1 (EPS)
JGAAP
IFRS
(Millions of yen)
2010
2011
2012
2013
2014
2015
2016
2015
2016
2017
2018*5
2019
¥ 982,607
¥1,214,939
¥1,291,396
¥1,436,395
¥1,628,658
¥1,673,406
¥1,845,117
¥1,705,427
¥1,890,450
¥1,786,447
¥1,829,344
¥1,832,608
25,984
2.6%
(5,332)
14,756
30,844
32,916
60,485
68,074
(27,334)
(27,825)
89,302
40,409
3.3%
15,780
13,688
45,779
36,289
80,106
48,680
(13,543)
(41,687)
92,329
17,915
1.4%
1,868
15,350
52,107
39,370
59,887
33,979
(142,067)
138,348
127,351
50,485
3.5%
21,347
14,025
73,795
44,736
100,627
28,432
(12,397)
(31,753)
114,662
69,080
4.2%
20,952
17,380
64,321
49,168
51,674
3.1%
22,013
18,199
62,622
50,724
124,822
108,887
83,533
(218,333)
153,144
139,039
138,931
(129,228)
10,010
160,378
56,259
3.0%
(18,664)
—
76,403
60,451
128,692
137,012
16,547
(171,758)
138,801
51,722
3.0%
48,041
30,864
18,211
61,454
50,404
102,126
98,563
(119,041)
46,618
147,708
70,069
3.7%
39,011
(25,605)
25,523
72,083
62,205
132,274
121,085
19,122
(154,403)
129,646
88,312
4.9%
67,535
42,503
26,362
68,215
60,701
76,046
4.2%
59,107
54,581
27,875
69,953
64,661
149,013
140,707
132,531
(58,052)
(79,899)
121,563
116,362
(52,606)
(43,843)
138,751
12,798
0.7%
(15,029)
(52,193)
28,443
67,639
68,502
81,300
69,351
(72,328)
1,579
141,421
1,033,504
1,166,834
1,481,063
1,465,689
1,786,294
1,875,249
2,060,873
1,915,427
2,130,120
2,042,165
2,107,131
2,059,544
516,322
158,980
536,408
175,487
538,776
266,771
566,312
307,089
601,795
463,479
613,651
418,720
637,517
528,386
590,855
559,971
537,308
697,413
559,431
638,345
649,573
549,159
567,167
584,537
¥ (19.12)
¥ 55.50
¥ 6.49
¥ 73.42
¥ 72.06
¥ 75.46
¥ (65.11)
¥ 105.80
¥ (89.33)
¥ 148.01
¥ 189.13
¥ (179.98)
Equity attributable to owners of the parent per share (BPS)
1,842.78
1,850.34
1,817.34
1,930.02
2,041.34
2,104.27
1,894.55
2,038.56
1,828.84
1,902.18
2,128.77
1,839.59
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)
40
40
40
40
6.2%
(1.0)
(0.5)
0.9
49.7
—
30.9
6.6%
3.0
1.4
1.0
45.2
72.1
33.3
35,976
41,090
4.6%
0.4
0.1
1.0
35.7
616.3
50.5
48,163
7.0%
3.9
1.4
1.0
38.3
54.5
54.7
45,602
55
7.7%
3.6
1.3
0.9
33.2
76.3
78.1
60
6.5%
3.7
1.2
0.9
32.1
79.5
69.5
51,419
52,427
60
7.0%
(3.3)
(0.9)
0.9
26.4
—
97.2
—
60
6.0%
5.3
1.7
0.9
30.5
56.7
95.9
—
60
7.0%
(4.6)
(1.3)
0.9
24.6
—
132.9
60,677
60
8.3%
7.9
2.0
0.9
26.8
40.5
116.6
59,248
65
70
7.7%
9.4
2.6
0.9
29.3
34.4
89.0
61,140
4.4%
(9.1)
(2.5)
0.9
25.9
—
109.5
62,940
¥ 1,903
¥ 2,160
¥ 1,733
¥ 1,858
¥ 2,846
¥ 2,847
¥ 2,295
¥ 2,847
¥ 2,295
¥ 2,825
¥ 2,376
¥ 1,478
595,742
676,197
542,523
540,221
827,426
891,265
718,459
891,265
718,459
884,378
743,817
463,086
(99.5)
1.03
38.9
1.17
267.0
0.95
25.3
0.96
39.5
1.39
37.7
1.35
—
1.21
26.9
1.40
—
1.25
19.1
1.49
12.6
1.12
(8.2)
0.80
*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.
*5 Due to the LIXIL Group’s decision to divest Permasteelisa in August 2017, the Company previously classified the operations of Permasteelisa as discontinued operations. However, during the fiscal year
ended March 2019 (FYE2019), LIXIL Group was unable to secure the necessary approval to sell Permasteelisa as is. Therefore, Permasteelisa’s profit and loss have been restated as profit and loss from
continuing operations.
Note: Under JGAAP, figures of less than ¥1 million are truncated, while under IFRS, figures of less than ¥1 million are rounded.
Recent M&As (Figures as of the acquisition)
July 2009
American Standard Asia Pacific
April 2010
Shin Nikkei Company, Ltd.
April 2010
SUNWAVE CORPORATION
August 2011
Kawashima Selkon Textiles Co., Ltd.
¥23.5 billion
Sales
¥110.0 billion
Sales
¥85.0 billion
Sales
Sales
Acquisition cost
Equity owned
¥17.6 billion
Acquisition cost
¥0.7 million
Acquisition cost
100%
Equity owned
100%
Equity owned
Goodwill
Intellectual property
¥2.1 billion (net)
¥3.5 billion
Goodwill
¥5.4 billion
Goodwill
¥13.7 billion
80%*6
¥6.1 billion
(negative)
Acquisition cost
Equity owned
Goodwill
¥34.3 billion*7
¥2.2 billion and
share exchange
100%
¥1.7 billion
60
*6 100% in March 2013
*7 Excludes interior fabric business for vehicles
which the Company separated from the main
business
December 2011
Permasteelisa S.p.A.
Sales
Acquisition cost
Equity owned
Goodwill
Intangible assets
August 2013
ASD Holding Corp. (ASB)
January 2014
GROHE Group S.à r.l.
October 2014
GROHE DAWN WaterTech Holdings Pty Ltd.
¥116.0 billion
Sales
¥82.0 billion
Sales
¥157.5 billion
Sales
¥60.8 billion
Acquisition cost
¥30.5 million
Acquisition cost
¥80.1 billion
Acquisition cost
100%
Equity owned
100%
Equity owned
44%*8
Equity owned
¥34.3 billion
¥35.0 billion
Goodwill
Intangible assets
¥14.7 billion
¥21.7 billion
Goodwill
Intangible assets
¥157.3 billion
¥209.3 billion
Goodwill
Intangible assets
*8 100% in September 2016
*9 100% in December 2017
¥12.9 billion
¥8.6 billion
51%*9
¥1.2 billion
¥7.8 billion
61
CORPORATE INFORMATION / DATA
Principal Group Companies
As of March 31, 2019
Consolidated Subsidiaries
Name
LIXIL Corporation
LIXIL Total Service Corporation
Dinaone Corporation
TM.S Corporation
GROHE Group S.à r.l.
Location
Koto-ku, Tokyo
Koto-ku, Tokyo
Tokoname, Aichi
Chiyoda-ku, Tokyo
Luxembourg
58 affiliate companies of GROHE Group S.à r.l.
—
Paid-in capital
(¥ million)
Equity owned
by the holding
company (%)
34,600
100
90
60
C thousand 57,143
—
ASD Holding Corp.
New Jersey, USA
US$ thousand 412,956
9 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
Cayman Islands
Hanoi, Vietnam
Suzhou, Jiangsu, China
Suzhou, Jiangsu, China
—
US$ thousand 24,907
VND million 743,386
4,000
1,730
Taiwan Inax Corporation
Taipei, Taiwan
NT$ thousand 282,677
LIXIL India Sanitaryware Private Limited
Andhra Pradesh, India
INR thousand 40,384
LIXIL Total Hanbai Corporation
Koto-ku, Tokyo
Kawashima Selkon Textiles Co., Ltd.
Sakyo-ku, Kyoto, Kyoto
G TERIOR Corporation
Setagaya-ku, Tokyo
Asahi Tostem Exterior Building Materials Co., Ltd.
Koto-ku, Tokyo
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 TEPCO Smart Partners Inc.
LIXIL INTERNATIONAL Pte. Ltd.
Toshima-ku, Tokyo
Chiyoda-ku, Tokyo
Shinjuku-ku, Tokyo
Suma-ku, Kobe, Hyogo
Oita, Oita
Saga, Saga
Koto-ku, Tokyo
Singapore
75
9,382
316
2,000
1,989
100
66
30
50
30
450
30,565
TOSTEM THAI Co., Ltd.
Pathum Thani, Thailand
Baht million 2,767
LIXIL Manufacturing (Dalian) Corporation
Dalian, Liaoning, China
US$ thousand 43,500
LIXIL GLOBAL MANUFACTURING
VIETNAM Co., Ltd.
Dong Nai, Vietnam
US$ thousand 40,700
LG-TOSTEM BM Co., Ltd.*1
Seoul, Korea
Won million 15,355
PT. LIXIL ALUMINIUM INDONESIA
Cileungsi, Indonesia
IDR million 173,617
Name
LIXIL WINDOW SYSTEMS PRIVATE LIMITED
LIXIL Renewal Corporation
Permasteelisa S.p.A.
Location
Haryana, India
Koto-ku, Tokyo
Veneto, Italy
36 affiliate companies of Permasteelisa S.p.A.
—
LIXIL VIVA CORPORATION*2
Urawa-ku, Saitama, Saitama
LIXIL Living Solution Corporation
LIXIL Housing Research Institute, Ltd.
Koto-ku, Tokyo
Koto-ku, Tokyo
JAPAN HOME SHIELD CORPORATION
Sumida-ku, Tokyo
LIXIL REALTY, Corp.
GHS Corporation
JHS Engineering Corporation
LIXIL Home Finance Corporation
Chuo-ku, Tokyo
Koto-ku, Tokyo
Sumida-ku, Tokyo
Chiyoda-ku, Tokyo
LIXIL Group Finance Corporation
Koto-ku, Tokyo
Paid-in capital
(¥ million)
Equity owned
by the holding
company (%)
Business
segment
INR thousand 727,818
100
C thousand 6,900
—
24,596
450
1,250
205
160
100
20
500
3,475
100
100
100
—
53
100
100
100
100
100
100
100
100
LHT
LBT
LBT
LBT
D&R
H&S
H&S
H&S
H&S
H&S
H&S
H&S
(Financing
services
for Group
companies)
56 other companies
Equity-Method Affiliates
Name
Location
Sanyo Homes Corporation*2
Ken Depot Corporation*3
62 other companies
Nishi-ku, Osaka, Osaka
Chiyoda-ku, Tokyo
Paid-in capital
(¥ million)
Equity owned
by the holding
company (%)
5,945
100
24
34
Business
segment
H&S
D&R
*1 The holding of shares of this company is 50%, but it is treated as a subsidiary because it is effectively controlled by the Group.
*2 The company submits securities reports.
*3 As of June 3, 2019, Ken Depot Corporation ceased to be an equity-method affiliate due to transfer of all of the Ken Depot shares held.
Business
segment
LWT, LHT,
LBT, H&S
LWT
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
100
100
100
100
100
—
100
—
100
100
100
100
72
97
100
100
100
80
100
100
100
100
100
100
60
100
100
100
100
50
75
62
63
CORPORATE INFORMATION / DATA
Basic Policy for Investor Relations
LIXIL Group Corporation’s investor relations (IR)
activities facilitate communication with capital
markets in Japan and overseas and thereby help
enhance corporate value. Accordingly, 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.
The Company discloses important
information that affects investment judgments,
such as decisions, events, or information
regarding accounts settlement, based on the
timely disclosure rules enacted by the Tokyo Stock
Exchange. It is also the Company’s policy to
disclose information that does not fall under the
timely disclosure rules as proactively and fairly as
possible, in order to better meet investors’ needs.
Investor relations
https://www.lixil.com/en/investor/
Activities for the Fiscal Year Ended
March 31, 2019
Annual General Meeting of Shareholders
(held on June 25, 2019)
Shareholder attendance: 629 people
Percentage of voting rights exercised: 81.6%
Communicated management message to the market
(for institutional investors and analysts)
Earnings briefing sessions–four times
(every quarter)
Individual meetings–359 times
Small meetings in Japan–three times
New product exhibition events–two times
Participated in investor conferences–
two times in Japan and two times overseas
Provided feedback from the market to the Company
Reported IR activities at meetings of the Board of
Directors–done regularly, in addition to four times
per year after the earnings briefing sessions
Exchanged opinions on the business condition and
market outlook with business divisions–done regularly
Shared information with the management via e-mail
–done regularly
External Recognition (from April 1, 2018 to July 31, 2019)
Companies with Greatest Improvement
in IR and Companies with
Best Continual Efforts in IR
Recognized among the “Companies with
Greatest Improvement in IR” and “Companies
with Best Continual Efforts in IR” as part of
the Japan Investor Relations Association
25th Anniversary Commemorative Award
selections (November 2018)
MSCI Japan Empowering Women Index
Selected for three consecutive years as a
constituent of the MSCI Japan Empowering
Women Index (WIN), created by MSCI Inc.
(June 2019)
Internet IR Commendation Award
Received “Internet IR Commendation
Award 2018” from Daiwa Investor Relations
Co., Ltd. for seven consecutive years
(November 2018)
FTSE4Good Index Series
FTSE Blossom Japan Index
Selected for three consecutive years as a
constituent of the FTSE4Good Index Series
and FTSE Blossom Japan Index, created by
FTSE Russell (June 2019)
S&P Japan 500 ESG
Selected as a component of the S&P Japan
500 ESG, created by S&P Dow Jones Indices
(June 2019)
Gomez IR Site Ranking 2018
Awarded silver prize in the overall IR site
ranking and first place in the “Metal
Products” industry category from
Morningstar Japan K.K. (December 2018)
Nadeshiko Brand
Selected as a component of the Nadeshiko
Brand initiative, jointly conducted by the
Ministry of Economy, Trade and Industry and
the Tokyo Stock Exchange (March 2019)
DJSI Asia Pacific Index
Selected for two consecutive years as a
component of the Dow Jones Sustainability
Indices (DJSI Asia Pacific Index), created
by S&P Dow Jones Indices and RobecoSAM
(September 2018)
S&P/JPX Carbon Efficient Index
Selected as a component of the S&P/JPX
Carbon Efficient Index, created by S&P Dow
Jones Indices (September 2018)
Water Security A List 2018
Earned place in CDP’s prestigious Water
Security A List (January 2019)
DISCLAIMER
The inclusion of LIXIL Group Corporation in
any MSCI index, and the use of MSCI logos,
trademarks, service marks, or index names
herein, does 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.
Shareholder Information
As of March 31, 2019
Number of shares and shareholders
Major shareholders (thousand shares)
Number of shares authorized
1,300,000,000
Number of shares outstanding
(excluding treasury stock of 23,223,744 shares)
Number of shareholders
290,095,415
60,532
Distribution of ownership among shareholders (thousand shares)
E
D
TOTAL
313,319
thousand shares
C
A
B
Financial
institutions
Domestic
companies
Foreign
investors
Individuals
and others
96,629
23,866
108,101
61,497
Treasury stock
23,223
A
B
C
D
E
Total
313,319
Name of shareholder
Number of
shares held
Ratio of
shareholdings
The Master Trust Bank of Japan, Ltd. (Trust Account)
16,704*1
5.76%
Japan Trustee Services Bank, Ltd. (Trust Account)
13,541*1
4.67%
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)
10,970
3.78%
8,896*1
3.07%
LIXIL Employee Stock Ownership
7,102
2.45%
Daiichi Life Insurance Company, Limited
(Standing proxy: Trust & Custody Services Bank, Ltd.)
6,561
2.26%
BNYMSANV AS AGENT/CLIENTS LUX UCITS
NON TREATY 1 (Standing proxy: MUFG Bank, Ltd.)
5,743
1.98%
Japan Trustee Services Bank, Ltd. (Trust Account 5)
5,725*1
1.97%
NORTHERN TRUST CO. (AVFC) SUB A/C
NON TREATY (Standing Proxy: The Hong Kong and
Shanghai Banking Corporation Limited Tokyo Branch)
5,589
1.93%
Monthly stock price range (Tokyo Stock Exchange)
Japan Trustee Services Bank, Ltd. (Trust Account 9)
4,769*1
1.64%
For the years
ended March 31
2015
2016
2017
2018
2019
High*2 (¥)
2,973
2,959
2,999
3,255
2,639
Low*2 (¥)
2,063
2,233
1,593
2,285
1,270
*2 High and low share prices are from the First Section of the Tokyo Stock Exchange.
Notes: 1. In addition to the above, LIXIL Group Corporation holds 23,223 thousand shares of treasury
stock. Shareholding calculations exclude treasury stock.
2. *1 indicates a trust service arrangement.
Stock price (¥)
LIXIL stock price
Nikkei Average (right)
3,500
3,000
2,500
2,000
1,500
1,000
500
0
30,000
25,000
20,000
15,000
10,000
5,000
0
April
2014
April
2015
April
2016
April
2017
April
2018
March
2019
Stock trading volume (thousand shares)
60,000
50,000
40,000
30,000
20,000
10,000
0
April
2014
April
2015
April
2016
April
2017
April
2018
March
2019
64
65
CORPORATE INFORMATION / DATA
Corporate Data
As of March 31, 2019
Company Name
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
Paid-In Capital
¥68,417 million
Fiscal Year Closing
March 31
Employees
56 (Consolidated employees: 62,940)
Accounting Auditors
Deloitte Touche Tohmatsu LLC
Overview of Major Businesses
The Company controls and manages domestic and Businesses
overseas companies that operate housing-related businesses and
urban environment-related businesses through acquisition or
holding of stocks.
Securities Traded (Common stock)
Tokyo Stock Exchange
Nagoya Stock Exchange
Transfer Agent and Special
Management of Accounts
Mitsubishi UFJ Trust and Banking Corporation
Annual General 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 results to differ materially
from those discussed in the forward-looking statements.
66
LIXIL Group Online Information
CORPORATE WEBSITE
In addition to the Group profile, CR activities, and the
latest news, our corporate website also contains sections
covering recent business initiatives within the Group
and insights from the Company’s CEO.
https://www.lixil.com
FINANCIAL INFORMATION
Our IR website offers enriched content for shareholders
and other investors, including information regarding
financial results, audio streaming of results briefings,
and market data.
https://www.lixil.com/en/investor
NON-FINANCIAL INFORMATION
Our sustainability website introduces our CR
commitment to and activities for enhancing living
spaces through innovative responsible engagements
and initiatives around the world.
https://www.lixil.com/en/sustainability
ANNUAL REPORT
PDF versions of the annual reports are available on our
corporate website.
https://www.lixil.com/en/investor/library/
annual_reports.html
TSE Securities Code: 5938
LIXIL Group Corporation
https://www.lixil.com
*XY5600 *
*XY5700 *
XY5700 01 2019.09.24発行
Printed in Japan