LIXIL GROUP
INTEGRATED REPORT
2020
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.
A better home is made up of surprisingly simple things – baths to escape
in after a long day, kitchens that unleash creativity, toilets that provide
cleanliness and comfort, doors and windows that connect you with the
world outside, showers and faucets to experience water in new ways, and
interiors and exteriors that bring spaces to life.
LIXIL makes better homes a reality for everyone, everywhere. We make
things that matter to all sorts of different people, to the many communities
we are part of, and to sustainably support the world around us. 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 do so much more.
LIXIL CORE
LIXIL BEHAVIORS
The three LIXIL Behaviors provide a
unified way of working for all our
employees, helping to establish
LIXIL as a purpose-led,
entrepreneurial company.
Our corporate philosophy defines
what we set out to do in the world.
The Group’s
superior products
and services
contribute to
improving people’s
comfort and
lifestyles
01
Contents
SECTION 1
SECTION 2
SECTION 3
SECTION 4
SECTION 5
LIXIL IN FYE2020
VALUE CREATION PROCESS
CR STRATEGY AND IMPACT
GOVERNANCE
BUSINESS RESULTS
An overview of LIXIL, our purpose,
A deep dive into how LIXIL creates
A summary of how our corporate
A look at our approach to corporate
A review of business results for the
strategy, and the progress we have
sustainable value for our stakeholders
responsibility strategy is making a
governance and the steps we are
year ended March 2020 and other
made over the fiscal year.
and society.
difference where it is needed the most.
taking in this area.
material information.
32
34
38
40
Value Creation Process
The Resources We Rely On
The Way We Create Value
The Value We Create
04
06
08
10
12
16
18
LIXIL at a Glance
Stages of LIXIL’s Evolution
Financial Highlights
Non-Financial Highlights
CEO Interview
CFO Interview
LIXIL Group Executive Officers
20 Megatrends
22
24
30
Progress of Management Strategy
LIXIL’s Businesses
Principal Risks and Countermeasures
44
46
48
50
CR Chairperson’s Message
Corporate Responsibility Strategy
LIXIL‘s Material Issues
Global Sanitation & Hygiene
52 Water Conservation &
Environmental Sustainability
54
Diversity & Inclusion
76
78
82
84
86
87
88
Consolidated 11-Year Summary
Review and Analysis of Operating
Results and Financial Position
Review of Operations by Segment
Principal Group Companies
Basic Policy for Investor Relations
Shareholder Information
Corporate Data
56
61
62
63
64
66
67
68
70
71
72
Corporate Governance Dialogue
Group Governance Reform
Selection Process of Director
Candidates and Formulation of
Draft Reports to the Board of
Directors on the System for
Executive Officers
LIXIL Group Board of Directors
Corporate Governance at
LIXIL Group
Nomination Committee Report
Compensation Committee Report
Executive Compensation
Audit Committee Report
Governance Committee Report
Internal Control Systems and
Compliance
Editorial Policy
This integrated report aims to enhance communication with LIXIL’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 integrated report, such as detailed non-financial information, detailed financial
information, and the latest news is available on our corporate website.
Note:
Due to our decision to divest Permasteelisa in May 2020,
we have classified the operations of Permasteelisa as
discontinued operations. Business results for FYE2019
shown in LIXIL’ s Annual Report 2019 have been
retroactively restated.
02
03
LIXIL at a Glance
WE ARE A GLOBAL LEADER IN OUR INDUSTRY
LIXIL IN THE HOME
1 billion people
use our products every day
Present in
over 150 countries
Approx. 75,000 employees
around the world
Over 100 years
of history
¥1,694.4 billion
consolidated revenue
¥58.6 billion
core earnings
WE MAKE PRODUCTS THAT IMPROVE DAILY LIFE
LIXIL
16 household
product brands
6 global
in-house
design centers
¥27.5 billion
invested in R&D
12,000+
patents and design
applications worldwide
Construction
methods
Tiles
Solar energy
systems
Windows
Bathrooms
and toilets
Garden
rooms
Housing
exteriors
Entrance
doors
Housing
interiors
IoT systems
Kitchens
Smart water
products
WE STRIVE TO MAKE THE WORLD A BETTER PLACE
MAJOR BRANDS
Improved access to
sanitation for
18.6 million people
in 38 countries
Products and
services helped reduce
66 million tons of
CO2 emissions
04
05
SECTION 1LIXIL IN FYE2020 Stages of LIXIL’s Evolution
We continually strengthen 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–
Created 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 this
integration, we generated synergies between our businesses
and established 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 a Nomination Committee, etc.,”
as outlined in Japanese Corporation Law. Under this
governance system, we clearly separate the conduct of
management from the surveillance of management with the
objective of creating a system where executive officers can
make management decisions quickly and decisively while
securing management transparency.
Established the foundation for
business expansion and
global growth
From 2011, LIXIL’s business rapidly globalized through a
series of acquisitions and investments, including integrating
some of the most iconic names in our industry such as
GROHE, American Standard, and Permasteelisa. This
provided us with the product and brand portfolio, as well as
global infrastructure, to establish our foothold in key
markets around the world.
FYE2016
¥598.6 billion
(IFRS)
FYE2013
¥205.1 billion
(JGAAP)
32%
14%
Net sales (JGAAP) / Revenue (IFRS) (Years ended March 31) (¥ billion)
International 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, we began to simplify our
business structure, taking steps to transition from a holding
company to an operating company structure in order to
focus on our core businesses and strengthen governance*1.
We also began to review our portfolio in order to strengthen
our balance sheet, focusing on businesses that have
synergistic relationships with our core businesses and high
potential profitability, in turn enabling us to prioritize our
investments in high growth areas*2. With a global foothold
established, we established a virtual structure to centrally
manage our international operations, strengthening cross-
regional collaboration and innovation. We will now continue
to build on our competitive advantage through differentiated
products, services, and business models, setting LIXIL on
the path to higher profitability and sustainable growth.
*1 LIXIL decided in March 2020 to merge LIXIL Group Corporation and LIXIL
Corporation. Please refer to page 61 for more information.
*2 LIXIL announced its decision to transfer its shares owned in Permasteelisa and
LIXIL VIVA in May and June 2020, respectively.
1,786.4
1,829.3
1,832.6
Permasteelisa classified as
discontinued operations
1,692.4
1,694.4
Toward
Sustainable
Growth
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. We
will harness LIXIL’s strengths to become a
truly differentiated and unique housing
and water technology company with the
world’s most respected and powerful
brands. To achieve this aim, we are
focusing on actively managing our core
businesses to enhance productivity and
efficiency, driving synergies across our
core business areas, as well as optimizing
our business portfolio to accelerate
growth and strengthen financial
conditions. We will become an
organization that can adapt and innovate
faster, providing differentiated products
and services that will enable us to achieve
sustainable growth.
2,000
1,500
1,000
500
06
1,436.4
1,291.4
2012
2013
2014
2015
2016
2017
2018
2019
2019
2020
JGAAP
IFRS
Japan
International
07
SECTION 1LIXIL IN FYE2020
Financial Highlights
LIXIL Group Corporation and Consolidated Subsidiaries (Years ended March 31)
Revenue
International
Japan
(¥ billion)
2,000
1,500
1,000
500
0
Core earnings / Core earning ratio
EBITDA / EBITDA to sales ratio
Net interest-bearing debt / Net debt-to-equity ratio
1,694.4
406.6
1,287.8
Core earnings (left)
Core earning ratio (right)
(¥ billion)
100
80
60
40
20
0
EBITDA (left)
EBITDA to sales ratio (right)
Net interest-bearing debt (left)
Net debt-to-equity ratio (right)
(%)
5.0
4.0
3.0
2.0
1.0
0
3.5
58.6
(¥ billion)
200
150
100
50
0
160.6
9.5
(%)
12
9
6
3
0
(¥ billion)
1,000
800
600
400
200
0
146.7
736.7
(%)
150.0
120.0
90.0
60.0
30.0
0.0
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
Due to strong first-half performance, revenue increased by 0.1% year on year to
¥1,694.4 billion despite the decline in demand following the consumption tax hike
in Japan and the impact of foreign currency translation.
Core earnings increased by 7.5% year on year to ¥58.6 billion due to
improvements to production efficiency and domestic price revisions despite costs
related to an early retirement incentive program.
EBITDA increased by 33.7% year on year to ¥160.6 billion due to a ¥33.6 billion
increase in depreciation resulting from the application of IFRS 16 “Leases.”
Net interest-bearing debt as of March 31, 2020 increased by ¥152.2 billion year
on year to ¥736.7 billion due to an increase in lease liabilities resulting from the
application of IFRS 16 “Leases.”
SG&A expenses / SG&A ratio
SG&A expenses (left)
SG&A ratio (right)
(¥ billion)
600
500
400
300
200
100
0
Earnings (loss) per share (EPS) / Dividends per share /
Dividend payout ratio
Earnings (loss) per share (EPS) (left)
Dividend payout ratio (right)
Dividends per share (left)
506.9
29.9
(%)
60.0
50.0
40.0
30.0
20.0
10.0
0.0
(Yen)
200
100
0
-100
-200
162.2
34.4
43.15
70
-179.98
(%)
200
100
0
-100
-200
Net debt-to-EBITDA ratio
(Times)
8
6
4
2
0
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)
4.6
(¥ billion)
800
600
400
200
0
502.2
24.0
(%)
40.0
30.0
20.0
10.0
0.0
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
SG&A expenses increased by 1.6% year on year to ¥506.9 billion due to a one-
time expense associated with an early retirement incentive program; excluding this
expense, SG&A expenses only increased by 0.1 percentage points.
Earnings per share increased year on year by ¥223.13 to ¥43.15 while the
dividend remained constant at ¥70 per share.
While interest-bearing debt increased due to the application of IFRS 16 “Leases,”
the application of this standard also resulted in increased EBITDA, slightly
improving net debt-to-EBITDA ratio to 4.6.
The ratio of equity attributable to owners of the parent as of March 31, 2020 was
24.0%, declining 1.9 percentage points year on year due to the increase in net
interest-bearing debt resulting from the application of IFRS 16 “Leases.”
Profit (loss) for the year attributable to owners of the parent / ROE
Total assets / ROA
Capital expenditures by business segment
Depreciation by business segment
Profit (loss) for the year attributable to owners of the parent (left)
ROE (right)
Total assets (left)
ROA (right)
LWT
LHT
LBT
D&R
H&S
LWT
LHT
LBT
D&R
H&S
(¥ billion)
60
30
0
-30
-60
2.4
12.5
(%)
10.0
5.0
0
-5.0
-10.0
(¥ billion)
2,400
1,200
0
2,091.5
0.6
(%)
4.0
2.0
0.0
-2.0
-4.0
(¥ billion)
40
30
20
10
0
38.6
17.5
11.8
3.2
0.7
(¥ billion)
40
30
20
10
0
39.0
23.5
5.3
1.7
1.1
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
Profit for the year attributable to owners of the parent increased by ¥64.7 billion
year on year to ¥12.5 billion due to the increase in core earnings and decrease in
loss associated with Permasteelisa.
Despite a holiday occurring at the end of FYE2019, the application of IFRS 16
“Leases” increased right-of-use assets recognized on the balance sheet, increasing
total assets by ¥32.0 billion year on year to ¥2,091.5 billion.
Expenditures derived mainly from investment in new product development,
business rationalization, and maintenance costs for LIXIL Water Technology (LWT)
and LIXIL Housing Technology (LHT). Improved production efficiency in LHT
resulted in decreased capital expenditure.
Depreciation was primarily attributable to developing Group-wide IT systems and
maintaining facilities. For LWT, depreciation increased due to initiatives to develop
products for the domestic and international markets, while for LHT, depreciation
decreased sightly due to improved production efficiency.
Notes: 1. Excluding the FYE2020 impact of the application of IFRS 16 “Leases”
Note: Excluding the FYE2020 impact of the application of IFRS 16 “Leases”
2. LBT: LIXIL Building Technology, D&R: Distribution & Retail Business, H&S:
Housing & Services Business
08
09
SECTION 1LIXIL IN FYE2020
Non-Financial Highlights
(Years ended March 31)
Environment
Contribution to reduction in CO2 emissions from products and services
(Measure: number of multiples compared to FYE2016 base year)
CO2 emissions from Group activities (Scope 1 and 2)*1
Implementation of responsible procurement surveys*4
Community development expenditures*5
(Times)
1.5
1.4
1.3
1.2
1.1
1.0
Scope 1 (left)
Scope 2 (left)
Carbon intensity per unit of output (right)
Japan
International
1.29
(Thousand t-CO2)
1,200
800
400
0
1,063
525
538
-14.3
(%)
0
-20
(%)
100
90
80
70
60
50
97
90
(¥ million)
2,000
1,500
1,000
500
0
1,751.7
2016
2018
2019
2020
2016
2018
2019
2020
2018
2019
2020
2018
2019
2020
We conduct environmental assessments on products at every stage of the
development process to make our products and services more energy conscious,
and achieved a 1.29 times greater reduction in CO2 compared to FYE2016.
* 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)
By seeking to increase energy efficiency and utilize renewable energy to further
reduce CO2 emissions, we achieved a reduction in carbon intensity per unit of
output of 14.3%.
We conduct surveys of our suppliers to promote responsible procurement and are
achieving our target of a 90% implementation rate (based on purchased amount).
We are working to return LIXIL assets appropriately and efficiently to society and
pursuing various initiatives to help solve problems as a responsible member of the
community.
Water intake and discharge*2
Waste recycling ratio*1
Number and ratio of independent outside directors
Governance
Water intake
Discharge
(Million m3)
20
15
10
5
0
16.1
13.2
Japan and Europe
Asia (excluding Japan)
North America
(%)
100
80
60
40
20
0
96
90
27
Internal
directors
5
Outside
directors
9
Compliance training take-up rate*6
(Basic training completion and pledge rate)
(%)
100
80
60
40
20
0
77.6
2018
2019
2020
2018
2019
2020
2018
2019
2020
By promoting water recycling, we reduced water intake to 16.1 million m3 and
water discharge to 13.2 million m3.
By working with stakeholders to minimize the use of newly introduced resources
and promote reuse and recycling, we achieved waste recycling ratios of 96% in
Japan and Europe, 90% in Asia (excluding Japan), and 27% in North America.
We place great emphasis on diversity in the Board of Directors both in terms of
attributes, and expertise or experience.
We experienced some delays in implementing pledges globally due to COVID-19,
resulting in a training take-up rate of 77.6% (partial data).
Social
Ratio of female participants in Stage 3 of the Talent Acceleration
Program (TAP) for next-generation leaders (LIXIL Corporation, Japan)
Number and ratio of employees with disabilities*3
(LIXIL Corporation, Japan)
Attendance rate at Board of Directors’ meetings
Result
Target
(%)
40
30
20
10
0
33.3
20.0
Number (persons) (left)
Ratio (right)
(People)
500
400
300
200
100
0
458.5
2.33
(%)
5
4
3
2
1
0
2018
2019
2020
2018
2019
2020
99.5%
To encourage female participation in the workforce, we set and achieved a targeted
20% ratio of female participants in the younger category of the Talent Acceleration
Program (TAP) for nurturing next-generation leaders.
We achieved a 2.33% ratio of employees with disabilities by adjusting working
environments to suit the needs of each employee in a broad range of areas,
including R&D, production, sales administration, and planning management.
The Board of Directors met 16 times in FYE2020. The attendance rate for Board
of Directors’ meetings was 99.5%.
*1 Scope of coverage: The entire Group (production and non-production bases in Japan,
and production bases outside Japan)
*2 Scope of coverage: The entire Group (production and non-production bases in Japan,
and production bases outside Japan.) Excludes tenanted properties, etc. that we
cannot access to assess the water intake.
*3 Directly hired employees in Japan only
FYE2018 and FYE2019 include LIXIL Senior Life Company
FYE2020: number of persons on June 1, 2019. FYE2018, FYE2019: number of
persons on March 31, 2017 and 2018, respectively.
Calculated based on the Employment Rate System for Persons with Disabilities issued
by Japan’s Ministry of Health, Labour and Welfare.
*4 Scope of coverage: Suppliers to LIXIL Corporation and its subsidiaries
Japan: Procurement by operating sites in Japan
International: Procurement by operating sites in international markets, excluding
GROHE Group and American Standard Brands
*5 FYE2018 excludes Permasteelisa Group
*6 *Breakdown: Japan 98%, international 53.7%
LIXIL Group’s sustainability policies and initiatives are on pages 46-55.
For more information on ESG data, please visit our corporate website.
www.lixil.com/en/sustainability/data/
10
11
SECTION 1LIXIL IN FYE2020
CEO Interview
Kinya Seto
Director, Representative Executive Officer,
Executive Officer and President, and CEO
LIXIL was able to reach a number of key milestones
in the Medium Term Plan this past year.
We asked CEO Kinya Seto about the highlights and
where the Company is now headed.
Q1
What do you feel were LIXIL’s main
achievements over the past year?
Thanks to everyone’s contributions, we made
tremendous progress this past year to transform
ourselves into a more agile and entrepreneurial
company. Most visibly, we achieved a positive profit, but
far more important were the great efforts that went into
fundamentally improving our business, such as
LIXIL is now ahead in
embracing the “new normal”
that we are facing globally.
changing our working style and our organizational
pace of change beyond what anyone had anticipated,
structure. I am pleased to see that, thanks to the
which is why our fast work in all these areas has been
strategic changes we have implemented, we are now
so important.
ahead of our peers in embracing the “new normal” that
we are facing globally. In addition, we reached an
agreement on the sale of Permasteelisa under LIXIL’s
Q3
building technology business, a strategic divestiture that
will enable us to focus on our core businesses and drive
long-term profitability and growth.
Q2
You have pursued LIXIL’s Medium Term Plan
(MTP) since 2017. In the “new normal” of
a world affected by COVID-19, do you need to
recalibrate your strategy?
So how has the COVID-19 pandemic changed
how LIXIL works?
There are two significant areas of change. When it
comes to demand, we now see a greater focus on
hygiene and health-related products. In Japan and
many other countries, working people would leave
home early each morning and return late, basically just
seeing the home as a place to sleep. We found that
many people seldom used their kitchens. But with
working at home and fewer long commutes, many have
Not at all. In fact, the strategy that we set out in our
now begun to realize the value of their home. They now
MTP fundamentally prepared us for many of the
want healthier and more stylish homes with better-
changes that have come with this new reality. In the
designed products and building materials.
MTP, we emphasize differentiated products. With people
The second part is in how we do business and the
now spending more time at home, they have a better
digitalization of our commerce model. It is now clear
understanding of the benefits of advanced technology
that consumers appreciate the time-saving and
and meaningful designs. Second, the MTP emphasizes
immediacy of video meetings where we can share
the need to motivate our employees and to help them to
blueprints, design plans and mock-up designs all in a
adapt to a new and more agile way of working. We
virtual world. Smartphones today can be employed to
developed ahead of time the extensive technical
work up the highly detailed measurements that
infrastructure, software and bandwidth needed to
previously required physical visits, making the
enable the tens of thousands of video meetings that now
purchasing process easier than ever.
take place weekly across the organization. And most
importantly, steps taken to focus on our core businesses
and to simplify our business structure are enabling us to
focus our resources to drive growth. Overall, I believe
COVID-19 and the global recession have sped up the
12
13
SECTION 1LIXIL IN FYE2020
CEO Interview
Q4
Q5
There have been some big changes at LIXIL
Housing Technology (LHT). What are you now
seeing as the key trends?
We have been very successful in terms of bringing
For LIXIL Water Technology (LWT), you have
talked about the importance of design and
brand awareness. Is that another key part of
your strategy?
down unit costs within LHT by continuously improving
Yes, absolutely. Design is a very important element, not
the efficiency of our production lines as part of our
only in how a product looks but also how people
platform strategy. This has helped us to bring down our
experience it. Central to this is our in-house design
fixed costs and allows us to renew our product lines at
organization under the global direction of Paul Flowers,
a lower level of investment. We will continue these
LIXIL’s Chief Design Officer. Because he oversees
efforts through this year while also looking to build our
products across all our product brands and
In terms of our portfolio, we have also simplified our
investments with the sale of our controlling interest in the
LIXIL VIVA chain of home improvement stores and the
sale of Permasteelisa, which has been a goal for some
time. These are critical steps to enabling us to focus on
our core businesses, drive investment in growth areas,
and improve governance.
On top of this, we are merging LIXIL Group Corporation
and LIXIL Corporation, a move that will enhance
management efficiency by eliminating duplication of
resources and improve Group governance. This action in
many ways symbolizes our broader efforts to create a flat
organization that is ppurpose-led and entrepreneurial. I
We are merging LIXIL Group
Corporation and LIXIL Corporation,
a move that will enhance
management efficiency and
improve Group governance.
brand equity. The key is to give customers a product
geographies, we can provide an unmatched level of
see this as our most important job ahead.
with better design and better technology.
consistency. It may seem a small thing, but as a
However, we need to be aware of the broader
consumer, you want the color of your kitchen products
industry trends. The number of new housing units in
all to match, so that an off-white in one LIXIL line will
Japan, LHT’s largest market segment, is expected to
match the off-white tone of other products.
decline over the next few years. In addition, new
Our brand strategy also provides an important point
houses are expected to use products and materials
of differentiation within our industry. Rather than
with longer lifespans going forward. This means that
segment products by price, we have given each brand
our higher-quality and differentiated products can
its own identity. If you want a sleek urban type of
Q7
You have talked about making LIXIL a purpose-
led organization. Does this mean there is a
diminished emphasis on bottom-line profitability?
Q8
Based on what you have achieved this past year,
what lies ahead for LIXIL?
We know that we will face difficult headwinds for much
of the fiscal year. We must leverage the programs that
we put in place to continue holding down costs and to
continue to sell well.
bathroom, GROHE might be your choice. For a more
Just the opposite. In today’s world, you must
embrace new ways of working and dealing with both
At the same time, we also expect long-term growth
traditional look with luxurious spaces, American
demonstrate that you stand for something. To achieve
consumers and professionals in the building industry.
in the renovation market. Similar to what we see in our
Standard would be suitable. If you want Japanese
higher profits, you must create a meaningful company
We will also keep an eye out for new market
water technology business, consumers are already
technology with a more minimal look and feel, then
culture. We know that this is very important for our
opportunities anywhere in the world, using our portfolio
starting to look around their residences and trying to
INAX would be the natural choice. By focusing on
employees and consumers, and I believe that
of brands to quickly fill market needs as we see them
find ways to improve space usage now that more
lifestyle segments, we can avoid eroding brand equity
stockholders are now coming to understand this
emerge.
people will be working from home. As just one indicator,
when we want to try new product types and exploit new
principle as well. If a corporation demonstrates its
And we must live up to our commitment of being a
we are seeing more website traffic for renovation-
opportunities in new markets.
related products than ever before.
Design is not only how
a product looks but also how
people experience it.
Q6
You have also instituted a number of changes
in your corporate structure. How does that help
LIXIL going forward?
Our goal is to create a flatter organization that enables
front-line employees to do their work more efficiently
with less unnecessary oversight. In Japan, we delayered
our sales structure and have reduced the number of
branch offices, area branches and local outlets to drive
efficiency. This delayering has also applied to the most
senior levels of the company. Today there are 24
corporate officers, down from 114 when I joined.
commitment to improving the world, consumers will
take note and reward that company. We also believe
this is a central part of making employees more
purpose-led organization. As part of this we have rolled
out the SATO Tap, a new hand-washing solution. With
the outbreak of COVID-19, we know that the simple
engaged. If a LIXIL employee can see that their daily
task of hand washing is one of the most important ways
work is making a contribution, they will help the
to stop the spread of disease, but unfortunately, many
Company prosper to the benefit of all our stakeholders.
people are not in a position to do so regularly. Our
This can be clearly demonstrated by the success of
ability to develop, manufacture and bring this product
our SATO social business. Through SATO, we provide
to the market just when it is needed demonstrates for
basic solutions for the two billion people in the world
me what LIXIL can deliver – for consumers, employees
who lack access to basic sanitation. This is no small
and shareholders.
mission, but it is an important part of our business. For
example, in a recent promotion for shower toilets, we
said that each sale would be matched with the donation
of a SATO toilet in the developing world. Our employees
believed this was a great opportunity to get involved
and our business partners, seeing the benefit, told us
that they wanted to promote more LIXIL products.
14
15
SECTION 1LIXIL IN FYE2020
CFO Interview
Sachio Matsumoto
Director, Representative Executive Officer,
Executive Officer and Vice President, Finance, Treasury,
and M&A, and CFO
LIXIL has steadily made progress
in simplifying its business portfolio
and strengthening its balance sheet.
CFO Sachio Matsumoto discussed
the Company’s focus and
opportunities going forward.
Q1
How do you view overall results last year?
Overall, we were able to achieve our key target for core
earnings, even with Permasteelisa – which we reached
an agreement to sell–categorized as discontinued
operations. This was because all of our business
segments exceeded their initial targets, while in the
Japan market, we experienced strong demand across
the board ahead of the increase in consumption tax in
October 2019. We were also able to introduce important
internal reforms ahead of schedule, such as the Career
Option early retirement incentive program. Considering
the impact of the COVID-19 pandemic from the fourth
quarter onward, I believe we can be proud of our
achievements in the fiscal year ended March 31, 2020.
Q2
What progress have you made in
strengthening the balance sheet?
What is your target in this area?
talent. Furthermore, with the expansion of working from
home, we believe that there will be greater demand for
our products and services as people seek to upgrade
their workspaces and general environment at home.
We consider improving the balance sheet to be one of
Q4
our top corporate priorities. Our agreements to sell
Permasteelisa and LIXIL VIVA, which are important
milestones in our strategy to realign our business
portfolio, will significantly help improve the strength of
our balance sheet. As key financial indicators, we are
Considering the results last fiscal year,
what are the prospects for the medium
and long term?
targeting a net debt/equity ratio of 1.0 and a net debt/
The divestitures of Permasteelisa and our holdings in
EBITDA ratio of 3.5. We view these as important
LIXIL VIVA are important steps in improving our overall
benchmarks and through the two divestitures, we
balance sheet. With these on track to close, we can
believe that we are very much on target to meet those
focus more fully on improving our core earnings ratio.
ratios by the fiscal year ending March 31, 2021.
Our aim is to achieve 7.5% in the medium term and
On this note, due to the application of new
10% or more in the longer term. To meet these targets,
accounting standards (IFRS 16) in the previous fiscal
we aim to increase our gross profit margin while
year, the debt ratios within LIXIL VIVA, primarily in
achieving lower selling, general and administrative
relation to store leases, were recalculated at a higher
expenses (SG&A).
level. The divestiture of the unit, therefore, will
To improve our gross profit margin, it is important to
significantly help to reduce our lease liabilities and
provide differentiated products and services. We are
bring us closer toward meeting our targets.
also working to reduce costs by improving production
In addition, the proceeds from the sale of the two
efficiency through the use of common platforms in
subsidiaries will help increase liquidity and reduce
product development, and to reduce SG&A expenses
external borrowing needs.
through systematization and greater operational
Q3
With the shift to teleworking, do you see
cost-saving opportunities from rent and
related areas in 2021 and beyond?
efficiency.
In relation to working capital, we have been working
for many years to improve our cash conversion cycle
(CCC) by reducing accounts receivable and inventories
while raising the accounts payable level.
In addition, we have greatly expanded the use of
ROIC (return on invested capital) to drive performance
throughout the Company. For the past two years we
The COVID-19 outbreak toward the end of the fiscal
have created ROIC targets as key performance
year and the restrictions put in place by governments
indicators on a global basis, while all executive officers
around the world changed how all of society works, and
are now given specific compensation-linked targets. All
we believe we will be able to take advantage of reduced
new capital investments will be prioritized on a
commuting time to improve the productivity of our
company-wide basis looking at investment efficiency
employees while even improving the quality of work. As
and cash flow implications. Goals are established on a
a result of this shift, a lot more work can be performed
monthly and quarterly basis to see where improvements
outside of the office environment, and therefore this
are required. This approach of balancing returns
provides us with the opportunity to review our office
against capital and SG&A costs will help to create long-
space requirements and look for potential savings.
term profitability for the Group.
Fortunately, we had anticipated this trend and had
already put in place a more robust infrastructure and
work-style reforms to help facilitate this greater use of
workspaces outside the office in order to secure leading
16
17
SECTION 1LIXIL IN FYE2020
LIXIL Group Executive Officers
(As of June 30, 2020)
Executive officer photographs were taken at different locations around LIXIL’s
newly redesigned WING global headquarters, which was unveiled in November 2019.*
*Due to the impact of COVID-19, Bijoy Mohan's image was taken in Singapore.
Profiles and reasons for selection of executive officers of
LIXIL Group are available on our corporate website.
To read more about the innovative design of LIXIL’s WING
headquarters, read “Our Stories” here:
www.lixil.com/en/about/governance/board/
www.lixil.com/en/stories/stories_18/
Kinya Seto
Director, Representative Executive Officer,
Executive Officer and President, and
Chief Executive Officer (CEO)
Sachio Matsumoto
Bijoy Mohan
Hiroyuki Oonishi
Director, Representative Executive Officer,
Executive Officer and Vice President, Finance, Treasury, and M&A, and
Chief Financial Officer (CFO)
Executive Officer and Senior Managing Director,
LIXIL International
Executive Officer and Senior Managing Director,
LIXIL Water Technology (LWT) Japan
Number of Company shares owned
243,308
Number of Company shares owned
Shares of Phantom Stocks
139,480
Shares of Phantom Stocks
86,344
44,600
Number of Company shares owned
0
Number of Company shares owned
Shares of Phantom Stocks
146,815
Shares of Phantom Stocks
13,910
10,706
Yugo Kanazawa
Jin Song Montesano
Executive Officer and Senior Managing Director,
Marketing, Digital, and IT, and
Chief Digital Officer (CDO)
Director, Executive Officer and Senior Managing Director,
Human Resources and General Affairs, Public Affairs,
Investor Relations, External Affairs, and Corporate Responsibility, and
Chief People Officer (CPO)
Number of Company shares owned
Shares of Phantom Stocks
10,086
14,070
Number of Company shares owned
Shares of Phantom Stocks
7,758
17,128
Satoshi Yoshida
Executive Officer and Senior Managing Director,
LIXIL Housing Technology (LHT) Japan
Number of Company shares owned
Shares of Phantom Stocks
10,043
11,004
Shoko Kimijima
Executive Officer and Senior Managing Director,
Legal and Compliance, and
Chief Legal & Compliance Officer (CLCO)
Number of Company shares owned
Shares of Phantom Stocks
0
5,961
18
19
SECTION 1LIXIL IN FYE2020 Megatrends
The world around us continues to evolve,
shaping and guiding LIXIL.
1 A World Affected by COVID-19
2 The Rise of the Middle Class
The COVID-19 pandemic shows how sudden events can have
long-term consequences. Such seismic events also serve to
greatly accelerate social and economic change that was already
underway. Health awareness has risen, work has shifted from the
office to the home, and digital commerce has soared, including a
50-70% surge in digital traffic in developed economies as the
virus spread*1. Agility, innovation and resilience will be key to
traversing the “new normal.”
Despite the economic setbacks caused by COVID-19, the rise of a
new global middle class is expected to continue in the long term*2.
Already constituting more than half of the world’s population, the
number of those considered financially secure is expected to rise
to more than five billion people by 2030*3. Established growth
markets of China and India are now being joined by the fast-
growing nations of Southeast Asia. In all, 88% of the growth in this
new middle class is expected to come from Asia*4.
3 Japan’s Maturing Market
4
A New Type of Consumer
Japan has the fastest-greying population in the world but also
holds the world’s largest pool of private savings, a number that
continues to grow*5. Despite this wealth, Japan has a lower level
of investment in residential property than the US, the UK or
Germany*6, showing there is room for growth as people look for
more comfortable spaces for teleworking and other stay-at-home
activities. Since the COVID-19 outbreak, more time is also being
spent on home improvements*7.
The new generation of consumers, whether established millennials
in developed economies or the new middle class in emerging
markets, have different spending habits. Research shows that the
sharing economy and a focus on experiences rather than the
purchasing of goods are driving their spending patterns. At the
same time, young people in this new global middle class dedicate
a large share of their spending to housing and spend at higher
rates than older people.
Opportunity
New health and hygiene-related products employing the
best technology are in greater demand
Opportunity
Upgraded hygiene and housing are among the first
priorities for people as they gain more disposable income
Opportunity
With people spending more time at home either for work
or play, there is a growing market for renovations of
existing properties
Opportunity
Differentiate water and housing products to demonstrate
they are more than just products but a part of one’s
lifestyle
Risk
The economic cost of the outbreak and the longer-term
risks to business growth remain uncertain throughout the
medium term
Risk
The new middle class is still less affluent than their
developed-economy counterparts. Competitive pricing
and value for money will be vital to win their business
Risk
New housing starts, forecast to decline by one-third
between 2020 and 2030, are being further impacted by
the uncertainty of the COVID-19 pandemic
Risk
Mass production of limited items, which is better suited to
fast-growing markets, increases risk of being caught in
the commodity trap
*1 SSR, April 2020
*2 Brookings Institution, March 2020
*3 Brookings, September 2018
*4 Brookings, February 2017
*5 Wisdom Tree Japan, September 2018
*6 Mitsui Fudosan, May 2020
*7 Unruly Group, April 2020
*8 Harris Group, May 2016
*9 Visa Business and Economic Insights, December 2018
5 All Things Digital
Impacted by COVID-19, the march to an internet-based world of
commerce is now a sprint, with the transaction value of global
mobile payments expected to grow nearly 25% annually over the
next five years. This has created a new shopping model that can
match up consumers and suppliers from across the globe.
Consumers are now showing a willingness to purchase whole new
ranges of products through computer-assisted shopping that is far
beyond what could be imagined a few years ago. Augmented
reality and other powerful tools allow for entire kitchens to be
created and purchased online.
6 The Impact of Climate Change
The total cost of achieving carbon neutrality is estimated at US$50
trillion, while the economic impact is incalculable*11. But the
United Nations warns that “the highest cost is the cost of doing
nothing*12.” Despite the growing evidence of the impact on the
environment, a global consensus on coordinated action remains
elusive. A new sense of purpose is needed urgently before it
becomes too late.
7 The Changing World of Work
The COVID-19 outbreak has given sudden impetus to the already
changing way we work. A U.S. survey found that 48% of
employees planned to work from home at least part time even
after COVID-19*13. In Japan, it has even shone a light on the
prevalent inefficiencies of its corporate culture. Companies will be
pressed to cater to the new needs of employees.
8 What Does a Company Stand For?
More than ever before, a company’s commitment to social issues
is vital to long-term success. Studies show that younger
consumers look specifically at these issues when deciding on
which firms they will select in making their purchases. Among
millennials in the US, more than 70% are willing to pay more for a
sustainable brand*14. Internally, the fair treatment of all employees
and the presence of comprehensive methods to reward and
counsel are central to recruitment and retention.
Opportunity
Gain consumer insight and leverage powerful digital tools
to create an entire home environment online
Opportunity
More advanced products and ways of working that reduce
the resources we use are an important contribution to
solving the problem
Opportunity
Transform work style to create a highly engaged, diverse
and productive workforce
Opportunity
Leadership in this area as a socially aware company that
brings together the best in global practices is a clear
differentiating feature in dealings with all stakeholders
Risk
An area that will require continuous investment and
upgrading to make sure the Company remains at the
cutting edge of technology
Risk
A failure to overcome the steady rise in temperatures
could create massive dislocations that would overwhelm
our abilities to combat them
Risk
Inability to adjust organization and engage employees in
the “new normal” could impact long-term resilience and
efficiency
Risk
Growing social movements have shown vigilance and
action beyond just words are vital to demonstrate
commitment
*10 Mordor Intelligence, June 2020
*11 Morgan Stanley, October 2019
*12 United Nations, April 2020
*13 Gartner, June 2020
*14 The Nielsen Company, October 2015
20
21
SECTION 1LIXIL IN FYE2020 Progress of Management Strategy
LIXIL unveiled the Medium Term Plan in 2017. Under the guidance of our four core pillars,
we have embarked on a journey that will transform us into an agile, entrepreneurial company that
can achieve sustainable growth by contributing to society.
1
Establish a purpose-driven
entrepreneurial company
2
Develop attractive and
differentiated products
3
Achieve competitive costing
4
Drive growth through
strategic marketing
LIXIL aims to develop a people-focused organizational culture that
In the increasingly commoditized housing products and
can respond quickly to both the external and internal changes of a
materials market, LIXIL will drive profitable growth by investing
world in transition. We believe an entrepreneurial mindset is vital
more in brand, design, technology and quality. We believe we
to achieving this, and today we are finding new ways to create a
can better respond to the individual tastes and preferences of
more agile work environment and enabling greater and faster
the growing middle-income and high-income segments by
exchange of ideas. We also believe that we must become a
differentiating ourselves through products that are meaningful
company that evokes passion and respect, inspiring and uniting
and matter to people. This will further strengthen our intellectual
not only our own people around goals that go beyond everyday
property base, and as we shift to a more asset-light business
life, but all of our stakeholders. And as our operating environment
model, we will be able to bring more products to markets in
shifts, we have to be ready to consistently redefine our business
shorter cycles.
domain to ensure future growth.
To further strengthen our financial position, LIXIL will leverage
new technology and infrastructure to create a more efficient
and flexible manufacturing supply chain platform. In addition,
we will improve productivity of corporate functions while
redeploying knowledgeable personnel to consumer-facing roles
with resource needs, contributing to greater cost efficiency.
We will harness strategic marketing to increase LIXIL’s touch
points with consumers and influencers such as contractors,
designers and builders. In addition, through the promotion of
services such as “LIXIL PATTO Reform,” we will create new
demand for home renovation in Japan by providing solutions to
challenges holding back market growth.
FYE2020 MILESTONES
FYE2020 MILESTONES
FYE2020 MILESTONES
FYE2020 MILESTONES
Announced merger of LIXIL Group Corporation and LIXIL
Brought design teams in-house under the Global Design
Corporation, which will enable accelerated decision-making,
Organization and established a new design studio in Singapore,
Under the “Kawaranaito LIXIL” program to transform Japan
operations in light of long-term market challenges, LIXIL shifted to
Accelerated digital transformation under the impact of COVID-19
pandemic, harnessing available and proprietary technology that
enhanced management efficiency, and improved governance.
joining existing studios in London, New York, Düsseldorf, Tokyo
a more meritocratic employment system, including introducing a
enables consumers to experience showrooms through online
LIXIL will transition from its current holding company structure to
and Tokoname
performance review system and new career planning support to
consultations and 360-degree images, as well as generate 3D
a simplified operating company that places greater focus on
Reworked the entire design process across the organization,
help boost productivity, while accelerating the implementation of
renderings and price quotations in real time
actively managing its core water and housing product businesses
clearly differentiating brands from each other and from
LIXIL’s digital transformation and HR policies in order to provide
Targeted investments to support the development of e-commerce
Simplified business portfolio and continued to focus on water and
competitors through design values and signature elements in
employees with greater work-life balance and flexibility
platforms, including strengthening direct-to-consumer channels in
housing products businesses by announcing the divestments of
Permasteelisa, LIXIL VIVA, Ken Depot, LIXIL Suzuki Shutter and
order to build consistency and enhance brand value
Unveiled the latest design series of the INAX brand, which went
Implemented the Career Option early retirement incentive program
in Japan, a solution beneficial to employees, to bring fresh
the US with new products such as the American Standard Filtered
Kitchen Faucet
others. In addition to enabling greater synergies through
through LIXIL’s in-house design process, at Milano Salone last
perspectives and energy to management positions and address the
Expanded IoT products and service portfolio to define the next-
enhanced integration, these transactions will strengthen LIXIL’s
year, resulting in multiple design awards in a single year due to
aging management structure facing LIXIL and other major
generation home and develop the home IoT ecosystem
balance sheet and financial position
new consumer-centric design concepts
companies in Japan
Driving demand growth in the Japan renovation market by
Established LIXIL International to centrally oversee global
Established tie-ups between LHT and renowned Swiss and
Implemented Robotic Process Automation (RPA) through in-house
developing and launching products as well as through new
businesses and enhance synergies and growth opportunities,
Belgian companies to develop and introduce new high-end
developers as a tool to improve productivity of primarily back-office
marketing campaigns that address changing lifestyles and work
while also centralizing reporting lines for core corporate functions
products, including frameless large windows and garden annexes,
functions by automating recurring operations
styles in the “new normal”
– Finance, Legal, HR and IT – enhancing alignment to achieve
to tap into the growing luxury housing market segment in Japan
company-wide goals
Embraced purpose-driven initiatives across the organization,
helping 18.6 million people to date gain access to basic sanitation
and achieving our carbon intensity targets two years in advance
Fully implemented new trading system introduced in FYE2019,
enabling faster decision-making on pricing in line with market
demand
Completed implementation of standardized core manufacturing
platforms for multiple products in interior and exterior factories in
Japan, improving cost control and enabling faster introduction of
new products to market
22
23
SECTION 1LIXIL IN FYE2020 LIXIL’s Businesses
LWT
LIXIL Water Technology
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.
Principal products and services
Plumbing fixtures
Sanitaryware, shower toilets, water faucets,
washstands, bathtubs, prefabricated bathrooms,
smart products, showerheads, washstand fixtures,
washstand cabinet units, kitchen systems, etc.
Tile building materials
Tiles for houses and buildings, interior decorative
tiles, etc.
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)
Geberit
TOTO
Takara Standard
Cleanup
Fortune Brands (Moen)
Panasonic
Major brands
American Standard Saybrook Filtered Kitchen Faucet
Market Conditions
The global plumbing fixtures and fittings market is worth ¥5 trillion
today and is forecast to grow in the future. In international markets,
despite COVID-19-related restrictions causing significant losses in
the global market, European and North American markets have
been resilient against the backdrop of monetary easing. The world’s
growing population, which is expected to reach 8.5 billion people
in 2030, is also driving new growth. In particular, the growing
middle class and increasing need for energy and water
conservation technology globally are among key trends expected to
increase demand for water technology products in the future. In
Japan, the demand for new housing has been decreasing over the
long term, and COVID-19 is accelerating this trend. However, the
renovation market, while small, shows potential for growth driven
by increased focus on hygiene and healthy homes. With COVID-
19, the entire world is now also more focused on hygiene, which is
expected to further drive demand for products such as touchless
faucets, shower toilets, and water filtration.
Key Strengths
Among LIXIL Water Technology’s (LWT) core strengths is a portfolio
of powerful, industry-leading brands which include GROHE,
American Standard and INAX. Combined, these brands cover all
bathroom product categories and all market segments, from the
SWOT analysis
Strengths
Combined capabilities managed by coordinated global team
Highly regarded brands and strong market positions across all major geographies
A product portfolio spanning all market segments, from the luxurious to the basic
ends of the spectrum
Globalized and independent design team creating clear and separate propositions
for each brand and its target segments under the unified “LIXIL design thinking”
Sales network in more than 150 countries
Global supply chain network
Opportunities
Growth opportunities related to COVID-19, which is driving focus on improving
health, hygiene, wellness and wellbeing
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
Increased demand for products catering to increased environmental awareness
Increased home renovation investment as consumers reflect the higher share of
time spent at home in their expenditure
Weaknesses
Threats
Strongest footprint is in mature economies
Underinvesting in marketing and brand management in international markets
luxurious to the basic ends of the spectrum, while catering to
different lifestyle preferences and local tastes. Leveraging this
unique strength, we are now developing LWT’s business in
emerging markets in particular, where the middle class is
expected to grow further.
With the formation of LIXIL International in 2019, a business
management structure that covers all operations outside of Japan,
LWT is now capable of bringing the global resources of LIXIL,
including design, R&D and manufacturing capabilities, together
across all regions. Through LIXIL International, we are also honing
our competitive edge by enhancing cross-regional and cross-
brand synergies, which combined with improved production
efficiency, will enable LWT to respond more flexibly to global
demand. This global operations framework enables all factories
and R&D hubs to be leveraged to supply all brands and regions,
creating an efficient and flexible network that optimizes our global
footprint, creates scale competitiveness, and builds future-ready
processes for quality, demand planning, product development and
customer service. This will enable us to deliver true value to
business partners and consumers by responding to specific
regional needs while leveraging our global operations footprint and
managing innovation and manufacturing platforms.
Decreasing new housing starts in Japan
Increase in labor cost and material prices
Shortage of skilled labor
Rapid commoditization due to new business models
Downward pricing pressure
Rise of highly cost-competitive manufacturers from developing countries
Economic deterioration and sluggishness due to the impact of COVID-19,
particularly the impact on end users in the hospitality and commercial real estate
sectors
Key Initiatives in FYE2021
Create clear and differentiated value for end users, professionals,
designers and developers as main target groups that will drive
industry growth
Drive sales growth through focus on target groups by strengthening
powerful channels, business partner legacies and brands
Optimize global manufacturing footprint and enable technology
platforms approach to maximize productivity, strengthen cost
competitiveness, and enhance flexibility. These initiatives allow
us to flexibly react to demand fluctuations caused by COVID-19
and ensure continued strong product availability
Respond faster to increase in demand for renovation and the
end-user journey moving increasingly online
Invest in innovation for future growth and continue to build a
platform-based, global product pipeline across all brands. This
includes accelerating the development process for synergized
products leveraging technologies from Japan for global launch
Respond to the major macro-trends accelerated by COVID-19
by focusing on home renovation and accelerating development
for hygiene-related products, as well as strengthening retail in
international markets
Transform business structure in the Japan market to suit its
mature economy, strengthening cost competitiveness
Employ a scalable and repeatable, high ROIC model of filling
category white spots
24
25
SECTION 1LIXIL IN FYE2020 LIXIL’s Businesses
LHT
LIXIL Housing Technology
LHT’s brands 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.
Principal products and services
Metal building materials
Housing window sashes, entrance doors, shutters,
gates, carports, banisters, high railings, 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.
Direct customers
Dealers
House manufacturers
Sales agencies
Building materials
wholesalers
Construction
companies
Architectural firms
Homebuilders
Developers
Competitors
YKK AP
Sankyo Tateyama
Major brands
Interio Lassisa
Market Conditions
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. COVID-19 is expected to accelerate this rate of decline.
Under these circumstances, it has become more important to
stimulate and capture demand for renovation, and building material
manufacturers are expected to increasingly focus on this field. In
the renovation segment, since the quality, performance, and design
of the products themselves are of great significance for the owner,
understanding the end user’s preferences as well as differentiation
– through new products, services, and business models that meet
diverse needs – will be key.
In international markets, the building materials market –
despite having been particularly heavily affected by COVID-19 in
Asia – is expected to continue expanding in the medium to long
term against a backdrop of economic growth and increases in
population and income levels.
Key Strengths
LIXIL Housing Technology (LHT) possesses a wide variety of
products with high market share and a robust nationwide sales
network. LHT’s products are designed to contribute not only to
improving the comfort of the home but also address key social
issues such as climate change. Due to their wide variety, LHT
SWOT analysis
Strengths
Top market share in residential window sashes and exterior products in Japan
Extensive nationwide sales and distribution network in Japan
Wide range of production facilities and technologies in Japan and Asia, from
aluminum smelting and casting to manufacturing end products
Wide range of products and product categories enabling coordination for the
entire home
Opportunities
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 interest in renovations due to COVID-19
Expanding market for highly affluent consumers
Increasing need for differentiated products due to population growth and rising
income levels in Asian markets
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
Decrease in new housing starts in Japan
Increase in labor cost and material prices
Decrease in housing-related spending due to stagnant income levels in Japan
Stagnant consumer sentiment due to the impact of COVID-19
products can also be coordinated to provide a seamless design
experience in the entire home.
Leveraging the strengths derived from a simple organization
structure that facilitates the rapid development, manufacture, and
sale of products, we are now strengthening LHT’s competitiveness
by innovating new designs and technologies, as well as enhancing
efficiencies in product development and manufacturing processes
by means of synergies within the Group. By relying not only on the
resources within LHT but by also establishing business alliances
with other companies that possess different technologies and
know-how, we will launch differentiated, high-value-added
products in quick response to market needs.
Key Initiatives for FYE2021
Expand sales of products for the “new normal”
In response to the changing needs of consumers due to the
impact of COVID-19, as well as to stimulate and capture demand
for renovation, we will strengthen sales of products that are
touchless and reduce close interaction, enable improved
ventilation, support working from home, and help users “switch
on and off” between work and their personal lives. This includes,
for example, our IoT postal delivery box, which reduces face-to-
face interaction with delivery personnel.
Improve production efficiency
In FYE2020, while continuing to reduce stock keeping units
(SKUs), we adopted a platform approach for exteriors and
wooden interior furnishing materials, which contributed to
shortening product development periods, improving capital
efficiency, and strengthening profitability. In FYE2021, we are
steadily reforming the window sash business and expect to see
the effects from the following fiscal year.
Enhance promotional activities
We will strive to expand sales of products designed to create
healthy, comfortable, secure and safe homes through awareness-
raising activities. These include, for example, how to prevent heat
stroke indoors, prevent heat shock during winter, and prepare for
natural disasters such as typhoons. We will also strengthen the
appeal of our power brands, such as TOSTEM, among
consumers and influencers to help drive sales of high-value-
added products.
Expand existing business fields
Aiming to expand our presence in the growing market for highly
affluent consumers, we are collaborating with international
manufacturers to launch products of exceptional quality,
performance, and design. We will further pursue activities
through the Business Incubation Center, which was launched in
April 2019, to quickly place highly innovative products on the
market.
26
27
SECTION 1LIXIL IN FYE2020
LIXIL’s Businesses
LBT
LIXIL Building Technology
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. Major products are curtain walls, building
window sashes, and store facades.
Principal products and services
Metal building materials
Curtain walls, building window sashes, store facades, etc.
Direct customers
Construction companies
Architectural firms
Major brands
LIXIL WING, Hoshi building
D&R
Distribution & Retail Business
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.
Direct customers
General consumers
Construction professionals
Major brands
Principal products and services
Home centers
Household products, DIY products, building
materials, etc.
(Expected to be sold in November 2020)
H&S
Housing & Services
Business
H&S offers comprehensive housing and lifestyle
support to customers in Japan throughout all stages of
their lives.
Principal products and services
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.
Financial services business
Housing loans, etc.
Direct customers
Major brands
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
GL Home WoodsHill
Super VIVA Home
in Kaishikishima, Yamanashi
28
29
SECTION 1LIXIL IN FYE2020 Principal Risks and Countermeasures
In order to achieve our business objectives, we regularly identify, assess and monitor risks according to
Strategic Risks
Group-wide standards. This enables us to better understand the nature of the world we operate in and
make better informed management decisions, ensuring we continue to generate value for our stakeholders.
Strategic risks affect the implementation of LIXIL’s business strategy. The following strategic risks were evaluated to have a moderate to high
degree of impact or possibility of occurrence.
LIXIL regularly monitors strategic and operational risks
and implements countermeasures at all levels of the
business in order to manage them. In addition, the Audit
Committee monitors whether effective measures are
being taken to address high-priority risks through
participation in the Board of Directors and other
committees.
Note: For a full description of LIXIL’s strategic and operational risks and
countermeasures, please visit:
www.lixil.com/en/investor/strategy/risks.html
New: The COVID-19 Pandemic
The COVID-19 pandemic is expected to affect a
wide range of LIXIL’s business activities. Failure
to protect employees through Occupational
Health and Safety (OH&S) safeguards could
result in personal harm while government
regulations such as lockdown measures could
affect local operations. The unprecedented and
unpredictable nature of the pandemic could also
cause supply interruptions, slowdown or
suspension of production, and even delays in
new product launches. Combined with the
economic slowdown, this could negatively affect
our business performance and financial position.
Countermeasures:
Coordinating global HR policies and implementing
OH&S protocols and communications processes
to prioritize people first
Leveraging IT infrastructure to transition
operations online
Managing flexible global supply chain to maintain
product and material supply
Securing working capital from financial institutions
and ensuring high liquidity through effective
capital investments and by managing SG&A
expenses
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w
11
13
14
1
4
7
5
16
3
6
17
8
9
18
10
12
15
2
Risks of increased importance compared
to last year or new risk
Same level of risk as last year
Risks of decreased importance compared
to last year
Strategic risk: cross-business risk
Strategic risk: risks specific to the business
Operational risk
Low
Middle
High
Possibility of occurrence
Business Risk (FYE2020 Report)
Risks related to COVID-19
(1) Risks related to changes in the economic environment
(2)
Risks related to fluctuations in exchange rates and
interest rates
(3) Risks related to the development of new products
(4) Risks related to the supply of raw materials
Cross-business risk
(5)
Environmental risk
(6) Risks related to business restructuring
(7)
Risks related to the acquisition and development of
human resources and the promotion of diversity
(8) Risks related to the capacity of facilities
(9)
Risks related to tie-ups with other companies and
corporate acquisitions
LWT*
(10) Risks related to sales channels
(11) Brand risk
LHT*
(12)
Risks related to competition with competitors and
product prices
LBT*
(13) Risks related to long-term contracts
(14)
Risks related to disasters, accidents and infectious
diseases
(15) Risks related to information security
Business-
specific risk
Strategic risks
Countermeasures
Changes in
economic
environment
Sales and profits in Japan are affected by housing demand, business
conditions, price fluctuations, and industry trends. In particular, changes
in housing starts and orders received by construction companies could
adversely affect our operating results and financial position. We also
engage in production and global sales activities in the Americas,
EMENA, APAC and Greater China regions. Should war, trade conflicts,
social unrest or other incidents occur, changes to sales activities and our
supply chain in these regions could adversely affect our performance.
Growing share in the new construction market,
expanding sales in the mid- to high-end market, and
strengthening renovation strategy in Japan
Monitoring geopolitical and social developments
through external third parties, etc., to identify signs of
emerging risks
Operating a stable supply chain system by
maintaining appropriate inventory levels, including
products and raw materials by securing alternative
suppliers
Fluctuations in
exchange rates
and interest
rates
With significant operations outside of Japan, exchange rate fluctuations
could materially impact the yen value of assets and liabilities arising
from foreign currency transactions, in addition to sales prices and
revenues from products traded in foreign currencies. With funding
mainly comprised of interest-bearing debt, such as loans from financial
institutions, a significant increase in market rates could increase our
interest burden, making it difficult to raise funds through such
borrowings and increasing interest expenses.
Operating a system in the Japan Treasury Unit to
identify working capital and capital needs for
investments and loans, and screening all transactions
through the Investment Review Committee
Operating Regional Treasury Centers in China,
Singapore, Germany and the US to monitor foreign
exchange rates, hedge transactions, and consolidate
fund management operations regionally
Sales channels
LIXIL Americas offers a wide range of medium- and high-end products
to suit various lifestyles. Its distribution structure, however, is shifting
from conventional sales channels, such as distributors and retailers, to
direct sales to consumers, such as through its own e-commerce
platform. While striving to transform its business and cost structure, the
inability to capture sufficient consumers during this transition could
affect profitability and cause LIXIL to record a potential impairment loss
on goodwill.
Strengthening sales plans with authorized distributors
and expanding sales channels to include construction
companies
Developing e-commerce platform to capture direct
demand from end users
Implementing management systems to ensure
information security and prevent disruptions to digital
platforms
Brands
The GROHE brand has expanded into emerging markets such as Asia
and Africa, requiring more flexible pricing and the development of
localized products. This could erode GROHE’s brand value and earning
power. In addition, if the GROHE brand is not strategically managed
within the LWT business, the brand and its designs may no longer be
sufficiently differentiated, affecting profitability. These factors could
cause LIXIL to record a potential impairment loss on goodwill.
Investing in brand to maintain brand value and
develop differentiated products
Monitoring and analyzing sales prices of GROHE and
competitors globally to implement consistent pricing
strategy and maintain optimal price corridor
Maintain brand value and differentiate from other
brands in LWT’s portfolio through brand and design
signature elements
Competition
and
competitive
pricing
The building and construction materials market in Japan is an
oligopolistic market where the pricing decisions of competitors can affect
revenue and profitability. While able to launch high-quality, attractive
products, LIXIL may not be able to develop a competitive advantage in
terms of prices. There is a possibility that our Group’s products and
services will be exposed to severe price competition, which may
adversely affect operating results and financial position.
Promoting the launch of value-added and
differentiated products, including through tie-ups
with global manufacturers to launch products in
growing market segments
Working to raise sales prices, including through
trading system that enables faster decision-making
on pricing in line with market demand
Group-wide
LWT
LHT
Building project contracts are characterized by a long cycle of
quotations, bids, orders, contracts, construction, and deliveries. With
revenue and expenses recognized as the contract progresses,
discrepancy between estimates and actual results, which can be
affected by a number of factors, could deteriorate the profitability of a
project. In addition, changing economic conditions or the financial
condition of borrowers during the course of a project may make some
receivables uncollectible or necessitate an increase in the allowance for
doubtful accounts.
Controlling the overall amount of bonds at the time of
tendering and receiving the order, developing an
order reception plan according to the operating status
of existing projects, and rigorously examining order
reception conditions
Strengthening governance through a system to
examine bids and approve the conditions of receiving
an order according to their monetary importance
Operational risk
(16) Risks related to litigation and other legal proceedings
LBT
Long-term
contracts
(17) Risks related to product liability and claims
(18) Recoverability risk of deferred tax assets
*LWT: LIXIL Water Technology, LHT: LIXIL Housing Technology, LBT: LIXIL Building Technology
30
31
SECTION 1LIXIL IN FYE2020
Value Creation Process
1
Starting with our Corporate
Purpose, LIXIL’s value creation
process describes how we
create value in a sustainable
and meaningful way for our
stakeholders and society.
Our Corporate Purpose
To make better homes
a reality for everyone, everywhere
2
The Resources We Rely On
P.34
Diverse and Purpose-Led People
“Monozukuri” Manufacturing Platform
Approximately 75,000 employees
Approximately 100 factories worldwide
providing the necessary competencies
making multi-brand products better,
to achieve LIXIL’s purpose
faster, and more responsibly
Global Sales Infrastructure
Sustainable Resource Management
Established infrastructure in 150
countries enhanced by new digital
business models
Reducing our environmental footprint
through innovation in key areas like
sanitation and water
Unrivalled Portfolio of Brands
Financial Foundation
16 global product brands meeting the
needs of a broad base of consumers
around the world
Balanced investment for medium- and
long-term sustainable growth and
reliable returns
Meaningfully Designed Products
Consumer-centric technology and
designs to enhance user experience
and solve social issues
3
4
The Value We Create
Outcomes for LIXIL
P.40
By following a strategy that prioritizes responsible business, we are increasing profitability through
reduced volatility, an improved balance sheet and generating more consistent returns. Combined
with our commitment to contributing to society, this will set us on the path to sustainable growth.
Outcomes for Stakeholders
Employees
are proud of their
company, thriving
in an engaging and
Consumers
have access to
brands and
meaningfully
Partners
benefit from
differentiated and
high-quality products
inclusive workplace that finds
designed products for the home
provided worldwide on a reliable
shared value in the LIXIL
which improve comfort in a
basis, in addition to industry
Behaviors and draws
sustainable and responsible
initiatives that create shared value.
competitiveness from its diversity.
manner.
Societies
benefit from
contribution that
addresses social
Shareholders
benefit from improved
future earnings
potential and a strong
issues, including promoting
commitment to ESG principles.
Supporting progress of the SDGs
global sanitation, innovating to
mitigate climate change, and
embodying diversity and
inclusion.
The Way
We Create Value
LIXIL’s value creation
comes from our people,
who are empowered to
act and create value for
stakeholders via six
enablers:
P.38
P.33
Strong
governance
Clear
strategic
goals
A modern
work
environment
LIXIL’s
people
A clear
corporate
purpose
Universal
“LIXIL
Behaviors”
An efficient
operating
structure
32
33
SECTION 2VALUE CREATION PROCESS The Resources We Rely On
Diverse and Purpose-Led People
Global Sales Infrastructure
Sales presence in
over 150
countries
LIXIL is present in more than 150 countries via a global
footprint of sales channels and industry-leading brands
that have been brought together to form our company.
This provides us with an unmatched ability to identify
and act on market opportunities as they emerge virtually
anywhere in the world. We are today continuing to drive
integration to further strengthen this global resource. In
2018, we formed the Synergy Creation Office, which
helped to identify synergies across the regions in
activities ranging from technology and product
development to manufacturing and human resources.
The ability to identify and quickly act on synergies across
our global business is now further strengthened with the
establishment of LIXIL International, overseeing the
management of all international markets.
Digital technologies too are allowing the business to
move closer to the consumer. With heightened awareness
of health and hygiene following the COVID-19 outbreak,
the importance of these technological capabilities has
been further heightened. In markets such as Japan, the
digitalization of showrooms using proprietary technology is
Approx. 75,000
employees
working around the world
Today more than ever, long-term corporate success relies
on a diverse team of highly engaged employees
motivated by meaningful work and broad opportunities
to advance through learning and professional growth.
For LIXIL, the human element in design, manufacturing
and working effectively with partners and consumers is a
core requirement. Our approximately 75,000 employees
come from many different backgrounds, joining LIXIL
from other organizations around the world or as part of
legacy companies that became a part of LIXIL. It is
therefore vital that we celebrate and leverage that
diversity to the fullest and management’s focus is to
build a global team of highly engaged employees who
are proud to work for LIXIL. As part of leveraging diversity
in order to foster the minds and skills we need, for
example, over 30% of new graduate recruits at LIXIL in
Japan are female, contributing to enhancing the 34.3%
ratio of female employees at LIXIL worldwide.
Today’s employees also have higher expectations of
their company. Not only must we show a total
commitment to the core values of diversity and inclusion,
we must be able to demonstrate that it is contributing to
society in a positive and sustained manner. These
corporate actions contribute to enhanced employee
engagement and long-term sustainability, and create the
goodwill that enables financial success.
To help ensure we have the right skills for a rapidly
changing world, and to become a company that can
attract and retain the best talent, we are redefining how
we work. Every employee should recognize meritocracy
and be empowered to build a fruitful career at LIXIL. We
are striving to enable each employee to manage their
own career journey and in the new workplace model,
ensure they have the tools, learning opportunities, and
supportive managers to help guide them and ensure
LIXIL has the right capabilities in place to drive the long-
term success of the Company.
As part of LIXIL’s Value Creation
Process, we leverage seven unique
resources that enable us to achieve
our Corporate Purpose.
bringing new opportunities, while big data is contributing
to product development. In the US, direct-to-consumer
business models are allowing us to further cater to
consumer needs, while in China, one-stop shop services
bound by digital are solving traditional consumer pain
points. The use of digital technology is serving as a bridge
across markets worldwide.
Unrivalled Portfolio of Brands
Over 70%
consumer recognition
rate for our brands
LIXIL brings together a unique portfolio of brands.
Brands such as GROHE, American Standard, INAX and
TOSTEM are industry-leading names, and in each of our
business regions our brands have over 70% consumer
recognition rate in multiple key markets. While each
brand has its own unique personality and strengths,
together they provide LIXIL with an unmatched offering
and ability to meet the full scope of consumer
preferences and needs. With our brands positioned as
the jewels of our global growth strategy, LIXIL has moved
from a company of individual brands to a “house of
global brands,” serving every market segment and the
breadth of consumers’ different lifestyles, tastes, and
preferences. Through the unique processes and tools we
have created, each brand has a clearly defined persona
and appeals to different consumer segments ensuring
they compliment each other and do not compete. By
sharpening values and characteristics of each of these
unique brands, we are also able strengthen touch points
with consumers and build engagement and brand equity
over the long term.
Management of our brands is fully aligned with how
we think about design and the use of our technology and
innovations. Leveraging our portfolio of global brands, we
strategically integrate the advanced technology that has
been developed in Japan to offer new and unique
solutions to consumers and further build brand equity.
At the same time, the design and marketing capabilities
that have been refined by our international markets are
now augmenting the strong technological capabilities
34
35
SECTION 2VALUE CREATION PROCESS
The Resources We Rely On
home environment instead of a collection of various
items, LIXIL’s design strategy and in-house capabilities
offer a comprehensive approach, emphasizing vital
elements to enable consumers to create a seamless
design experience in the home.
“Monozukuri” Manufacturing Platform
Approx.
100 factories
around the world
LIXIL operates approximately 100 factories worldwide
spread out across its regions. Our unmatched network of
infrastructure allows us to meet demand anywhere in the
world, an especially important capability at a time when
global supply chains are constrained. The benefit of this
capability, now managed as an integrated global
operations network, became clear during the various
stages of the COVID-19 outbreak where manufacturing
could be shifted away from countries facing isolation
orders to those less affected. As the impact of the virus
shifted, so too could LIXIL’s manufacturing, helping to
ensure a steady supply of key products across key
markets.
This global network model for operations, combined
with the multi-product and multi-brand production
capabilities of various factories, also gives LIXIL an
unmatched ability to efficiently “go to market” with new,
innovative products serving all market needs and without
the need for expensive plant construction and related
capital investments. This helps to lower ongoing costs
and meet market needs with greater flexibility.
LIXIL’s commitment to quality is another feature of its
manufacturing capabilities. Cross-regional training and
the chance to take the Japanese “monozukuri” model of
manufacturing to other countries have helped our global
operations to offer high-quality products. To further drive
improvements in our global manufacturing network,
LIXIL has appointed two leaders to establish unified
technology and manufacturing organizations across LIXIL
International’s fixtures and fittings operations. This
investment will help us manage operations more
centrally, drive synergies across our brands, and enable
cost efficiencies.
that have traditionally been the foundation of the INAX
brand. Through such initiatives, we will further enhance
the brand recognition and long-term equity of LIXIL’s
global house of brands.
Meaningfully Designed Products
6 design studios
in Europe, North America,
and Asia
LIXIL’s design thinking approach brings the voice of the
consumer to the heart of our product development
process and is an important differentiator for the entire
company. Designs that anticipate consumer needs and
support lifestyles around the world have been vital to the
success of our brands and create unique consumer
experiences. Driving this is approach is the LIXIL Global
Design Organization with six design studios in Europe,
North America and Asia. Bringing design processes
in-house and overhauling them, the Design Organization
has won numerous awards for its innovative creations as
well as contributions to brand communications. As an
in-house resource, the design team is now involved in
every step of the product development process.
With consumers increasingly seeking a coordinated
Sustainable Resource Management
Financial Fundamentals
14.3 %
decrease in CO2 emissions
per unit of output
Long-term goal of
10 %
core earnings ratio
To truly be a purpose-led organization that contributes
positively to society, every organization must look to
reducing its impact on the environment. This requires a
program of constant improvement as technology and
innovation are brought together in line with the aims of
the 2015 Paris Climate Agreement.
Since first implementing our Corporate Responsibility
strategy in 2016, we have achieved our carbon intensity
target two years ahead of schedule. Today, LIXIL
accounts for 1,314 kg-CO2 / ¥1 million in revenue
representing a drop of 14.3% per unit of output. The
company is accelerating its activities, and now commits
to pursuing a net-zero carbon footprint and helping the
world transition to a circular economy through its
products by 2050. This program cuts across the entire
organization. Manufacturing is of course a central
element, but the program also covers activities from
initial procurement through to product disposal.
Water resource management is an equally important
part of this process, and particularly relevant in the
context of our products. It is estimated that by 2050, over
40% of the world’s population will not have access to a
sufficient water supply*. Through innovation in our
products, including ways to use less water in daily
sanitation, we can help achieve global water sustainability.
*OECD Environmental Outlook to 2050 (2012)
A strong financial base is a critical part of LIXIL’s
success, both to reward our stockholders and to provide
us with the capital needed to make profitable
investments. Our goals in this area are ambitious but
achievable. For the medium term, we are targeting a
core earnings ratio of 7.5% and for the longer term, we
are raising that to 10%. To help ensure we can meet
these goals, we are including specific earnings-linked
targets on Return on Invested Capital (ROIC) for each
executive officer. We believe that the ROIC metric not
only enables management to see the progress that is
achieved in every part of the business but it also guides
management on the adjustments needed regarding our
actions to ensure that execution remains on track.
At the same time, we are strengthening the balance
sheet through a reduction in our overall debt by limiting
future capital expenditures through a better utilization of
our assets. As part of this, we aim to achieve a net debt/
equity ratio of 1.0 or less and will also target a net debt/
EBITDA (earnings before interest payments, taxes,
depreciation and amortization) ratio of 3.5. Through the
planned sales of Permasteelisa and the LIXIL VIVA home
improvement store division, we will make significant
progress on both measures. These divestitures will also
help the management team to better focus on our core
areas of growth and look to improve the key metrics for
each business area. While we have adopted ROIC as an
internal benchmark to measure performance and to
incentivize our senior managers, management and the
finance operation will also closely monitor other
measures including the core earnings ratio, return on
equity, net debt/EBITDA, and the ratio of equity
attributable to the owners of the parent.
36
37
SECTION 2VALUE CREATION PROCESS
The Way We Create Value
At LIXIL, we believe our people are the ultimate drivers of value creation.
We understand that, fundamentally, an idea has zero value until it is successfully implemented.
Our people enable us to realize the aims of our strategies.
operations around the world. We are ultimately focused on
achieving sustainable competitiveness and growth by improving
profit margins and contributing to society. To achieve this, we set
out four specific goals: (1.) to establish a purpose-driven
entrepreneurial company able to deliver sustained growth, (2.) to
further develop attractive and differentiated products to meet the
evolving needs of the market, (3.) to make our costs more
competitive and (4.) to leverage strategic marketing initiatives to
bolster growth. This paves the way to becoming a more agile and
resilient company that can reward its stakeholders for many years
to come.
business portfolio. We have since begun implementing
organizational changes – large and small – that are making LIXIL
leaner, simpler and faster, allowing employees to get on with the
job of producing success. LIXIL is transitioning from a holding
group model to an integrated operating company structure that
enables faster decision-making. In Japan, we have delayered the
structure of our sales force, while internationally, we are integrating
and centralizing operations. Each of these moves, supported by
HR policies that empower employees and digital tools that bring
them closer together, will help to make LIXIL a more agile
company and at the same time help lower costs.
02
A Clear Corporate Purpose
04
Universal “LIXIL Behaviors”
Creating a truly global team of engaged and committed colleagues
is the most important - and yet most complex – challenge for any
organization. At LIXIL, our unique history of formation through
numerous mergers and acquisitions make this task especially
challenging. To realize this important goal, we take a multi-faceted
approach to ensuring that our people are not just “labor inputs” in
the value creation system, but are the very heart of the enterprise.
From the product developers, designers and manufacturing staff
to those who meet directly with consumers to sell our products,
our people and their efforts realize the unique competitive
advantage of LIXIL.
We believe this approach ensures LIXIL has the resilience and
agility to serve local markets and to collaborate seamlessly to
maximize opportunities with a global, or enterprise, mindset. It
ensures the LIXIL name represents an ethical and commercially
successful enterprise. With every employee working in this way,
the company can achieve its purpose to make better homes a
reality for everyone, everywhere.
01
Clear Strategic Goals
Through the contribution of our employees, LIXIL is delivering on
a set of goals laid out in the Medium Term Plan (MTP) announced
in 2017. A clear strategy is vital for any organization to succeed,
especially one such as LIXIL with a portfolio of brands and
At LIXIL, we work to make better homes a reality for everyone,
everywhere. We believe that contributing to society through our
core business is central to our long-term sustainability. Creating a
sense of purpose inspires and motivates employees beyond their
everyday goals, while forging deeper connections with our external
stakeholders. LIXIL is uniquely placed to play an important part in
society, from redefining how people live to providing solutions
addressing social issues. As part of this, we are taking important
steps to reduce the impact of living spaces on the environment
through eco-friendly products and services, while developing
solutions that improve quality of life and comfort. We also believe
that taking part in solving society’s challenges goes beyond
corporate responsibility programs, it is a part of our daily business
and will benefit all of our stakeholders. Through our SATO social
enterprise and similar initiatives, for example, our goal is to better
the lives of 100 million people through improved hygiene and
sanitation by 2025.
03
An Efficient Operating Structure
Complex operating structures benefit no one. They confuse
employees unnecessarily because information is distorted as it
moves down the line, raise direct costs and most significantly,
create the unseen costs of slowing down decision making. When
LIXIL was formed through the integration of renowned industry
leaders in Japan and international markets, it inherited a top-
heavy structure with overlapping areas of authority and a broad
LIXIL’s creation brought together front-runners that achieved
success through each of their unique cultures. To create a
common foundation from which all employees can work toward
the same goals, we introduced three core LIXIL Behaviors. These
apply to everyone in the company, no matter their role or location
and are designed to augment the strong brand cultures that
remain important for our success. First is “Do the right thing.”
Decisions should be made on the basis of a strong sense of
ownership and what is best for the company, encouraging
employees to speak up and share opinions despite past norms
defined by rank and hierarchy. This removes the traditional
hierarchical approach in which employees too often make a
decision based on what “the boss would want.” Second is to “Work
with respect” in order to create an environment in which all
employees can exchange their opinions and ideas openly and
equally. We must focus on the quality of an idea, not where it
came from. Third is to “Experiment and learn.” Highly innovative
cultures recognize the value of failure; it is not an opportunity to
lay blame, but rather an opportunity to learn so as to get the next
version of the effort right. Designing experiments to keep the cost
of failure low and the learning value high is a key part of LIXIL’s
new culture. We believe this new culture will encourage more
experimentation and lead to important innovations for our future.
Not only can employees feel more empowered in this new
atmosphere, they will also be able to work with greater agility,
enabling LIXIL to respond to the increasingly competitive
landscape and implement innovations faster.
05
A Modern Work Environment
The COVID-19 pandemic has resulted in rapid and fundamental
changes in the way people work around the world. Companies must
quickly introduce new infrastructure, new working models and new
ways of interacting with their stakeholders. At LIXIL, we believed in
the need to make these fundamental changes as early as 2017,
helping prepare us for this “new normal.” To bring our operations
on par with global standards, and especially to accelerate our Japan
operations to this standard, we have embraced remote working for
employees to enable everyone to better cater to their own lifestyles
and needs, while providing employees the right to manage their
own flextime. As part of our digital journey, social platforms such as
Workplace by Facebook are driving real-time, informal, networked
communications by increasing the number of contacts employees
are exposed to and lowering the barriers to communicate,
collaborate, and learn from one another. More productive online
meetings that bring together our sales people with distributors,
architects and consumers are fast becoming the new norm. We are
transforming our office environments, including the company’s
Tokyo headquarters, creating an environment that enables people
to work more collaboratively, comfortably, and flexibly.
06
A Strong Governance Foundation
Strong corporate governance is crucial to improving accountability
and transparency. The company operates a governance structure
with a Nomination Committee, Audit Committee, and
Compensation Committee under the Board of Directors, and last
year also additionally established a Governance Committee as a
voluntary permanent committee to monitor and supervise
corporate governance. Members and the chairperson of each of
these committees are outside directors. The Nomination
Committee also announced details of strengthened processes for
the selection of candidates for the Board of Directors and
executive officers. In addition, the merger between LIXIL Group
and LIXIL Corporation is scheduled to be completed in December
2020 to enhance the company’s agility by enabling faster decision-
making and improve Group governance. The LIXIL Group Code of
Conduct, and Group-wide financial and accounting management
policies are reinforced through education and training for
directors, executive officers and employees.
38
39
SECTION 2VALUE CREATION PROCESS The Value We Create
Through our unique resources and
by enabling our people to create
new value, LIXIL strives to create
sustainable value for all of
its stakeholders.
Outcomes for LIXIL –
The Results of Our Work
Value creation is the ultimate measure of a
corporation. A company that can add value in
everything that it does is destined for long-term
success.
At its core, LIXIL’s value creation process is
designed to create higher profitability and sustainable
growth, which allows us to meet our corporate purpose
of making better homes a reality for everyone,
everywhere. We believe value creation should not be
confused with business aggregation. Focusing only
on growing market share can actually lead to the
reduction of value since it can increase coordination
costs and lower profitability. Sales growth and the
expansion of our business should instead come from
greater competitiveness.
To achieve this, we have to differentiate ourselves
to compete with low-cost manufacturers offering
commoditized products, established manufacturers
expanding their offerings, and e-commerce platforms
disrupting traditional sales channels. Being agile and
succeeding in selling the best products and services
at the right price will provide us with the consistent
returns that can then be used to reward our
shareholders, allow us to re-invest in new and
profitable growth areas, and weather the volatility of
markets. With a profit-driven model in place, we can
then pursue higher growth rates and market
expansion, driving long-term, sustainable growth.
But sustainable profit creation also requires
success across a range of stakeholder commitments
that go well beyond traditional financial metrics. This
is especially true in a fast-changing global environment
in which there is broad demand for corporations to
play a greater role in benefiting society.
At LIXIL, we do this through products that improve
people’s lives as well as contributing to solving social
issues. In addition, our operations must minimize their
impact on the environment. These initiatives combined
are an important part of employee engagement, are
increasingly seen as factors in the purchasing
decisions of consumers, and are a sign of long-term
sustainability. They therefore help to create a stronger
company and that will in turn benefit shareholders.
The Value to Stakeholders – How They Judge What We Have Done
Each set of LIXIL stakeholders have their own priorities that create an interlocking set of expectations for us to meet.
Employees –
The people who contribute to growing LIXIL
How we engage
SDGs
Employee pulse surveys to respond quickly to HR policy needs
Global internal communications platforms
Employee networks to support employee activities and interests
Union relations
Speak Up! compliance hotline
Our achievement standards
Through our ongoing efforts, we have been able to raise employee
engagement and to build a greater sense of commitment to the
Company. Our surveys show that 51% of all employees strongly
agree or agree they are proud to work for LIXIL.* They also show a
strong affiliation with the Company’s business goals of helping
people meet their housing needs and contributing to better
sanitation standards for people around the world. All employees
should feel connected and that they are contributing to making
better homes a reality, not only those who are directly working on
SATO and improving sanitation.
Ensuring meritocracy and giving our people control over their
career path is also vitally important. LIXIL believes that employees
anywhere can create their own career journeys. With the vertical
integration of core functions such as human resources, we can
strengthen functional excellence and enhance transparency. We
Over 51 %
of all employees are
proud to work at LIXIL
also embrace diversity and want to turn the energy and creativity
generated by diversity into a source of strength. Creating an
inclusive environment is therefore at the core of the Company’s
HR activities.
The workplace is also an important indicator of how a
company views its employees. Even before the restrictions
imposed by COVID-19, we encouraged home working and the
expanded use of technology to connect employees with each
other, consumers and partners. This not only raised employee
satisfaction, it also boosted productivity. LIXIL’s latest employee
survey taken in April to measure the response to remote working
indicated a 10% increase in engagement among employees based
in Japan compared to data from December.
*82% including employees who “slightly agree”
40
41
SECTION 2VALUE CREATION PROCESS
The Value We Create
Consumers – The end users
who enjoy our products
Partners – The architects,
distributors and builders who
help create a home
Societies – The communities
and social issues we contribute
to globally and locally
Shareholders – Those who
believe in and support us
How we engage
How we engage
How we engage
How we engage
Sales and marketing activities
Design, technology and social trend research
Customer services
Exhibitions
Partner surveys
Construction-related training programs
Safety and product education sessions
Responsible procurement survey of suppliers
Human rights due diligence
Dialogue and information-exchange sessions
Volunteer activities
Annual General Meeting of Shareholders
Regular meetings with investors
Announcements from the Investor Relations team
The Investor Relations website provides all pertinent information
SDGs
SDGs
SDGs
SDGs
¥4.9 billion
in sales from cross-brand
synergy and new business areas
73.5 %
satisfaction rate among our
business customers
Enabled
18.6 billion
people in 38 countries to
access basic sanitation
Listed on the Dow Jones
Sustainability World Index
and FTSE4Good Index
Our achievement standards
Our achievement standards
Our achievement standards
Our achievement standards
Innovation is central to LIXIL’s brand value. However, to be truly
meaningful, innovation must represent new features and
functionality that anticipate the needs of those around the world
who use our products. Our brands are also designed to appeal to
consumer lifestyle tastes and preferences, from the cosmopolitan
to the more traditional. Combined with our technology and wide
range of products, it means that we can create a coordinated
range of products that together create a lifestyle sought by the
consumer.
The combination of our technology, design and marketing
strategies is today driving growth. In FYE2020, ¥4.9 billion of LIXIL
Water Technology’s sales were driven by products born from
cross-brand and cross-regional synergy as well as new business
areas such as direct-to-consumer channels.
We also share consumers’ concerns about environmental
issues and recognize the desire for home products to utilize
technology and functionality to reduce their environmental impact.
Beyond their own homes, consumers also want to do business
with companies that share their concerns and demonstrate a
commitment to combating climate change and conserving
increasingly scarce water supplies.
In light of global trends such as aging populations, we are also
today focusing our efforts on expanding Universal Design (UD).
Based on these design principles, LIXIL intends to develop and
offer products and services that incorporate ideas from multiple
perspectives to enable all individuals to live full and comfortable
lives in the home.
For the professionals with whom we do business, our commitment
is to use our global resources to provide high-quality products
worldwide on a reliable basis. These products must be fully
compatible and meet all safety and regulatory standards in each
market. Our surveys show there is a 73.5% satisfaction rate
among our partners in Japan and that we enjoy a 89% conformity
rate for responsible procurement.
We also work together with partners to help overcome shared
challenges to provide the best products at competitive prices. In
Japan, LIXIL’s PATTO Reform campaign brings together LIXIL as a
manufacturer, distributors and construction contractors to make
the entire renovation process faster, simpler and clearer for
consumers. By bringing transparency to the purchase of housing
products, we ensure consumers are getting the best value and
can undertake renovation projects in confidence. The program is
designed to fill an identified gap, and is just one example of LIXIL’s
ability to identify and act upon new market opportunities.
We further reinforce our ties to the industry by offering
differentiated products that partners can more easily sell into the
consumer market. LIXIL’s corporate responsibility and
environmental commitments further help consumers feel that they
are contributing to strong social practices when purchasing and
using LIXIL products.
As a company operating globally, we must be in tune with the
needs of society and of each community where we operate. Our
programs must therefore be both global and local. One of our
primary assets in this area is the ability to leverage our technology
and know-how to make a difference in the world.
At the global level, the SATO Toilet System and SATO Tap
handwashing station provide unique solutions for developing
countries, while facilitating the development of local production
and sales structures to ensure they become locally rooted
businesses. To date, we have already helped 18.6 million people
in 38 countries gain access to basic sanitation – but know we have
much more work to do.
We are also executing on an environmental strategy under
which we pursue innovation in low-carbon and water-efficient
technologies, including the goal of a net-zero carbon footprint.
With the use of our products accounting for more than 90% of
their total environmental impact over their life cycle, this is how we
can make a difference.
At the local level, our employees play a direct role in helping
society, contributing to the communities where they work and live.
These programs help us “pay back” our neighbors and provide
our people with the pride of knowing that they have helped. To
further encourage their involvement, all LIXIL employees can use
company time to participate in Community Day programs. Last
year more than 15,000 employees in 33 countries demonstrated
their desire to make their communities a better place.
All of our efforts in value creation accrue to the benefit of our
shareholders. This of course means improving profit margins and
boosting our long-term corporate value. But long-term corporate
value comes from a much wider range of goals. By engaging more
effectively with our employees, creating a respected brand for
consumers, helping our partners and contributing to society, we
help to raise our future earnings potential and therefore reward
our shareholders. A commitment to ESG principles, for example,
is not just about “doing the right thing,” it also strengthens our
valuations. LIXIL is today listed in indexes such as the Dow Jones
Sustainability World Index and FTSE4Good Index.
Good corporate governance forms a key part of this work.
Data-driven research shows that companies that open up their
decision-making processes, invite more external oversight and
practice diversity at the top levels solidly outperform companies
that take a narrow view of how to manage. LIXIL’s Board today has
a majority of independent external directors and each of the
Board’s committees is chaired by an outside director.
Communication of our values is also important to demonstrate
to the investor community that our strategy is robust and offers a
path to success. The support of investors is central to succeeding
in our mission to build a company that can generate more
consistent returns, reduce stock volatility by better coping with
external factors and proceed on a path to sustainable growth.
42
43
SECTION 2VALUE CREATION PROCESS
CR Chairperson’s Message
Jin Song Montesano
Director, Executive Officer and Senior Managing Director,
Human Resources and General Affairs, Public Affairs,
Investor Relations, External Affairs, and
Corporate Responsibility, and Chief People Officer
Reaffirming Our
Purpose and Setting
New CR Strategy Goals
this knowledge, we are more determined than ever to
make it a reality.
Since launching our “Make a Splash! Toilets for All”
partnership with UNICEF in July 2018, we are making
progress in forming sustainable sanitation markets in
Kenya, Ethiopia, and Tanzania. Together, we are
accelerating advocacy and supporting local campaigns
to improve the sanitary environment, in collaboration
with local governments. These activities have the
exciting potential to extend to other countries. Our core
activities with UNICEF have also further benefited from
donations totaling ¥10 million from employees through
“Team Splash!” as well as ¥26 million raised from the
3rd annual “Toilets for All” cause-related marketing
campaign in Japan.
We have also expanded the stakeholders we work
with to develop the sanitation market. Last year, we
signed a memorandum of understanding with the
Japan International Cooperation Agency (JICA), to
collaborate on improving sanitation and access to clean
water in developing economies.
In addition, to strengthen handwashing practices in
developing markets, we recently launched the SATO
Tap, an affordable handwashing solution that can be
used anywhere in the home without access to running
water. LIXIL has committed US$1 million to support
accelerated rollout and enable sustained handwashing
practices through this innovation.
to ensuring all of our products and services in Japan
are based on our Universal Design concept by 2030.
Last year, our new Resilience Toilet, which operates on
a minimal amount of water during emergencies, won
the Japan Resilience Award. We designed a new
restroom concept to enhance gender inclusivity, which
we have applied in our headquarters. We also
presented a prototype of an AI toilet that uses image
sensing technology to check the health of the elderly.
To foster a more inclusive environment in the
company, we formed a new Global Diversity & Inclusion
Department in September 2019 to implement unified
Diversity & Inclusion strategies and measures across
the organization. We have since established a new
Diversity & Inclusion Committee, chaired by CEO Kinya
Seto, to ensure that these activities are driven by our
business leaders at the most senior level. In addition, in
July 2020 we issued an updated statement on our
Diversity & Inclusion commitments. In recognition of
our workplace Diversity & Inclusion initiatives, LIXIL has
been awarded Gold in the PRIDE Index for three
consecutive years.
I am pleased to report that we saw a further
increase in employees’ participation in LIXIL Community
Day in FYE2020 to over 15,000 employees across 33
countries. In Japan, our employees conducted
educational classes for 4,026 elementary school
children to drive awareness for sustainable living.
In the area of Water Conservation & Environmental
The unprecedented spread of the COVID-19 virus
has forced us all to reflect on how our business
contributes to society while protecting our employees’
health and safety. Across the globe, we have managed
to come together to respond flexibly. I am proud to see
employees taking the initiative to contribute to society
and collaborating across teams and borders via our
internal platforms. I look forward to working with our
employees, customers, and partners to further
strengthen our contribution in this new normal.
Sustainability, we accomplished our 2016 carbon
intensity target two years early and announced our new
Environmental Vision 2050. Our goal is to achieve net-
zero carbon emissions from housing and lifestyle
solutions, as well as operations, by 2050. In addition,
we strive to become a leader in the field of preserving
water and limited resources for future generations.
We continue to incorporate our CR commitments in
our products, services, and business operations.
GROHE converted all its production plants to run on
green electricity in July 2019. In Japan, we participated
in the Ministry of Environment’s “Practical Guide for
Scenario Analysis in line with the TCFD
Recommendations,” using LIXIL Housing Technology’s
sash door and Zero Energy House (ZEH) as examples.
We are also continuing our shift to 100% renewable
energy in our business centers and are working globally
to eliminate, reduce, or replace plastics throughout the
product life cycle. LIXIL has been named in the CDP’s
prestigious Water A List for two consecutive years,
reflecting our leadership in water stewardship.
Regarding Diversity & Inclusion, we have committed
LIXIL’s purpose is to make better homes a reality for
everyone, everywhere. Our Corporate Responsibility
(CR) activities play a crucial role achieving this. At the
same time, our commitment to contributing to society
builds pride among our employees and a deeper
connection with external stakeholders, which forms the
basis for the organization’s sustainable growth.
LIXIL’s CR activities have continued to gain global
recognition, including a listing in the Dow Jones
Sustainability World Index for the first time in 2019. We
are proud of this recognition as a global sustainability
leader and remain committed to improving our
performance. Reflecting progress made so far and
changes in the business environment, we set new goals
for our three CR strategic pillars in FYE2020.
Concerning Global Sanitation & Hygiene, cumulative
deliveries of SATO products have helped change the
lives of 18.6 million people in over 38 countries thus
far. Although we are proud of this impact, this is behind
our targets, and as a result we have extended our
timeline to improve sanitation for 100 million people
worldwide to 2025. We have learned important lessons
since first announcing our target and now know what is
needed to quickly scale up our activities. Armed with
44
45
SECTION 3CR STRATEGY AND IMPACT
Corporate Responsibility Strategy
LIXIL is committed to improving the quality of people’s lives around the world and to pursuing
the growth of its businesses through responsible and sustainable innovations.
Leading with three strategic pillars
Global Sanitation &
Hygiene
Promote and enable access to safe and
hygienic sanitation practices, especially
for women and girls, while preventing
the harmful transmission of diseases
for children
Sanitation for All
By 2025, improve the livelihood of 100
million people through sanitation and
hygiene initiatives
Water Conservation &
Environmental
Sustainability
Conserve water, energy, and other natural
resources utilized in and by LIXIL
products and services, including in the
supply chain, production, distribution
and during end use
Zero Carbon and Circular Living
By 2050, achieve net-zero carbon
emissions from housing and lifestyle
solutions as well as operations, and
become a leading company based on a
model that preserves water and natural
resources for future generations
Diversity &
Inclusion
Leverage the knowledge and perspectives of a diverse
workforce as a key driver of growth and innovation,
and improve quality of life for all people through
our products and services, irrespective of their age,
gender, and the level of disability
Inclusive for All
By 2020, establish the culture of
diversity and inclusion within our
organization and among 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,” it is important to pursue
sustainable innovation, achieve profitable growth 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 their corporate
strategies are connected to environmental and social
initiatives.
Within this context, LIXIL aims to meet our social
responsibilities and increase the trust of our
stakeholders. We conduct CR activities based on 16
identified material issues (see pages 48-49) to build the
foundation for sustainable corporate growth. These
issues are categorized into Governance, Fair Business
Practices, Human Rights, Labor Practices, Quality and
Satisfaction, Supply Chain, and Stakeholder
Engagement, and form the basis of our CR activities.
Tackling these material issues helps us fulfill our social
responsibility, build credibility with stakeholders, and
strengthen the LIXIL brand. Addressing these issues also
contributes to risk management by helping to reduce
reputational risk.
We identified Global Sanitation & Hygiene, Water
Conservation & Environmental Sustainability, and
Diversity & Inclusion as three social issues that are of
highest priority to us. We call these our three strategic
Selection process of material issue
Selection
Assessment
Validation and approval
Social issues were selected by considering
global trends and 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
pillars, and seek to help solve these challenges by
leveraging our core Group strengths. We believe
addressing these fields will offer the greatest
opportunities and form the foundation for our
sustainable, long-term growth.
Supporting International Initiatives
LIXIL should take active leadership as a global company
of pioneering water and housing products to help solve
social issues through our business activities.
The UN Sustainable Development Goals (SDGs)
serve as a guide and our CR strategy reflects the
underlying SDG vision. We also fully support the
principles set out in the UN Global Compact (UNGC).
Since becoming a signatory, we have continued to
implement UNGC principles in the four areas of human
rights, labor, environment, and anti-corruption. In March
2019, we expressed support for the Task Force on
Climate-Related Financial Disclosures (TCFD), and
began conducting scenario analyses proactively.
LIXIL’s efforts have received external recognition,
including the receipt of the Deputy-Chief’s Award (by
Japan’s Foreign Minister) at the second Japan SDGs
Awards presented by the Japanese government’s SDGs
Promotion Headquarters. Such recognition from external
organizations provides a great opportunity for us to
confirm the direction of our decision-making and spur
an even greater contribution to valuable international
initiatives.
CR Management Structure and Material Issues
Management should demonstrate leadership and
collaborate with our core technology units to swiftly and
appropriately tackle material issues. That is why the
Corporate Responsibility (CR) Committee, which takes
the lead in our CR initiatives, is made up of officers from
each functional division at LIXIL’s head office and
representatives from each technology business unit. The
CR Committee meets quarterly and aims to formulate a
faster response to sustainability issues in economic,
environmental, and social areas. The results of CR
Committee discussions are, as necessary, approved by
LIXIL’s Board of Directors and Executive Officers
Committee. Once adopted, the initiatives are then
implemented by each functional division at the direction
of the officer responsible for each initiative. In FYE2020,
the CR Committee discussed and determined the
updated CR strategy and commitments, key human
rights issues, and TCFD response. The materiality
selection process, as per the above diagram, enabled us
to identify the issues that matter the most to our
stakeholders and the Group.
46
47
SECTION 3CR STRATEGY AND IMPACT
LIXIL’s Material Issues
Action plan and progress for each material issue
Material issues
Target
FYE2021 targets
FYE2020 progress
For further details regarding the Group’s material issues and CR activities and
outcomes, please refer to the sustainability section of our corporate website.
www.lixil.com/en/sustainability/
On track
Needs attention
Progress
Corporate governance
Establish governance structure that
meets global standards
Reorganize and implement Group governance rules and procedures, and clarify
rules, approval processes, etc.
Governance
Compliance
Group-wide ratio of basic training completion and Group Code of Conduct pledge:
100%
Develop a comprehensive and effective
compliance system across the Group
Establish a system to operate and improve compliance structure, and ensure
appropriate allocation and effective use of resources
Utilize the same concern-raising system in the Group, and publicize important
compliance indicators such as the number and summary of reported concerns
Conducted governance seminars for Group companies in Japan
Reviewed jurisdiction rules in relation to organizational changes at international Group companies
Established Governance Committee as a voluntary and permanent committee under the Board of Directors
Announced plans to merge LIXIL Group Corporation and LIXIL Corporation, which will strengthen monitoring and supervision
Revised and clarified Nomination Committee’s systems and operations
Group-wide ratio of basic training completion and Code of Conduct pledge: 77.6% (98% in Japan, 53.7% international)
Target not achieved due to variation in training completion rates by region and employee level. Training to be continued in FYE2021
Awareness of the concern-raising system in Japan: 63.3%; education and awareness-raising activities are ongoing
Held regional compliance events from October to November; implemented educational and awareness-raising activities
Risk management
Establish and operate a Group-wide
enterprise risk management system
Adoption rate of the crisis management system in Group companies: 100%
Adoption rate of the crisis management system in Group companies: 100%
Achieved timely escalation to the Group HQ for crisis events, including those that occurred outside 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
Adoption rate of global policies at Group companies: 100%
Completion rate of compliance-related education and training across the Group:
100%
Adoption rate of global policies at Group companies: 100% (adoption rate by company unconfirmed)
Completion rate of compliance-related education and training across the Group: target not achieved (the results vary by region and policy)
Compliance violations: 0
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
Diversity and equal
opportunity
Secure highly competent people by
respecting diversity across the Group
Occupational health
and safety
Establish the foundations of an
occupational health and safety
management system across the Group
Conduct global human rights due diligence and pinpoint human rights risks
Employed multiple means to help grasp potential human rights risks, especially surveys by the Human Rights Due Diligence Task Force
Determined seven key issues in which to focus our energies to reduce potential human rights risks
Ratio of women among recent graduate recruits: 30% or greater (LIXIL Corporation,
Japan)
Ratio of female participants in Stage 3 of the Talent Acceleration Program (TAP) for
next-generation leaders: 20% or greater (LIXIL Corporation, Japan)
Ratio of female undergraduate and graduate students recruited: 30.5%
Ratio of female managers: 5.7%
Ratio of female participants in Stage 3 of the Talent Acceleration Program (TAP) for next-generation leaders: 33.3%
Operational coverage of the occupational health and safety management system
across the Group: 100%
Acquisition of occupational health and safety performance data (based on number of employees): 100%
Conducted regular internal audits of the occupational health and safety management system and its operational status at each business
Labor
Practices
Quality and
Satisfaction
Working environment
Build a worker-friendly environment for
all employees
Ratio of employees who rate their work-life balance as favorable in Group-wide
employee opinion surveys: 46% (increased 10% from the 42% recorded in
FYE2018)
Talent development
Promote more employee-driven talent
development to encourage a bottom-up
corporate culture
Cumulative 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)
Ratio of employees who rate their work-life balance as favorable in the opinion surveys: 44%
Participants in the Talent Acceleration Program (TAP) for next-generation leaders: 70; cumulative participants: 1,265
Coverage ratio of the basic training program for third-year employees: 100%
First-year follow-up training participants: 192;
second-year communication training participants: 217;
third-year communication training participants: 161 employees
Product safety
Eliminate product accidents
Number of serious product accidents in the entire Group: 0
Number of serious product accidents across the Group: 7
Held product-related crisis management meetings for serious accidents. Decided the need for countermeasures on a case-by-case basis. Implemented product improvements
and awareness-raising on safe use
Climate change
mitigation and
adaptation
Environment
Water sustainability
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
CO2 emissions reduction attributable to Group products and services: expand by 1.36
times vs. FYE2016
CO2 emissions from Group activities: reduce by 8% vs. FYE2016
CO2 emissions intensity for LIXIL transportation: reduce by 5% vs. FYE2016
CO2 emissions reduction attributable to Group products and services: expand by 1.29 times vs. FYE2016 (65,868 thousand t-CO2)
CO2 emissions from Group activities: reduced by 6.3% vs. FYE2016 (14.3% reduction of carbon intensity per unit of output)
CO2 emissions intensity for transportation carried out in Japan by LIXIL as the consigner: reduced by 2.8% vs. FYE2016
Improve water-use efficiency at key water-risk management sites
Promoted initiatives aimed at reducing water use and the volume of waste water and expanding recycled water use at five key sites
Circular economy
Promote the sustainable use of raw
materials from procurement to disposal
Waste recycling rates at places of business:
95% (Japan, Europe), 66% (Asia), 40% (North America)
Waste recycling rates: 96.2% (Japan, Europe), 90.4% (Asia), 26.6% (North America)
Supply Chain
Supply chain management
Identify suppliers’ CR risks and
establish mechanisms to respond
accordingly
Increase the coverage of the Group-wide supplier CR survey to 90% in Japan, 60%
international (based on purchased amount), and the conformity rate to 90% (Japan)
Coverage ratio of Group-wide supplier survey: top 97% of suppliers in terms of purchased amount in Japan, 90% international. Average conformity rate: 89% (Japan)
Continued follow through activities, expect to achieve targets as planned in FYE2021
Contribute to global
sanitation and hygiene
Help improve global sanitation and
hygiene through our business
Cumulative users: 100 million
Cumulative shipments of SATO toilets: over 3.8 million units (18.6 million cumulative users). Shipped to over 38 countries
Changed the target for providing SATO toilets to 100 million people from FYE2021 to FYE2026
R&D to solve social
problems
Help solve issues experienced by the
elderly and people with disabilities
through our products
Research activities using digital and other means: 10
Research activities using digital and other means: 5;
external announcements: 2
Stakeholder
Engagement
48
49
SECTION 3CR STRATEGY AND IMPACT
Global Sanitation & Hygiene
Global Sanitation &
Hygiene
Relevant SDGs
Critical Social Issues
LIXIL’s Response
An estimated two billion people around the world do not
have access to safe and sanitary toilets. 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 unsanitary living conditions
and lack of clean water. The lack of school toilets can be
a barrier for girls to continue 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*. 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.
* “The True Cost of Poor Sanitation,” a 2016 collaborative research conducted
by Oxford Economics, the international NGO WaterAid, and LIXIL Group
LIXIL set a target to provide basic sanitation and improve
sanitary environments for 100 million people by FYE2021,
but, in FYE2020, decided to extend that time frame until
FYE2026. While, unfortunately, we did not achieve the
initial target, we are now accelerating efforts by bridging
gaps and increasing shipments of our simple SATO Toilet
Systems for developing nations. Our Bangladesh SATO
operation has already become profitable, demonstrating
that it can make a positive social impact while sustaining
itself financially. Building on knowledge acquired to date,
we plan to further expand the use of SATO products, and
conduct further research and development in our water-
conserving Micro Flush Toilet System, and our Portable
Toilet System, which facilitates the efficient and hygienic
collection of human waste.
We are proactively seeking collaboration
opportunities with specialist organizations, NGOs, and
business partners to help achieve these targets. Our
“Make a Splash!” partnership with UNICEF and our
partnership with the Bill & Melinda Gates Foundation to
develop a “reinvented toilet” that does not require sewer
connection are both examples of our efforts to use our
combined expertise to address global sanitation
challenges.
Achievements and Challenges
The SATO business is based on a grassroots social
enterprise concept. Its products are produced in six Asian
and African countries, and approximately 3.8 million units
have been delivered to more than 38 countries so far. This
equates to improving the sanitation and hygiene of
approximately 18.6 million people. In FYE2020, SATO
shipments topped one million for the first time, rising over
40% year on year to 1.16 million units.
SATO Toilet Systems are designed to be affordable,
so it is important to sell a certain volume to break
even. In Bangladesh, where the SATO business turned
profitable in FYE2019, we expanded production in
partnership with the biggest local plastics
manufacturer, RFL. We also worked together with the
NGO, Bangladesh Rural Advancement Committee
(BRAC), to increase awareness of hygiene and
potential toilet solutions. We believe the achievement
of a financially viable and sustainable SATO business is
immensely significant.
Our “Make a Splash!” partnership with UNICEF aims
to apply our joint expertise to establishing competitive
sanitation markets on a global scale. LIXIL is committed
to developing products tailored to local needs and
encouraging their broader use, providing a solution in
response to UNICEF’s awareness-raising and behavior
change initiatives to spur demand for toilets in target
countries. In FYE2020, LIXIL started to help establish a
market for sanitary products in Tanzania by cooperating
on a local government campaign to guarantee access to
toilets for all local citizens by 2025. We are also working
on tailored initiatives for Ethiopia and Kenya.
SATO, our first commercial solution for communities
that are not connected to water or sewerage systems, took
several years to establish itself in local areas. In addition
to its performance in terms of profitability and sales
volumes, we view the social impact of the solution as a
key element of the business’s success. The expansion of
our social business through our partnership with UNICEF
is a source of motivation for LIXIL employees.
LIXIL believes further expanding the reach of SATO,
particularly in India and Africa, is the most significant of
its initiatives to overcome global sanitation challenges. To
this end, it is vital to accurately understand local
challenges, develop locally tailored solutions, and build a
business model to effectively deliver those solutions.
Countries using SATO Toilet Systems
FYE2026 target
Users:
100 million
Achievements through FYE2020
SATO shipped to
more than
38 countries
Cumulative total of
SATO units
delivered:
approximately 3.8 million
Number of people whose
sanitary environment has been
improved:
approximately 18.6 million
50
51
SECTION 3CR STRATEGY AND IMPACT
Water Conservation &
Environmental Sustainability
Water Conservation &
Environmental Sustainability
Relevant SDGs
Critical Social Issues
The 2015 Paris Agreement seeks to limit the rise in
average global temperatures compared to pre-industrial
levels to less than two degrees Celsius, and aims to
contain that rise below 1.5 degrees Celsius. To achieve
this, the world must reduce CO2 and other greenhouse
gas emissions to net zero by 2050.
In addition, an estimated 800 million people around
the world today do not have access to safe drinking
water. By 2050, over 40% of the world’s population won’t
have access to sufficient water supply due to the
depletion of water resources.
Furthermore, global resource consumption is
expected to more than double by 2050. To help address
this situation, the world is gradually shifting from a one-
way economy, which mines resources, makes products
in large quantities, and eventually discards them, to a
circular economy that closes resource loops.
LIXIL’s Response
In FYE2020, LIXIL established its Environmental Vision
2050, which sets out parameters for company action
looking toward 2050, to increase motivation and drive for
its ongoing environmental activities. Our Zero Carbon
and Circular Living policy aims to reduce CO2 emissions
from our business processes, products, and services to
net zero, and we strive to be a leader in the field of
preserving water and limited resources for future
generations by 2050.
To achieve the vision, we have determined three
focus areas: climate change mitigation and adaptation,
water sustainability, and circular economy. We will
advance the process of deciding medium- to long-term
targets and action plans, and seek to fully grasp and
reduce the environmental impact of our business across
the whole value chain.
We have also declared our support for the Task
Force on Climate-related Financial Disclosures (TCFD)
and are currently analyzing the impact of climate change
on our business and considering our best response. Our
aim is to nurture greater trust and sustainably enhance
corporate value by promoting the appropriate disclosure
of climate-related information and increasing
communication with stakeholders.
Achievements and Challenges
Climate change mitigation and adaptation: We strive to
further improve the environmental performance of many
of our products and services by offering, for instance,
windows and doors with improved thermal insulation to
help reduce energy used for heaters or air conditioners,
or faucets designed to reduce the volume of hot water
used. We are now introducing renewable energy sources
for our business processes. We have already switched to
renewable energy at all GROHE production sites, our
LIXIL Kyoto showroom, INAX MUSEUMS, and LIXIL head
office, and plan to expand this shift going forward.
Water sustainability: We provide customers with water-
related solutions, including water-conserving toilets and
faucet fittings, smart controllers that can detect water
leaks, and products equipped with advanced water
purification technology. We are also reducing water use
and the volume of waste water, and expanding recycled
water use at production sites that were judged high risk
in water risk surveys. Going forward, we will further
promote sustainable water usage by also focusing on
water quality, regulations, reputation, and other risks.
Circular economy: We promote the sustainable use of raw
materials and strive to close resource loops across the
entire product life cycle from procurement through
manufacturing, product use, and disposal. We seek to do
this by using recycled resources, designing products with
a longer lifespan and/or reuse potential, providing
functions or parts that can update or replace some parts
of existing products, and expanding service-type products
that can be used only when needed. We are also striving
to reduce single-use plastic in our supply chain to help
address the increasingly severe issue of ocean plastic
pollution. That includes changing out plastic product
packaging for paper materials and reducing the amount
of stretch film used in product transportation.
As a comprehensive living and housing solutions
company, LIXIL aims to achieve both global
environmental sustainability and business growth by
seeking to provide solutions that offer healthy,
comfortable, and environmentally conscious living for
consumers and working 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)*
Water intake and water discharge
Waste recycling rate*
(Thousand t-CO2)
1,500
Scope 1
Scope 2
(Million m3)
30
Water intake volume
Water discharge volume
1,200
1,161
1,137
1,074
579
569
529
582
568
545
900
600
300
0
25
20
15
10
5
0
18.0
16.8
16.6
16.1
13.8
13.2
2018/3
2019/3
2020/3
2018/3
2019/3
2020/3
* Data coverage is different from LIXIL’s target due
to the change of scope.
Japan & Europe
Rest of Asia
North America
96.2
90.4
26.6
96
62
34
(%)
100
80
60
40
20
0
94
61
19
2018/3
2019/3
2020/3
* The recycling rate of waste resulting from all production
and sales.
52
53
SECTION 3CR STRATEGY AND IMPACT
Diversity & Inclusion
Diversity & Inclusion
Relevant SDGs
Critical Social Issues
Populations are aging in many different regions around
the world. By 2050, more than one in every five people
around the world is projected to be over the age of 60,
with many 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. To achieve the global goal of
leaving no one behind, 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. We are expected to help realize a
sustainable society that helps improve the quality of
people’s lives through products and services and
provides opportunities for elderly people, people with
disabilities, women, and all other people to actively
participate and shine in society.
LIXIL’s Response
Committee led by senior managers. We hold workshops
with participants from across the Group, including
design, R&D, marketing, and corporate communications.
In these workshops, we focus our UD concepts on four
themes: easy to understand; easy to use; safe and
secure; and easy to love. Based on these concepts, LIXIL
applies various perspectives to its product and service
development to ensure people of all ages can live
comfortable and fulfilling lives.
In FYE2018, we established our LIXIL Diversity &
Inclusion Declaration (see right page), 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.” LIXIL has set four focus areas for the
declaration, and each local operation pursues initiatives
to improve their most relevant focus areas.
Achievements and Challenges
all ages and genders, including those who may require
special care. Under normal circumstances, each flush
uses five liters of water. In the event of a disaster, the
volume of water required to flush can be switched to one
liter, without compromising its functionality. The
Resilience Toilet is designed for convenience,
cleanliness, and safety. We are promoting its adoption at
schools and gymnasiums that serve as emergency
shelters when a disaster strikes, as well as at municipal
buildings that serve as disaster response centers. 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 personal
characteristics. We will continue our diversity efforts in
each region, consider taking a cross-regional approach
to human resource development and deployment, and
endeavor to make diversity and inclusion a core part of
the Group’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.
FYE2021 targets
Build a strong organization 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% year on year in the work-life balance category of the Group-wide
employee opinion surveys. (The survey was conducted once every two years through FYE2020. We are seeking
to accelerate the cycle of improvements by conducting the survey four times a year from FYE2021.)
Establish a culture of diversity and inclusion within our organization and among all employees.
Achieve 100% operational coverage of Group-wide occupational health and safety management system.
Provide common learning opportunities for 800 next-generation leaders across the Group.
Expand the number of employees participating in the Talent Acceleration Program (TAP) for next-generation
leaders to 1,300 cumulatively (in Japan).
Favorable responses in work-life
balance category of our group-wide
employee opinion surveys
Cumulative number of participants
in the Talent Acceleration Program (TAP)
for next-generation leaders
(LIXIL Corporation, Japan)
Female participation ratio in Stage 3 of the
Talent Acceleration Program (TAP) selective
training for young next-generation leaders
(LIXIL Corporation, Japan)
(%)
Target
Progress
(Persons)
1,500
Target
Progress
(%)
100
Target
Progress
60
50
40
30
20
10
0
42.0
44.0
46.0
1,200
1,078
1,265
1,300
1,195
900
600
300
0
80
60
40
20
0
37.5
29.2
33.3
20
20
20
LIXIL is investing in developing its Universal Design (UD)
solutions aimed at helping everyone live comfortably. To
further our activities, in FYE2018 we launched the UD
The new Resilience Toilet can be used like a regular
toilet even during times of natural disasters by people of
2018/3
2020/3
2021/3
2018/3
2019/3 2020/3
2021/3
2018/3
2019/3
2020/3
Change in the participation ratio since FYE2018 in
Stage 3 of the Talent Acceleration Program (TAP)
for next-generation leaders
54
55
SECTION 3CR STRATEGY AND IMPACT
Corporate Governance Dialogue
ROUND-TABLE DISCUSSION
To discuss the importance of strong corporate governance and
the steps that LIXIL is taking in this area, we brought together
CEO and director Kinya Seto, Chairperson of the Board
Masatoshi Matsuzaki, and all outside directors of the Company
for a group discussion.
Kinya Seto
Director, Representative Executive Officer,
Executive Officer and President, and CEO
Matsuzaki: Fourteen directors were appointed at the
Annual General Meeting of Shareholders in 2019,
marking a new start for LIXIL. Today, I’d like to look
back on our governance reforms over the past year and
speak with each outside director serving on a
committee about initiatives we have taken. But first, as
an internal director, what are your thoughts, Mr. Seto?
Seto: Initially, a lot of attention was paid to whether the
Board, coming from separate slates at that time, could
function and hold constructive discussions. But when
we first met, I could feel the enthusiasm and
determination on the part of all Board members to
improve the Company. I knew from then that we would
be able to move forward. Over the past year, I think we
have had many open and meaningful discussions and
very much benefited from the diverse skills and
experience of outside directors.
Matsuzaki: As chairperson of the Governance
Committee, Mr. Suzuki, you presented the results of a
report on governance issues at LIXIL’s financial results
briefing on October 31, 2019. The Governance
Committee had been created to ensure that we looked
closely at governance reform. Based on the results of
this review, could you tell us where the problems were
and what measures were taken to improve governance?
Suzuki: In conclusion, we did not find any irrational
points in the third-party investigative report of April
2019. However, while LIXIL has a basic governance
framework in place, having been established as a
company with a nomination committee, there were still
issues related to the nomination process. Through our
evaluation, we found that even with a governance
56
57
SECTION 4GOVERNANCE Corporate Governance Dialogue
Masatoshi Matsuzaki
Outside Director, Chairperson of
the Board, Member of
Nomination Committee, and
Member of Governance Committee
Teruo Suzuki
Outside Director, Chairperson of
Audit Committee and Member of
Governance Committee
Certified public accountant
Yuji Nishiura
Outside Director, Chairperson of
Nomination Committee,
Member of Compensation Committee, and
Member of Governance Committee
Daisuke Hamaguchi
Kaoru Onimaru
Tamio Uchibori
Outside Director, Chairperson of
Compensation Committee,
Member of Nomination Committee, and
Member of Governance Committee
Outside Director, Chairperson of
Governance Committee,
Member of Nomination Committee, and
Member of Audit Committee
Outside Director, Member of Audit Committee,
Member of Compensation Committee,
Member of Governance Committee
Licensed tax accountant
structure in place, it will not work properly without an
independent entity to oversee operations and make
recommendations. Therefore, we established the
Governance Committee to ensure the effectiveness of
the Board of Directors. In order to ensure that the
Board of Directors can operate with objectivity, fairness,
and transparency, as well as maintain a system that
can monitor and supervise each committee from an
independent standpoint, we proposed to make the
Governance Committee permanent. In addition, it must
consist of only outside directors and should meet at
least quarterly.
We have also focused on our communications with
stakeholders. We have reported to them directly on
governance issues and will enhance our dialogue going
forward.
Matsuzaki: The role of the Nomination Committee is
also critical in this. Mr. Nishiura, as the chairperson of
the committee, how did you contribute to reforming
governance?
Nishiura: I believe that we have been able to create a
solid foundation for good corporate governance. The
Nomination Committee was at the center of last year’s
governance issues, and to carry out our role properly,
we focused on three main points. First, we clarified the
role of the Nomination Committee, reviewed the rules
to prevent ambiguous interpretations, and revised the
corporate governance guidelines. Second, since it was
necessary to endorse the appointment of director
candidates in a fair, impartial and highly transparent
process, we conducted a survey of all directors. After
deciding on the most suitable size of the Board of
Directors, we then discussed who we would like to
elect as candidates. A nomination vote by all directors
was adopted for the appointment of outside directors.
Third, because the work of the Nomination Committee
had been seen as a “black box,” we interviewed all
executive officers, including retired and newly
appointed ones. Taking into account their range of
opinions, we began to review the term of office of the
executive officers and submitted our proposals to the
Annual General Meeting of Shareholders.
Matsuzaki: Mr. Hamaguchi, having led the
Compensation Committee in its work to create a new
compensation framework within a limited period of
time, what were the key aspects of the new
compensation system created by your committee?
Hamaguchi: In our view, executive compensation is
about more than just rewarding executives for the work
they have done, it is also an important tool to contribute
to the achievement of management goals. To that end,
we reviewed the compensation policy with a focus on
incentivizing executive officers, who are the ones who
turn a management strategy into results. As part of this,
we decided to remove sales targets from their
performance-linked compensation KPIs (key
performance indicators) and shifted to ROIC (return on
invested capital) instead. Through this, we want to
encourage executives to play their part in achieving
management goals, including focusing on core business
operations, company profitability, and improving capital
efficiency. We also adopted a new stock-linked
compensation system as part of our strategy to globalize
management and actively appoint foreign executives.
Matsuzaki: Ms. Onimaru, in light of your extensive and
distinguished legal background, what did you focus on
as a member of the Nomination Committee from the
perspective of governance?
Onimaru: By law, a company that includes a Nomination
Committee should have the highest standards of
governance. As part of this, it was important to review
the rules and how they were applied when Mr. Seto
was replaced as CEO under somewhat unclear
circumstances. The guidelines themselves were not the
problem. What we found was that they had been
interpreted in an arbitrary manner. We therefore felt it
was important to rigorously strengthen the rules of the
Nomination Committee and to enhance the rules of the
Board of Directors and the bylaws of the Company to
prevent the recurrence of similar governance problems.
Matsuzaki: Mr. Uchibori, from your experience as
LIXIL’s statutory auditor and as a member of the Audit
Committee, how important is the role of outside
directors in terms of governance?
Uchibori: It is important to note that LIXIL’s Board of
Directors from 2020 will consist of just three internal
directors along with six independent outside directors.
This is very important to show the independence of the
Board and its ability to provide oversight to the
Company’s executive team. It also means that we
cannot sit on the sidelines and only require the internal
directors to decide the future direction of the Company.
As outside directors we must make every effort to
provide meaningful contributions to the future of LIXIL.
questions to help foster focused discussions. I also
believe that while the Board should appropriately
supervise management execution, we should also
ensure that we do not act solely as a brake to slow
down the speed of business execution by the
executive officers. In the past year, I believe that
sound decision-making was made possible by the
timely and transparent provision of information from
the executive team.
Matsuzaki: LIXIL Group Corporation and LIXIL
Corporation will merge on December 1, 2020, and the
new LIXIL will be formed with nine directors. Over the
next year, I would like to discuss how, as the Board of
Directors, we can contribute to the Company and what
role we play in order to achieve sustainable growth and
increase corporate value. First, I would like to ask Mr.
Uchibori and Ms. Onimaru for their thoughts.
Uchibori: From the perspective of improving corporate
value, the simple and most direct way is through
raising the stock price and therefore our total market
capitalization. This comes initially through achieving
the CEO’s medium- and long-term goals and strategic
vision. Second, we must set concrete reduction targets
and improve the financial structure to raise profitability.
The third important element is the creation of the
appropriate corporate governance system.
Onimaru: In relation to legal affairs, we will endeavor to
further revise the Company’s bylaws to help strengthen
governance.
Matsuzaki: Lastly, regarding the management of the
Board of Directors, the role of the chairperson is to
ensure that the Board functions smoothly, and to ask
Matsuzaki: As the incoming chairperson of the
Nomination Committee, Mr. Nishiura, what are your
plans to continue strengthening LIXIL’s governance?
58
59
SECTION 4GOVERNANCE Corporate Governance Dialogue
Group Governance Reform
Under the holding company structure, LIXIL Group has been
accelerating its business development. However, as LIXIL Group’s
strategy has evolved, the highest priority of the Company now is to
enhance corporate value by placing greater focus on its core
businesses inside and outside of Japan and driving synergies
across these business areas.
Dissolving the two-tier structure of the Company and LIXIL
Corporation will enable faster decision-making and improve
management efficiency, as well as improve corporate governance
by simplifying the Group management system and increasing the
transparency of management. Therefore, the Company has
decided to merge with LIXIL Corporation on December 1, 2020,
change the company name to LIXIL Corporation, and move to an
operating company system.
Governance structure of LIXIL Group Corporation, LIXIL Corporation, and other operating companies
Before the merger
(As of March 2020)
After the merger
Company
name
LIXIL Corporation
(From December 1, 2020 (plan))
Holding company: LIXIL Group
Holding company: LIXIL Group
Operating company: LIXIL
Board of Directors
Board of Directors
Nomination Committee
Nomination Committee
Governance
Committee
Compensation Committee
Executive
Officers
Governance
Committee
Compensation Committee
Executive
Officers
Audit Committee
Audit Committee
Operating company: LIXIL
Management and supervision
of business portfolio
Board of Directors
Corporate
Auditors
Group companies
Management and supervision
of business management
Management to enhance company-wide
control across the Group through
centralization of Core Functions from HQ
through all businesses and geographies.
Monitoring and supervision
of business portfolio +
business management
All subsidiaries
Finance
IT
Legal
Human Resources
Note: As of April 1, 2020, the management of LIXIL Group Corporation and
LIXIL Corporation has been substantially integrated.
Strengthen monitoring and supervision by the Board of Directors
1. Pursue effectiveness of monitoring and supervision
In addition to monitoring and supervising the portfolio management of the holding company, the Board of Directors will also monitor and supervise
the business operations
2. Improve management transparency
By dissolving the two-tier structure, the Board of Directors will support the decisive management executions of LIXIL Corporation, the largest operat-
ing company in the Group
Strengthen Group companies’ management and improve management efficiency
1. Enable faster decision-making
2. Eliminate duplication of management and human resources (reduce additional operating costs)
3. Improve management control and supervision across the Group by headquarter function
Nishiura: This year, I’m determined to work on
necessary steps to further strengthen governance and
introduce advanced governance models. First, we will
revise the rules based on the integration of LIXIL Group
Corporation and LIXIL Corporation. Second, we will
undertake a review of the number of members of the
Board of Directors, the ratio of internal directors, the
term, timing and conditions of replacing members, and
the method of recruiting new outside directors. Third,
including Mr. Seto’s opinion, we will formulate a CEO
succession plan. To do so, we will establish the
requirements for the next CEO, the selection process, a
candidate pipeline, and other issues.
Matsuzaki: Mr. Hamaguchi, as an outside director,
what kind of role do you think we should play?
Hamaguchi: It is often said that the role of outside
directors is to supervise and monitor, but it is actually
somewhat different. To use a sports analogy, we are not
like baseball coaches, who direct players every minute
of the game. That is done by the CEO and their
executive team. On the other hand, outside directors
must sometimes play a leading role, such as in a crisis
caused by a scandal or sudden worsening of the
business, and we must not shirk from this duty. To
prevent a crisis situation, it is necessary to
communicate with the executives on a daily basis, give
advice and support if necessary, and at the same time
monitor the work of the executive team closely.
Matsuzaki: Mr. Suzuki, what do you think will be the
future challenges for members of the Audit Committee,
especially in relation to corporate governance?
Suzuki: With the merger of LIXIL Group Corporation
and LIXIL Corporation, I think the immediate issue will
be to ensure proper Group governance of the merged
entity. For the future, we will further enhance our
system for full-time corporate auditors so that we can
conduct sufficient audits. It is also necessary to
consider integrating and reorganizing the governance
of subsidiaries, and the governance of the Group
companies themselves.
Matsuzaki: Mr. Seto, from your perspective as CEO and
an executive officer, what role do you think the Board
of Directors should fulfill in order to further improve
governance?
Seto: I believe that the reduction in the number of
Board members will promote more active discussions,
which will help us move more quickly as a company. I
also think that it is important to have outside directors
perform as a “checking function” for the management
team to ensure we do not move too quickly. At the
same time, having Board members see top-level
executive officers taking part in the discussions will be
a benefit and can be an important tool in succession
planning. I am confident that the LIXIL Board is a
strong group that will openly discuss the future vision
of the Company and help to guide management.
Matsuzaki: I think it is important for the chairperson to
set the agenda, taking into account the views of the
directors and the interests of all stakeholders. I will
seek to fulfill my responsibilities at LIXIL in a balanced
manner that allows an appropriate level of decision-
making by the Board without impeding the speed of
business execution.
60
61
SECTION 4GOVERNANCE
Selection Process of Director Candidates and Formulation of Draft Reports to
the Board of Directors on the System for Executive Officers
LIXIL Group Board of Directors
(As of June 30, 2020)
As a “Company with Nomination Committee, etc.,” in deciding
upon the candidates for director seats, the Nomination Committee
will apply the Company’s own criteria, specified in Article 24 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 25 of the Guidelines.
When independent outside director candidates are decided, the
Company’s own independence criteria will be used, as set forth in
Article 29 of the Guidelines.
The LIXIL Group Corporate Governance Guidelines are
available on our corporate website.
www.lixil.com/en/about/governance/policies.html
Selection process of director candidates
A. Composition of
Board of Directors
Summarization of the results of replies to surveys to all directors (October 2019)
Individual hearings concerning the details of replies to surveys (November 2019)
Internal directors
Outside directors
B. Selection of director
candidates
Organization of outlooks and points of selection
Exchange of opinions by the Chairperson of the Board of
Directors, Chairperson of the Nomination Committee and CEO
Discussions by the Nomination Committee on proposals from
the Chairperson of the Nomination Committee
Recommendation and vote by all directors
(December 2019–January 2020)
Individual hearings concerning details of votes (January 2020)
Hearing of opinions other than directors
Report and proposal concerning the above results
(February 2020)
Based on the above, director candidates were determined through discussion at the Nomination Committee meeting held in March 2020.
Formulation process of draft reports to the Board of Directors on the system for executive officers
STEP 1.
August–October 2019
Revisions on rules and guidelines concerning executive personnel
STEP 2.
August–September 2019
Individual meetings with current executives (deepening understanding of executives)
STEP 3.
December 2019
Agreement on receiving proposal on the executive officer system for the next term, assuming the reappointment of CEO Seto
STEP 4.
January 2020
Proposal from CEO concerning executive officer system for the next term
STEP 5.
February 2020
Meetings with resigning candidates and newly appointed candidates (confirmation of intention)
STEP 6.
February 2020
Confirmation of policy on CEO reappointment and discussion on draft reports concerning selection of executives for the next term
STEP 7.
March 2020
Resolution on draft reports to the Board of Directors on the system for executive officers
Based on the above, a resolution on the draft report from the March 2020 Nomination Committee was made at the Board of Directors’
meeting, and the new executive system started from April 1, 2020.
CEO Succession Plan
The Nomination Committee has received explanation from Kinya
Seto, CEO, with respect to CEO candidates for the next term, on
the following points.
The CEO Succession Plan is currently being considered by the
Nomination Committee and will continue being considered by the
Nomination Committee from next fiscal year onwards as well.
1. Measures and subjects at time of emergency
2. Mid- to long-term CEO successor candidates (internal)
3. Personnel who may possibly become CEO successor candidates
in the future
Kinya Seto
Sachio Matsumoto
Jin Song Montesano
Director, Representative Executive Officer,
Executive Officer and President, and
Chief Executive Officer (CEO)
Representative Director, Chairman, President and CEO,
Chairperson of the Board of LIXIL Corporation
Number of the Company shares owned: 243,308
Shares of Phantom Stocks: 139,480
Director, Representative Executive Officer,
Executive Officer and Vice President, Finance,
Treasury, and M&A, and Chief Financial Officer (CFO)
Representative Director and Executive Vice President,
CFO of LIXIL Corporation
Number of the Company shares owned: 86,344
Shares of Phantom Stocks: 44,600
Director, Executive Officer and
Senior Managing Director, Human Resources and
General Affairs, Public Affairs, Investor Relations,
External Affairs, and Corporate Responsibility, and
Chief People Officer (CPO)
Director, Executive Vice President,
CPO of LIXIL Corporation
Number of the Company shares owned: 7,758
Shares of Phantom Stocks: 17,128
Tamio Uchibori
Kaoru Onimaru
Outside Director, Member of Audit Committee,
Member of Compensation Committee,
Member of Governance Committee
Licensed tax accountant
Director and Senior Managing Executive Officer of
MinebeaMitsumi Inc. (former)
Number of the Company shares owned: 0
Shares of Phantom Stocks: 1,921
Outside Director, Chairperson of Governance
Committee, Member of Nomination Committee,
Member of Audit Committee
Lawyer
Justice of the Supreme Court of Japan (former)
Number of the Company shares owned: 0
Shares of Phantom Stocks: 1,921
Teruo Suzuki
Outside Director, Chairperson of
Audit Committee and Member of
Governance Committee
Certified public accountant
Deputy Chair of KPMG AZSA LLC (former)
Number of the Company shares owned: 0
Shares of Phantom Stocks: 1,921
Yuji Nishiura
Daisuke Hamaguchi
Masatoshi Matsuzaki
Outside Director, Chairperson of
Nomination Committee,
Member of Compensation Committee, and
Member of Governance Committee
Chair and CEO, Sumitomo Mitsui
Trust Club Co., Ltd. (former)
Number of the Company shares owned: 0
Shares of Phantom Stocks: 1,921
Outside Director, Chairperson of
Compensation Committee, Member of
Nomination Committee, and
Member of Governance Committee
Management Execution Director and
Chief Investment Officer,
Pension Fund Association (former)
Number of the Company shares owned: 0
Shares of Phantom Stocks: 1,921
Outside Director, Chairperson of the Board,
Member of Nomination Committee, and
Member of Governance Committee
Director and Chair of the board of directors of
Konica Minolta, Inc. (incumbent)
Number of the Company shares owned: 0
Shares of Phantom Stocks: 1,921
62
63
Reference
Nomination Committee Report on page 66
Profiles and reason for nomination of directors of LIXIL Group Board are available on our corporate website.
www.lixil.com/en/about/governance/board/
SECTION 4GOVERNANCE Corporate Governance at LIXIL Group
LIXIL Group Corporation has adopted the corporate governance
structure of a “Company with Nomination Committee, etc.” as
outlined in Japan’s Companies Act. Under this governance system,
the Company separates the conduct of management from the
supervision of management. This enables it to leverage a system
where its executive officers can make management decisions
quickly and decisively while securing management transparency.
In order to monitor, supervise and continuously enhance its
corporate governance, the Company has established the
Governance Committee within the Board of Directors as a
permanent voluntary committee, and also convenes meetings
under the Compliance Committee, Risk Management Committee,
M&A Committee, Investment Review Committee, and Corporate
Responsibility Committee, among others. These committees
discuss management strategies, medium- and long-term
policies, and investment-related matters in order to accelerate
decision-making while enhancing the effectiveness of the
Company’s governance.
Governance structure (July 1, 2020)
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Appointment
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(Decision-making and supervision)
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Compensation Committee
Governance
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Compliance audit
Validation audit
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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
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Management Meeting
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For further details regarding the Company’s corporate governance, internal control
systems, and other related matters, please refer to our corporate website.
www.lixil.com/en/about/governance/
64
Number of meetings held during FYE2020
Board of Directors
Nomination Committee
Compensation Committee
Audit Committee
Governance Committee
Executive Officers Meeting
Internal Audit Committee*1
Compliance Committee
Risk Management Committee*2
Corporate Responsibility Committee
M&A Committee
Investment Review Committee
16
17
14
17
6
26
1
3
3
3
34
31
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. From June 25, 2019, the committee consisted of 11
outside directors and 3 internal directors in FYE2020. Except for one outside director’s attendance of 90.9%, all directors
attended all the Board of Directors’ meetings held.
Made decisions on the content of proposals to be submitted to the Annual 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.
Made decisions regarding the compensation of directors and executive officers and their individual compensation received
from the Company as consideration for duties.
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 Annual General Meeting of Shareholders
regarding the selection and dismissal of financial auditors.
Monitor, supervise and continually enhance the Company’s corporate governance and discuss or advise the Board of
Directors to enhance the effectiveness of the Board of Directors. Following the establishment of the committee on October
31, 2019, the committee consisted of four outside directors and one internal director in FYE2020. All directors attended all
the committee meetings held.
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.
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.
Reported on the status of compliance measures at each Group company, reviewed compliance activities, and discussed
the strategy.
Endeavors to improve the ability to deal with future risks by predicting extraordinary risks of the Company and the Group
and establishing systems to address them in advance.
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.
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.
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.
*1 From the Executive Officers Meeting held on November 8, 2019, the functions of the Internal Audit Committee have been transferred to the Executive Officers Meeting and the Audit Committee for
the purpose of strengthening governance in line with changes in the Audit Committee system and achieving more effective reporting of the Executive Officers Meeting.
*2 From November 2019, the Risk Management Meeting described in Annual Report 2019 was reorganized into the Risk Management Committee to improve the ability to deal with future risks by
predicting extraordinary risks of the Company and the Group and establishing a system to address them in advance. Risk Management Meetings have continued to be held in each business unit
and Group companies.
Composition of the Board of Directors (As of June 30, 2020)
Directors / Executive officers
3
6
Directors who are concurrently
serving as executive officers
Directors who are
not executive officers
Internal directors / Outside directors
3
6
Internal directors
Outside directors
Gender diversity
Male
Female
Nationality
Japanese
Foreign
7
2
8
1
Kinya Seto
Sachio Matsumoto
Jin Song Montesano
Tamio Uchibori
Kaoru Onimaru
Teruo Suzuki
Yuji Nishiura
Daisuke Hamaguchi
Masatoshi Matsuzaki
Independent
Directors
Nomination
Committee
Compensation
Committee
Audit
Committee
Governance
Committee
Chairperson
Chairperson
Chairperson
Chairperson
65
SECTION 4GOVERNANCE
Nomination Committee Report
Compensation Committee Report
We will further strengthen
governance by not only
“reinforcing our defense”
but also “going on the offense.”
Yuji Nishiura
Chairperson of
the Nomination Committee
We will enhance corporate value
through an executive compensation
system that motivates officers to
achieve business objectives and
thorough corporate governance.
Daisuke Hamaguchi
Chairperson of the
Compensation Committee
the terms of executive officers with fiscal years. We are
confident LIXIL Group has made significant progress in
reforming its governance this fiscal year.
Issues to Address in FYE2021
We will tackle three main issues in FYE2021. First,
continuing from FYE2020, we will continue to investigate
regulations related to the Nomination Committee. We
believe the revision of regulations will pass a significant
milestone this term. Second, we will help address the
formulation of a CEO succession plan. While this is not
an official function of the Nomination Committee, our
active contribution is required and is considered critical
in ensuring strong governance. Third, we will again
consider the role of outside directors. Last fiscal year we
reviewed the structure of our Board of Directors. In
FYE2021, however, we will go one step further by
considering matters such as evaluating outside director
candidates and their nomination and election process.
Issues and Initiatives in FYE2020
The Nomination Committee has contributed to improving
governance at LIXIL Group, one of the Company’s
highest priorities, by tackling the following three main
issues. The first issue is revising the Nomination
Committee’s regulations. The aim of this is to prevent
arbitrary interpretations of the regulations and abuse of
the Nomination Committee system. The second is
reviewing the structure of the Board of Directors and
nomination of director candidates, while ensuring a high
level of transparency in these processes. Third, in order
to strengthen our supervisory function, we held thorough
discussions with all executive officers, and also
considered whether to align the terms of executive
officers with fiscal years.
Progress on Issues in FYE2020
We have completed the first stage of revising regulations,
which has led to improved governance. Regarding the
structure of the Board of Directors, the scope of the
Board has been reduced, the ratio of outside directors
increased, and efforts made to increase diversity. In
particular, the committee made a bold change to give all
directors voting rights to elect candidates in elections of
outside directors. The Nomination Committee has also
facilitated diverse channels of communication with
executive directors and formed a consensus on aligning
Nomination Committee members, meetings convened, and attendance*1
in FYE2020
Nomination Committee members*2
in FYE2021
Member
Meetings convened
Attendance
Member
Yuji Nishiura (Chairperson)
Kaoru Onimaru
Haruo Kawahara
Masatoshi Matsuzaki
Keiichiro Ina
*1 Since June 25, 2019
12
12
12
12
12
100%
100%
100%
100%
100%
Yuji Nishiura (Chairperson)
Kaoru Onimaru
Daisuke Hamaguchi
Masatoshi Matsuzaki
*2 Since June 30, 2020
Issues and Initiatives in FYE2020
The Compensation Committee contributes to sustainably
achieving LIXIL Group’s Core Philosophy – “The Group’s
superior products and services contribute to improving
people’s comfort and lifestyles” – by motivating executive
officers to achieve the Company’s business objectives.
We also believe that the Compensation Committee plays
a critical role in ensuring all directors and executive
officers (“officers”) are involved in achieving thorough
corporate governance.
FYE2020 has been a year in which the Company has
changed course significantly under our corporate
strategy, accelerating efforts to focus our business
portfolio and enhance profitability by improving capital
efficiency. Therefore, the executive compensation system
has been changed to align with this new direction.
Progress on Issues in FYE2020
In FYE2020, the Compensation Committee made
progress on the following issues:
1. We have implemented a compensation mix to attract
and retain human resources globally. This is based on
a clear compensation policy and made up of an
Annual Base Salary according to roles and
responsibilities, performance-linked compensation,
and stock-linked compensation. The Annual Base
Salary was decided by considering various factors,
including management responsibilities, the
experience of each officer, the level of difficulty in
securing personnel, and geographic location.
2. To create a strong incentive to improve capital efficiency,
we have reviewed our performance-linked
compensation system. In terms of business target items
eligible for performance-linked compensation, revenue,
which indicates growth, has been removed. Instead, we
refer to return on invested capital (ROIC), a new
management indicator; core earnings; and profit for the
year attributable to owners of the parent. Moreover, the
payout curves have been updated to be more rational.
3. To promote the integration of global Group management,
a new unified, global system of stock-linked
compensation (“Phantom Stock”) was introduced.
In addition, to strengthen Group-wide governance related
to the executive compensation, the Compensation
Committee manages compensation for executives of
international corporations, while to develop more
transparent operations, we introduced new executive
officer delegation contracts and compensation regulations.
Issues to Address in FYE2021
We will continually monitor whether the executive
compensation system is functioning appropriately in
relation to the corporate strategy and in response to
changing economic and social conditions, and consider
revising the system as necessary.
Compensation Committee members, meetings convened, and
attendance*1 in FYE2020
Compensation Committee members*2
in FYE2021
Member
Meetings convened
Attendance
Member
Daisuke Hamaguchi (Chairperson)
Haruo Kawahara
Yuji Nishiura
Zenji Miura
*1 Since June 25, 2019
12
12
12
12
100%
100%
100%
100%
Daisuke Hamaguchi (Chairperson)
Tamio Uchibori
Yuji Nishiura
*2 Since June 30, 2020
66
67
SECTION 4GOVERNANCE
Executive Compensation
Compensation Basic Policies for
Directors and Executive Officers
The compensation for directors and executive officers is
determined in accordance with the following basic policies,
Foster improvement of short-, medium-, long-term and
sustainable business results and corporate value.
Attract and retain the best talent who are necessary to foster
business growth globally.
Ensure a fair and reasonable decision process with regards to
compensation that will provide accountability to shareholders,
employees, and all stakeholders.
Consider and discuss, based on the economic and social
situation, our business condition and objective indexes and advice
of external specialized agencies at the Compensation Committee.
Individual compensation shall be managed in consideration of
each individual duty, performance, experience, and priority of
attracting and retaining personnel, etc.
Compensation System
The compensation structure for directors, who monitor and
supervise the Company’s management, shall be separate from
that for executive officers, who are responsible for the performance
of business. In principle, when a director concurrently serves as
an executive officer, the compensation system for executive
officers shall be applied.
Directors’ compensation system
83%
17%
Executive officers’ compensation system
(Vice President and above)
40%
30%
30%
(Senior Managing Director and above)
Annual Base Salary
Annual Base Salary for directors and executive officers shall be
determined based on the compensation in the 50th percentile of a
group of Japanese companies with sales of ¥1 trillion to ¥2 trillion,
on the data from external specialized agencies, taking into
consideration the 25th percentile to 75th percentile of the above
data. For the directors and executive officers who live abroad,
reference shall be made to the data in each country.
Performance-linked Compensation
To encourage the executive officers to work together to achieve
single-year management goals – and to ensure that they are fairly
and equitably rewarded in accordance with the results of their
performance – individual performance that was included in the
formulas up to the previous business year is being abolished, and
the formula for the relevant business year calculated only on
company-wide performance.
Performance-linked
compensation
Base amount of
performance-linked
compensation
Payout rate according
to achievement rate of
performance targets
The base amount of performance-linked compensation shall be
determined by multiplying the Annual Base Salary by a coefficient
set for each position.
Position
Base amount of performance-linked
compensation (model case)
Vice President and above
Annual Base Salary × 75%
Senior Managing Director and above
Annual Base Salary × 50%
Payout rate based on the achievement level of business target will
be calculated as shown below.
Achievement level of performance target
If 50% or less
Payout rate
0%
If more than 50% but less than 100%
Same as achievement level
57%
29%
14%
If 100% or more but less than 150%
([Achievement level of
performance target – 100]
× 2 + 100)%
Annual Base Salary
Performance-linked compensation
Stock-linked compensation
If 150% or more
200%
Achievement level of performance targets for FYE2020
Performance target item
Percentage of all
performance targets
Performance target
Result
Achievement level of
performance target
(Performance
target/result × 100)
Achievement level of
performance target ×
ratio of each performance
target item to overall target
ROIC*1
Core earnings
Profit for the year*2
Total
40%
30%
30%
100%
2.3%
3.0%
¥47,000 million
¥58,576 million
¥15,000 million
¥12,518 million
—
—
130.3%
124.6%
83.5%
—
52.1%
37.4%
25.0%
114.6%
*1 ROIC = Core earnings × (1 – tax rate) / (Total equity + Interest-bearing debt)
*2 Profit for the year attributable to owners of the parent
68
200%
175%
150%
125%
100%
75%
50%
25%
0%
e
t
a
r
t
u
o
y
a
P
Payout rate of 200% of
base amount when 150%
or more of performance
target achieved
Base amount when performance
target achieved
No payout when 50% or less of performance target achieved
0%
25%
50%
75%
100%
125%
150%
Performance target achievement rate
Clawback Clause and Other
In the event that the Company has to correct its accounts after the
fact due to a serious accounting error or illegality, the
Compensation Committee could decide to amend a compensation
amount or demand the return of compensation already paid to an
eligible executive officer. Either action would be taken on the basis
of the cause arising and after deliberating any revision to planned
performance-linked compensation in the future or any return of
paid performance-linked compensation. Furthermore, in the case
of an unexpected event at the beginning of the applicable period
for the evaluation of performance-linked compensation, the
Compensation Committee would be able to adjust the method of
calculating performance-linked compensation. Any adjustment
would be carried out based on an internal verification of the facts
and, if necessary, the views of external specialized agencies, and
after comprehensively considering the event and the management
responsibilities of the eligible executive officer(s).
Stock-linked Compensation
The Company has been applying a stock-linked monetary
compensation plan (“Phantom Stock”) since the FYE2020. The aim
is threefold: to encourage directors and executive officers to monitor,
supervise, and make management decisions to achieve a sustained
improvement in the Company’s corporate value over the medium to
long term; to further promote shared value between the directors
and executive officers and shareholders of the Company; and to
attract and retain personnel from around the globe who will
contribute to further raising corporate value by standardizing global
executives’ compensation in the Group. This compensation plan
grants shares of Phantom Stock but substantially has the same
effect as granting own stocks.
As the Phantom Stock plan was commenced during the
FYE2020, the date of grant was set at November 5 for both
directors and executive officers. From the FYE2021, onward,
executive officers shall be granted the Phantom Stock on the day
the business year starts and directors on the day of the Annual
General Meeting of Shareholders.
The amount of grant is calculated by multiplying the Annual
Base Salary by the coefficient set for each position, and the
number of shares of Phantom Stock granted to officers is
calculated by dividing by the average closing price of the
Company’s stock price for 30 business days prior to the grant date.
Position
Outside director
Amount of grant (Model case)
Annual Base Salary × 20%
Vice President and above
Annual Base Salary × 75%
Senior Managing Director and above
Annual Base Salary × 25%
The holding periods for Phantom Stock are one year for directors
and three years for executive officers.
Information on the amounts of compensation for those officers with total compensation
of ¥100 million or more is posted on the Company’s website.
www.lixil.com/en/about/governance/compensation.html
Total amount of compensation by officer title, by type of compensation and number of officers receiving (FYE2020)
Officer title
Directors
(excluding outside directors)
Executive officers
Outside directors
Total
Total
compensation
(¥ millions)
192
1,290
154
1,636
Total compensation by type (¥ millions)
Annual Base
Salary
Performance-
linked
compensation
Stock-linked
compensation
Restricted
stock
90
539
134
763
—
426
—
426
10
156
14
180
92
50
6
148
Other
—
119
—
119
Number of
officers receiving
6
13
13
32
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.
There is no compensation system that uses ESG performance as a
direct evaluation index in the fiscal year under review. However,
for the purpose of motivating directors and executive officers to
contribute to the sustainable enhancement of the Company’s
corporate value, in addition to having introduced stock-linked
compensation, it was decided to also base the performance
indicators for executive officer performance-linked compensation
on sustainable business strategies.
69
SECTION 4GOVERNANCE
Audit Committee Report
Governance Committee Report
By strengthening LIXIL Group’s
audit structure and internal control
systems, we aim to build an
enhanced compliance structure.
Teruo Suzuki
Chairperson of the
Audit Committee
We will respect diversity and
promote the creation of structures
that are not bound by existing
frameworks.
Kaoru Onimaru
Chairperson of
the Governance Committee
Initiatives in FYE2020
The Function of the Audit Committee
LIXIL Group’s Audit Committee aims to conduct efficient
and effective audits while collaborating closely with the
internal auditors of the Company and its subsidiaries, as
well as with corporate auditors (“Kansayaku”). Its
activities include auditing the effectiveness of the internal
control systems of the Company and its main subsidiaries,
and monitoring the execution of duties by directors and
executive officers. This is conducted via various means
such as regularly receiving audit reports – and giving
directions as appropriate – from internal auditors and
corporate auditors, interviewing executive officers and
other personnel, attending important Company meetings,
and reviewing internal documentation such as financial
reporting, disclosures, and minutes of important
meetings. Moreover, the Group’s corporate auditors’
meetings are held periodically to share information on
each subsidiary and Group-wide auditing policies.
Additionally, Audit Committee members also serve as
corporate auditors of LIXIL Corporation – a key subsidiary
– to further strengthen the Group’s auditing function.
Supporting the Audit Committee
The Audit Committee Office was established to help the
committee and committee members exercise their
authority as stipulated by law and in Company regulations,
and to monitor the compliance and validate the work of
directors and executive officers. The Audit Committee
elects four corporate auditors who are then assigned as
auditors to 32 Group companies, where they serve as the
auditing function in order to strengthen corporate
governance. As corporate auditors are assigned directly
by the Audit Committee, they are immediately required to
report any issues identified related to operational audits or
internal controls to the Audit Committee. Executive officers
cannot give orders or instructions with regard to any
directions issued by the Audit Committee or Audit
Committee members to the Audit Committee Office and
corporate auditors. Meanwhile, the Audit Committee is
responsible for deciding on personnel changes and
performance evaluations of members in the Audit
Committee Office and corporate auditors.
Initiatives in FYE2021
The Audit Committee for FYE2021 consists of three
independent outside directors. Of the members, the
chairperson, Teruo Suzuki, is a certified public
accountant with significant auditing experience, while
Tamio Uchibori is a licensed tax accountant. Therefore,
they have significant knowledge and experience in
finance, accounting, and taxation. The Audit Committee
will aim to become even more effective and efficient
under the new unified Group management structure to
be established after the integration of LIXIL Corporation
planned for December 2020.
Audit Committee members, meetings convened and attendance*1
in FYE2020
Audit Committee members*2
in FYE2021
Member
Meetings convened
Attendance
Member
Zenji Miura (Chairperson)
Teruo Suzuki
Tamio Uchibori
Daisuke Hamaguchi
Ryuichi Kawamoto
*1 Since June 25, 2019
10
10
10
10
10
100%
100%
100%
100%
100%
Teruo Suzuki (Chairperson)
Tamio Uchibori
Kaoru Onimaru
*2 Since June 30, 2020
70
Background to Establishment of Governance Committee
At the Board of Directors’ meeting held in October
2019, the Board of Directors resolved to establish the
Governance Committee as a permanent voluntary
committee within the Board of Directors and carried
out activities with the aim of strengthening the
Company’s corporate governance, increasing
transparency and objectivity for all stakeholders, and
growing corporate value.
Composition of Current Governance Committee
Based on the results of the effectiveness evaluation of
the Company’s FYE2020 Board of Directors and other
factors, the Governance Committee for the current fiscal
year will pursue further transparency and objectivity. To
evaluate the governance of the Company by conducting
discussions from an open and independent perspective,
the decision was made that the Committee be composed
entirely of outside directors.
Aspirations for Current Term’s Activities
The Governance Committee makes full use of the wide
range of knowledge of its outside directors, who have
been chosen for diversity, and is not limited by existing
frameworks. The Governance Committee also exchanges
opinions to enhance the Board of Director’s effectiveness
and will maintain LIXIL Group’s robust governance
system that continues to undergo reform.
Reference Governance Dialogue on page 56
Board of
Directors’
Effectiveness
Evaluation
To strengthen and improve the governance systems needed to support the sustainable growth and the creation of medium- and
long-term corporate value of LIXIL Group as a whole, the Company conducts an evaluation and analysis of the effectiveness of
its Board of Directors once a year.
Effectiveness Evaluation Process
The Company, led by the Governance Committee, conducted a
questionnaire survey and other evaluations from February to May 2020.
Responses were obtained from 14 directors and six executive officers
(besides another three persons serving concurrently as directors).
Main Categories of Evaluation of Effectiveness of
the Board of Directors Conducted by Directors
1. Items relating to operation of Board of Directors’ meetings
2. Items relating to the agenda of Board of Directors’ meetings
3. Items relating to the system that supports Board of Directors’ meetings
4. Items relating to dialogues between the Board of Directors and shareholders,
investors, and stakeholders
5. Items relating to outside directors
Main Categories of Evaluation of Effectiveness of
the Board of Directors Conducted by Executive Officers
1. Items relating to the agenda of Board of Directors’ meetings
2. Items relating to the system that supports Board of Directors’ meetings
3. Items relating to dialogues between the Board of Directors and shareholders,
investors, and stakeholders
Overview of Evaluation Results and Future Efforts
Based on the ratings and comments from all the directors
and executive officers, as the Company’s Board of
Directors, we have concluded that the Board of Directors
“functioned effectively” during FYE2020.
The Company’s Board of Directors had discussions
based on the points evaluated by the respondents and a
number of suggestions from each director and executive
officer. The Board of Directors will improve the
effectiveness of the Board of Directors, setting the following
three points as the priority issues for FYE2021:
1) To establish a common understanding of the matters
for which the Board of Directors is responsible, the
matters for which the executive officers are
responsible and the matters for which the Board of
Directors and the executive officers are jointly
responsible.
2) To clarify the matters to be supervised by the Board
of Directors and each committee (the Nomination
Committee, the Compensation Committee, the Audit
Committee and the Governance Committee)
3) To expand opportunities to have discussions with
stakeholders
71
SECTION 4GOVERNANCE
Internal Control Systems and Compliance
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 enhance corporate
value. In addition, we are strengthening our Group-wide operational
management system through risk-consciousness and, as a
corporate Group that emphasizes compliance management,
building various systems that comply with laws and regulations.
LIXIL Group Enterprise Risk Management (ERM)
LIXIL Group strives for 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 also 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 determined for each risk and is
responsible for responding to and reporting on the assigned risks.
LIXIL Group takes 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 business
operations is sought by placing risk managers in major regions.
LIXIL Group is also 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 every region.
Crisis Management (CM)
In order to prepare for crises, a crisis management framework has
been established in each LIXIL Group company. 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
domestic and international 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, losses will be
minimized through prompt initial response, timely escalation,
sharing of information among relevant departments for
management decision-making, and external disclosure of
information done consistently and sincerely.
Anticipating that management may not always be able to
gather in one location in the event of a crisis, the Crisis
Countermeasures Division for the head office has been made
available online to allow timely and prompt decision-making
remotely.
Understanding the importance of cybersecurity, LIXIL Group
has established and operates the LIXIL Computer Security Incident
Response Team (LIXIL-CSIRT) to minimize the impact of
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.
www.lixil.com/en/investor/strategy/risks.html
Compliance
LIXIL Group Code of Conduct
The LIXIL Group Code of Conduct (the “Code of Conduct”) is a set
of rules to be adhered to by all 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 is available in 18 languages
and is regularly updated. The Company has adopted 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, LIXIL Group
established Global Policies for 10 areas – including anti-corruption,
fair competition, and protection of personal information – and,
where necessary, established guidelines subordinate to its policies.
These policies are translated into major languages and LIXIL Group
has 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.
www.lixil.com/en/about/governance/pdf/LIXIL_CoC_en.pdf
Corporate Culture
Company management is working to raise compliance awareness
and embed a culture of compliance by discussing compliance
issues, making use of opportunities provided by “all-employee”
meetings and site visits, as well as increasing the use of
communication tools within the Group. We also plan educational
events such as quizzes and contests in Japan and global every
year so that all employees can voluntarily increase their
compliance awareness in a fun setting.
Compliance Committees
In addition to the compliance committees of the Group and within
subsidiaries in Japan, compliance committees have been established
in each business unit. This is to strengthen compliance measures
globally and to improve the reporting system of business units to
the Group compliance committee. We hold compliance reviews,
report those findings to each compliance committee and the
Group compliance committee, and use these platforms to pursue
Group-wide initiatives, better visualize the state of compliance,
review compliance activities, and discuss countermeasures.
Education and Training Programs
LIXIL Group holds education and training programs for new
employees, new managers, and executives to develop its compliance
culture. The Group is also implementing education and training
programs on Global Policies for all officers and employees. The
Group will continue to further develop its education and training
programs by planning suitable programs that utilize e-learning and
face-to-face training and are based on the risks of each area in which
the Group operates. In addition, the Group publishes newsletters
both in Japan and outside of Japan and has been striving to increase
and cultivate employees’ knowledge and awareness of compliance.
Concern-Raising System “Speak Up!”
LIXIL Group 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 24-hour,
multilingual concern-raising system “Speak Up!” was introduced in
all international subsidiaries in 2016, and in Japan in 2017. In 2019,
we created a global management structure for compliance
information by dissolving and merging the former internal reporting
system in Japan with the “Speak Up!” system. The reported
compliance concerns are analyzed for trends and the results used in
initiatives such as the development of the compliance structure and
employee education to prevent fraudulent and unlawful behavior.
Risk Management Initiatives (Years ended March 31)
Compliance Initiatives (Years ended March 31)
Reviewed the Plan-Do-Check-Act (PDCA)
cycle for FYE2019
Identified material risks for FYE2020 at
the Executive Officers Meeting (identifying
material risks every year thereafter)
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
2018
2019
2020
2016
2017
2018
2019
2020
Developed and rolled out
crisis management handbook
Efforts to optimize
Business Continuity
Plan (BCP) in Japan
Crisis
Countermeasures
Division for the
head office goes
online
COVID-19
countermeasures were
implemented
Established Global Compliance Policies
and Guidelines
Introduced “Speak Up!” in international
subsidiaries
Strengthened cooperation
with audit divisions
Revised LIXIL Group
Code of Conduct
73
RM
CM
72
SECTION 4GOVERNANCE
concerns over functional and geographic redundancies and
excesses. Operations are carried out thoroughly in accordance
with the clearly defined roles and responsibilities for each
department and the Group within various large categories such as
domestic (Japanese) and international operations.
Increased Sophistication of Internal Audit through Digital Technologies
LIXIL Group is advancing a comprehensive IT reform project to
enhance existing internal audit activities by establishing a new IT
department within Corporate Audit. This IT department is
utilizing digital tools to improve efficiency and strengthen
auditing work through 1) the timely visualization of auditing work;
2) the aggregation and unification of audit data; and 3) data
analysis, while also aiming to expand the area of Group-wide
IT-related auditing.
Corporate Audit
Japan
International
IT
Internal Control Systems and Compliance
Internal Audit
How LIXIL Group Sees Internal Audit
Corporate Audit, a corporate function, is responsible for managing
all of the Group’s internal audit organizations in Japan and
international markets, and ensures all Group audits are conducted
without omission. (At the end of April 2020, the Group’s internal
audit organizations consisted of 64 people in total.) Corporate
Audit is responsible for carrying out traditional internal audit
processes such as accounting audits, operational audits, and
assessment of internal controls. Additionally, it continuously
reviews internal audit systems and processes in order to help
achieve sustainable Group-wide growth, strengthen Group-wide
governance as well as internal control, and contribute to the
development of human resources.
Strengthening Internal Audit System to Achieve Sustainable Growth
All LIXIL Group audit organizations, including our global teams
report to Corporate Audit which in turn ensures detailed
information is shared in a timely manner with each global team.
Additionally, the head of Corporate Audit reports directly to the
CEO of LIXIL Group, and as the corporate function’s representative,
to the Audit Committee of the Board of Directors. By unifying the
internal audit chain of command globally, LIXIL Group has
implemented a new and stronger system of information sharing (as
of April 1, 2020, the internal audit organizations transitioned to a
new system of stronger cooperation with the global headquarters).
Under this new system, the mission of Corporate Audit is to
continuously provide value through internal auditing practices that
enable top management to respond quickly to internal and
external environmental changes. Similar in structure to the
transformed and globally unified executive management
departments for finance, legal and compliance, IT, and HR,
Corporate Audit’s organizational structure is lean and simple in
order to increase transparency. This is a significant change in
course from the previous expansive network which resulted in
Internal Audit Initiatives (Years ended March 31)
Inappropriate activities
by subsidiaries in
Japan
2016
2017
2018
2019
2019
2020
Strengthened audit
reporting lines for
domestic and
international
subsidiaries
Reorganized
Corporate Audit
into a network-
based organization
Aligned the
assessment
standards of
internal audit
Transfer of GCAS*
Expanded the
scope of internal
audit for domestic
subsidiaries
Enhanced
internal audit
functions
Increased
sophistication of
internal audit
through digital
technologies
Increased global
talent
*Global Corporate Audit Staff
Corporate
Audit
74
SECTION 5
Business Results
75
SECTION 4GOVERNANCE Consolidated 11-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
2010
2011
2012
2013
2014
2015
2016
2015
2016
JGAAP
IFRS
2017
2018
2019*5
2020
(Millions of yen)
¥ 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
¥1,692,432
¥1,694,439
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
70,069
3.7
39,011
(25,605)
25,523
72,083
62,205
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
54,485
3.2
49,011
(52,193)
28,188
67,639
68,502
102,126
132,274
149,013
140,707
120,053
98,563
(119,041)
46,618
147,708
121,085
19,122
(154,403)
129,646
132,531
(58,052)
(79,899)
121,563
116,362
(52,606)
(43,843)
138,751
69,351
(72,328)
1,579
141,421
58,576
3.5
39,121
12,518
27,515
68,635
105,557
160,569
157,701
(41,314)
(153,285)
95,862
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
2,091,529
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
535,137
736,689
Earnings (loss) per share*1 (EPS) (yen)
¥ (19.12)
¥ 55.50
¥ 6.49
¥ 73.42
¥ 72.06
¥ 75.46
¥ (65.11)
¥ 105.80
¥ (89.33)
¥ 148.01
¥ 189.13
¥ (179.98)
¥ 43.15
Equity attributable to owners of the parent per share (BPS) (yen)
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
1,730.99
Dividends per share (yen)
Key Ratios
EBITDA to sales 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
Price earnings ratio (times)
Price book-value ratio (times)
40
6.2
(1.0)
(0.5)
0.9
49.7
—
30.9
40
6.6
3.0
1.4
1.0
45.2
72.1
33.3
35,976
41,090
40
4.6
0.4
0.1
1.0
35.7
616.3
50.5
48,163
40
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
7.1
(9.1)
(2.5)
0.8
25.9
—
109.5
62,940
70
9.5
2.4
0.6
0.8
24.0
162.2
146.7
61,634
¥ 1,903
¥ 2,160
¥ 1,733
¥ 1,858
¥ 2,846
¥ 2,847
¥ 2,295
¥ 2,847
¥ 2,295
¥ 2,825
¥ 2,376
¥ 1,478
¥ 1,345
595,742
676,197
542,523
540,221
827,426
891,265
718,459
891,265
718,459
884,378
743,817
463,086
421,414
(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
—
0.80
31.2
0.78
*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 May 2020, business operations of Permasteelisa are classified as discontinued operations from FYE2020. FYE2019 results have also been
restated for comparison.
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
76
*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.
*9
¥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
¥12.9 billion
¥8.6 billion
51%*10
¥1.2 billion
¥7.8 billion
*8 100% in September 2016
*9 Currently LIXIL AFRICA HOLDINGS (Pty) Ltd.
*10 100% in December 2017
77
SECTION 5BUSINESS RESULTS Review and Analysis of Operating Results and Financial Position
In FYE2020, Japan’s economy experienced a recovery in job
growth and consumer spending on the back of improved corporate
profits. Despite showing signs of a moderate economic recovery,
however, consumer sentiment deteriorated due to natural disasters
such as major typhoons, as well as to the consumption tax increase
in October 2019. In addition, affected by the spread of COVID-19,
its economic outlook remains uncertain. Regarding the housing
sector, investment in houses for rent continued to fall sharply, as
in FYE2019, while investment in owner-occupied houses and
houses for sale also fell below the previous year’s level. As a result,
the number of new housing starts in FYE2020 was 884,000, down
by 7.3% year on year, and is expected to continue to decline over
the medium to long term. Accordingly, the business environment
continues to be challenging for LIXIL Group.
In terms of the global economy, the impact of the COVID-19
pandemic from January 2020 onward, the US-China trade
conflicts and other trade issues, and the slowdown in China’s
economic growth has been greater than anticipated. Consequently,
there are concerns of a serious and long-term impact on not only
on the domestic but also on the global economy.
Status of Operating Results
Since LIXIL decided to divest its shares in its consolidated subsidiary Permasteelisa S.p.A. (Permasteelisa) in May 2020, the operations of
Permasteelisa and its subsidiaries are classified as discontinued operations. Accordingly, the figures of revenue, core earnings, operating
profit, and profit (loss) before tax stated in this section are for continuing operations only and exclude discontinued operations. Also, the
percentages of year-on-year changes and the results of the previous fiscal year have been revised to reflect the said reclassification.
Revenue in FYE2020
LIXIL Group generated ¥1,694.4 billion in revenue in FYE2020, up
by 0.1% year on year. In the Japan market, LIXIL Housing
Technology (LHT), LIXIL Water Technology (LWT), and Distribution
& Retail Business (D&R) contributed to the revenue increase to
¥1,323.1 billion, up by 0.6% from the previous fiscal year. Their
strong revenue growth recorded during the first half of the fiscal
year offset the drop in the second half, which was attributable to
the rebound from the consumption tax hike and the decrease in
demand affected by the COVID-19 spread. In international
markets, revenue declined to ¥398.6 billion, down by 2.5% from
the previous fiscal year, although revenue on a local currency
basis, which excluded the negative effect of foreign exchange
translation of ¥15.0 billion generated by the depreciation of the
euro, recorded a 1.2% increase year on year.
FYE2020 revenue by segment for the domestic and
international businesses
Japan
LWT
LHT
LBT*
D&R
H&S*
International
LWT
LHT
Adjustment
Total
FYE2019
FYE2020
1,315.5
1,323.1
435.3
530.0
115.9
176.4
57.9
408.6
397.8
10.8
-31.6
438.2
533.9
112.8
184.2
54.0
398.6
390.3
8.3
-27.2
1,692.4
1,694.4
*LBT: LIXIL Building Technology, H&S: Housing & Services Business.
(¥ billion)
Increase/
decrease
7.6
2.9
3.9
-3.1
7.8
-3.8
-10.0
-7.5
-2.5
4.4
2.0
Core Earnings in FYE2020
LIXIL Group posted core earnings of ¥58.6 billion in FYE2020, up
by 7.5% year on year. In the Japan market, selling, general and
administrative (SG&A) expenses increased mainly due to the one-
time expenses recorded in relation to the Career Option Program,
an early retirement incentive program adopted as part of the
comprehensive HR initiative “Kawaranaito LIXIL.” However, this
expense increase was covered primarily by the positive effect
brought by price revision in LHT, as well as by the improvement of
production efficiency through the progression of the platform
strategy and other measures, leading to the overall increase in
core earnings. With regard to the international markets, all regions
except South East Asia recorded increased core earnings. In the
North America region, ongoing initiatives to improve sales prices
and reduce SG&A expenses have been successful. The Europe
region and the China region also posted strong sales.
FYE2020 core earnings by segment for domestic and
international businesses
(¥ billion)
FYE2019
FYE2020
Increase/decrease
Actual
Reference*
Actual
Reference*
Japan
LWT
LHT
LBT
D&R
H&S
International
LWT
LHT
Adjustment
Total
65.3
29.2
21.3
3.7
7.8
3.5
30.5
31.1
-0.6
-41.4
54.5
70.5
29.4
29.2
2.7
6.3
3.0
31.3
32.1
-0.9
-43.2
58.6
74.8
30.8
31.1
3.3
6.3
3.2
31.3
32.1
-0.9
-41.9
64.2
5.2
0.2
7.8
-1.0
-1.4
-0.5
0.8
1.1
-0.3
-1.9
4.1
9.4
1.7
9.8
-0.4
-1.4
-0.2
0.8
1.1
-0.3
-0.6
9.6
* Reference value: Figures excluding the impact of expenses incurred from the early
retirement benefit program (the Career Option Program).
Profit (Loss) Attributable to Owners of the Parent in FYE2020
LIXIL Group recorded net profit of ¥12.5 billion, up by ¥64.7
billion from the previous fiscal year. Despite the expenses
recorded as other expenses in relation to COVID-19
countermeasures, the increase in core earnings and the decrease
in loss generated by Permasteelisa led to overall profit.
Forecast of Operating Results for FYE2021
The impact of the COVID-19 pandemic on operating results varies
significantly by the region where LIXIL Group operates, while the
respective circumstances are changing rapidly and substantially.
LIXIL Group will announce its forecast of operating results for
FYE2021 once the impact of COVID-19 is better assessed.
With the COVID-19 pandemic having a serious impact globally,
LIXIL Group has taken prompt measures against the outbreak,
setting the safety of its employees and other stakeholders as its
top priority. Although production activities were temporarily
suspended in certain countries, LIXIL Group has continued to
Financial Position as of March 31, 2020
deliver products to customers worldwide by leveraging its strength
in a global supply chain network. In order to fully support the
growing interest in hygienic and healthy housing, which is
expected in a future both “with COVID-19” and “post-COVID-19,”
LIXIL Group is committed to enhancing the following three
initiatives while implementing its Medium Term Plan: (1) improving
efficiency through work-style reforms centered around working
from home and through accelerated digitalization, (2) accelerating
progress globally, and (3) strengthening product lineups for the
new normal. In particular, the Group offers a wide range of
products that are useful for preventing infectious diseases, and is
confident that LIXIL Group will be able to contribute to society
through sustainable business activities. LIXIL Group is also
determined to establish a more agile business operating structure
and to drive innovation through employee-focused initiatives, in
order to enhance its competitiveness for sustainable growth.
In accordance with the decision made in May 2020 to divest shares in Permasteelisa, the assets and liabilities comprising discontinued
operations are classified as "assets held for sale" and "liabilities directly associated with the assets held for sale," respectively, effective
from March 31, 2020.
Consolidated financial position
(¥ billion)
[A]
[B]
Increase/decrease
March 2019
March 2020
Impact of
application of
IFRS 16*
Reclassification
due to the decision
to transfer shares
in Permasteelisa
Others
(actual increase/
decrease)
[B]–[A]
Total increase/
decrease
Cash and cash equivalents
Trade and other receivables
Inventories
Assets held for sale
Property, plant and equipment
Right of use assets
Other
Total assets
Trade and other payables
Interest-bearing debt
Liabilities directly associated with the
assets held for sale
Other
Total liabilities
Treasury shares
Other
Total equity
Equity ratio (%)
Net assets per share (yen)
Number of shares (in thousands)
Net interest-bearing debt
141.4
401.7
234.6
11.4
552.8
—
717.7
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
95.9
307.1
227.6
58.2
496.9
215.0
690.9
2,091.5
336.5
832.6
91.9
295.4
1,556.4
-48.9
584.0
535.1
24.0%
1,730.99
290,103
736.7
—
—
—
—
—
—
166.3
166.3
—
166.3
—
—
166.3
—
—
—
-7.0
-19.9
-2.2
53.5
—
—
-24.4
0
-30.8
-4.7
89.9
-54.4
0
—
—
—
-38.6
-74.7
-4.9
-6.6
-55.9
215.0
-168.7
-134.4
-25.1
-55.1
-3.0
-19.2
-102.3
0
-32.1
-32.0
-45.6
-94.6
-7.0
46.8
-55.9
215.0
-26.8
32.0
-55.9
106.6
86.9
-73.6
64.0
0
-32.1
-32.0
-1.9pp
-108.60
8
152.2
*The impact amounts as of the beginning of FYE2020 incurred due to the mandatory application of new accounting standard (IFRS 16 “Leases”) effective from the beginning of FYE2020.
78
79
SECTION 5BUSINESS RESULTS
Review and Analysis of Operating Results and Financial Position
Assets
Total assets as of March 31, 2020, amounted to ¥2,091.5 billion,
up by ¥32.0 billion year on year, as a result of a ¥149.0 billion
decrease in current assets and a ¥181.0 billion increase in non-
current assets. The decrease in current assets was mainly
attributable to a ¥38.6 billion decrease in cash on hand due to the
repayment of interest-bearing debt, and to a ¥74.7 billion
decrease in trade and other receivables reflecting the year-end
date of FYE2019 falling on a holiday. The increase in non-current
assets was contributed to by the adoption of the new accounting
standard (IFRS 16 “Leases”) and the effect of exchange rate
fluctuations due to the depreciation of the euro. The adoption of
IFRS 16 “Leases” resulted in the decrease in property, plant and
equipment and the increase in right of use assets, accounting for
net ¥159.1 billion of the increase in non-current assets.
Liabilities
Total liabilities as of March 31, 2020, stood at ¥1,556.4 billion, up
by ¥64.0 billion year on year, reflecting a ¥131.5 billion decrease
in current liabilities and a ¥195.5 billion increase in non-current
liabilities. While trade and other payables decreased by ¥25.1
billion due to the year-end date of FYE2019 falling on a holiday,
the increase in interest-bearing debt brought by the adoption of
IFRS 16 and other increasing factors overcame the decrease.
Equity
Total equity as of March 31, 2020 amounted to ¥535.1 billion,
including ¥502.2 billion of equity attributable to owners of the
parent which decreased by ¥31.5 billion year on year. Major
decreasing factors included ¥20.3 billion dividends paid, and
¥24.2 billion other comprehensive loss recorded mainly due to the
foreign exchange translation differences from international
subsidiaries and the fluctuations in the fair value of financial
assets.
The ratio of equity attributable to owners of the parent (equity
ratio) was 24.0%, and the equity per share attributable to owners
of the parent (net assets per share, BPS) was ¥1,730.99.
Cash Flows in FYE2020
Cash and cash equivalents as of March 31, 2020 amounted to ¥95.9 billion, down by ¥45.6 billion year on year.
Consolidated statement of cash flows (¥ billion)
Cash and cash equivalents at
the beginning of the year
138.8
Cash and cash equivalents at
the beginning of the year
141.4
Net cash flows from operating
activities
Net cash flows from investing
activities
Net cash flows from financing
activities
Effects of exchange rate changes on
the balance of cash and cash
equivalents held in foreign currencies
Net increase (decrease) in cash
and cash equivalents included
in assets classified held for sale
Cash and cash equivalents at
the end of the year
69.4
-72.3
1.6
0.5
3.6
141.4
Net cash flows from operating
activities
Net cash flows from investing
activities
Net cash flows from financing
activities
Effects of exchange rate changes on
the balance of cash and cash
equivalents held in foreign currencies
Net increase (decrease) in cash
and cash equivalents included
in assets classified held for sale
Cash and cash equivalents at
the end of the year
-2.0
-6.6
95.9
157.7
-41.3
-153.3
FYE2019
FYE2020
Financial Resources and Liquidity of Funds
LIXIL Group strives to generate operating cash flows and considers
a wide range of fundraising methods to procure a stable and
flexible supply of funds necessary for its business activities while
maintaining a sound financial position. Regarding cash on hand,
in principle the Group maintains funds adequate to cover the
settlement of its liabilities in an emergency. To ensure financial
flexibility, the Group works to diversify the sources of funds, in
addition to bank borrowings and funds from other financial
institutions, by arranging for a commercial paper issuance line,
establishing commitment lines, and implementing the
securitization of trade notes and accounts receivable.
In response to concerns of further deterioration in the
business environment due to the spread of COVID-19, in addition
to the basic policies described above, LIXIL Group is working to
establish new short-term funding to prepare for such an economic
decline. Also, LIXIL Group is striving to further secure liquidity on
hand by prioritizing capital investment projects, rigorously
managing inventory, and implementing measures to reduce SG&A
expenses within the Group.
The impact of the adoption of the new accounting standard (IFRS
16 “Leases”) is as follows.
A ¥33.6 billion increase in net cash flows from operating
activities due to the increase in depreciation and amortization
A ¥41.0 billion decrease in net cash flows from financing
activities due to the increase in lease liabilities paid
Cash Flows from Operating Activities
Net cash provided by operating activities for FYE2020 amounted
to ¥157.7 billion, up by ¥88.4 billion year on year. Major factors of
this increase were the decrease in income taxes paid and a ¥33.6
billion increase in depreciation as a result of the adoption of the
new accounting standard IFRS 16 “Leases,” along with the
improved working capital balance reflecting the year-end date of
FYE2019 falling on a holiday.
Cash Flows from Investing Activities
Net cash used for investing activities was ¥41.3 billion, down by
¥31.0 billion year on year. Major cash-outflow factors included
purchases of property, plant and equipment and intangible assets,
while there was a cash-inflow effect of ¥12.4 billion in relation to the
sale of subsidiaries and disposal of interests in affiliated companies.
Cash Flows from Financing Activities
Net cash used for financing activities for FYE2020 was ¥153.3
billion, reversing ¥1.6 billion net cash generated for FYE2019.
This net cash outflow was attributable mainly to dividends paid, a
¥60.0 billion increase in redemption of bonds, and a ¥41.0 billion
increase in lease liabilities paid due to the adoption of IFRS 16
“Leases,” in addition to a net ¥42.0 billion decrease in interest-
bearing debt as external funding for working capital on top of the
increase in net cash provided by operating activities.
Changes in key indicators of financial condition
Ratio of cash flows to net interest-bearing debt (times)*1
Net debt-to-equity ratio (%)*2
Interest coverage ratio (times)*3
FYE2016
FYE2017
FYE2018
FYE2019
FYE2020
5.8
132.9
16.7
4.8
116.6
7.7
4.8
89.0
15.5
8.4
109.5
14.9
4.2
146.7
26.5
*1 (Interest-bearing debt – cash and cash equivalents) / operating cash flows
*2 (Interest-bearing debt – cash and cash equivalents) / equity attributable to owners of the parent
*3 Operating cash flows / interest paid
Sale of Subsidiaries
LIXIL Group announced the divestiture of shares in Permasteelisa
in May 2020, and of shares in LIXIL VIVA CORPORATION (LIXIL
VIVA) in June 2020. As the business forms of both subsidiaries
are different from the Group’s core businesses, the divestiture of
shares in these subsidiaries aims to improve management
efficiency by concentrating its management resources on its core
businesses, promoting synergies among businesses, and investing
in new businesses and businesses with high profit growth
potential. The businesses of LIXIL VIVA, as well as those of
Permasteelisa, will be classified as discontinued operations
effective from the first quarter of FYE2021.
80
81
SECTION 5BUSINESS RESULTS
Review of Operations by Segment
(Fiscal Year Ended March 31, 2020)
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
(As of the end of FYE2020)
Revenue
Revenue
Revenue
Revenue
Revenue
Number of factories
¥ 828.5
billion
48.1%
¥ 542.2
billion
31.5%
¥ 112.8
billion
6.6%
¥184.2
billion
10.7%
¥ 54.0
billion
3.1%
Core earnings
¥61.5 billion
Core earnings
¥28.3 billion
Core earnings
¥2.7 billion
Employees
R&D
32,661 people
Employees
18,650 people
Employees
6,758 people
*
¥18.9 billion
R&D
¥7.6 billion
R&D
¥0.9 billion
Core earnings
Employees
¥6.3 billion
Core earnings
¥3.0 billion
1,447 people
Employees
1,087 people
97
sites
Japan
41
International
56
Japan Americas Europe
Africa
LWT
20
LHT
21*
LBT
—
11
—
2
4
—
5
3
—
—
Asia
Pacific
22
7
2
* Seven of the LHT factories also manufacture commodities
for LBT.
Key Highlights for FYE2020
Key Highlights for FYE2020
Key Highlights for FYE2020
Key Highlights for FYE2020
Key Highlights for FYE2020
Number of showrooms
In addition to LWT mainstay products such as our
RICHELLE SI system kitchens and SPAGE and
Arise system bathrooms that pursue the best in
both ease of use and comfort in living, we have
launched an industry-first Resilience Toilet that can
be used in the same location and in same way,
whether in normal times or during a natural
disaster, by people of all ages. This product has
received numerous awards and we have carried out
active marketing activities.
Revenue was down 0.6% year on year due to factors
such as the impact of foreign exchange translation
from a weaker euro. Core earnings, on the other
hand, were up 2.1% due to factors such as
increased gross profit and SG&A reduction efforts.
Domestic revenue was up due to solid results in the
first half of FYE2020. Core earnings were up, despite
the impact of costs related to an early retirement
incentive program (Career Option Program).
International revenue was down resulting from
weaker demand in Southeast Asia and the impact
of foreign exchange translation; however, revenue
excluding the impact of foreign exchange
translation was up 1.8%.
In the Americas, revenue was the same level year
on year, however, pricing improvement and cost
reduction in production resulted in higher core
earnings.
Revenue growth in Central and Eastern Europe
remained steady, for a 6% increase year on year for
revenue in Europe.
Full-year revenue growth in China was 9% year on
year, however, both revenue and core earnings
were down in Asia total due to reduced demand in
Southeast Asia.
82
LHT strengthened products with advanced design
such as the TOSTEM LW window designed to
seamlessly connect the outside and inside for a
comfortable living space, and the Fence AA type
outdoor fencing that features a refined wooden,
furniture-like design. Meanwhile, interior decorative
materials such as the Lassisa range maintained
steady sales.
Both revenue and core earnings were up, with the
former up 0.3% and the latter up 36.5% year on
year. Contributing factors for core earnings were the
impact of price revisions, improved product mix
through increased sales particularly of new products
in exterior products and wooden furnishing
materials, as well as due to success in increasing
gross profit as a result of improved production
efficiencies from progress in the platform strategy.
Revenue and core earnings were down year on year,
by 2.7% and 27.6%, respectively, as a result of
reduced orders due to decline in demand related to
the Tokyo 2020 Olympics.
LIXIL Group decided to transfer all shares of
Permasteelisa S.p.A. to a US company in May
2020, and it has been classified as a discontinued
operation since March 2020. The US company to
which the shares have been transferred manages a
diverse range of businesses and has unique
knowledge and experience in supporting
businesses, such as improving safety and
operations. Thus, it is an ideal company to take over
Permasteelisa, as it will be able to advance recovery
plans, improve profitability, and achieve
independent growth. For LIXIL Group, this share
transfer means we reduce risk in an area outside
our core business and can progress our ongoing
reforms to the next stage. We will further strengthen
our water and housing technology businesses and
further focus management resources on high
growth areas.
* Includes employees of discontinued operation
Permasteelisa and of its subsidiaries.
Since LIXIL VIVA CORPORATION initial public
offering in April 2017, it has accelerated opening
new stores. D&R newly opened seven stores,
achieving its FYE2020 target. D&R now operates
102 stores in Japan as of March 31, 2020.
D&R started operating a new logistics center in
Higashimatsuyama City in September 2019.
While revenue was up 4.4% year on year, core
earnings were down 18.1% year on year due to the
impact of increased personnel costs, and upfront
investment such as construction of the new logistics
center and strengthening IT systems.
In June 2020, an agreement was reached to make
LIXIL VIVA CORPORATION a wholly owned
subsidiary of Arcland Sakamoto Co. Ltd. LIXIL VIVA
CORPORATION has been operating independently
as a listed company, however, as a result of this
agreement, it will also become independent from
LIXIL Group in terms of capital.
H&S strengthened sales activities for housing
products such as: Cecibo, designed to foster family
dreams and ties; arietta-VERDEA, a warm,
comfortable, energy-efficient home achieved
through passive design; and the beautiful quality
and design of WoodsHill that features earthquake
resistance and heat insulation.
H&S drove initiatives to expand its existing
businesses and housing stock businesses
(secondhand and renovation market) in response
to the decreasing number of new housing starts
over the medium and long term in Japan. However,
both revenue and core earnings were down as a
result of a decrease in sale of real estate. Revenue
composition for businesses other than for new
houses reached 36.9% in FYE2020, which was a
decrease of 1.8 percentage points from the
previous year.
131
sites
Japan
103
International
28
Japan
Americas
Europe
Africa
Asia
Pacific
103
1
9
1
17
Domestic home reform shops
and reform network members
12,343 stores
Domestic homebuilding
franchise members (H&S)
218 stores
Note: The total number of factories include those of
Permasteelisa S.p.A., which was classified as a
discontinued operation in FYE2020.
83
SECTION 5BUSINESS RESULTS Principal Group Companies
As of March 31, 2020
Consolidated Subsidiaries
Name
LIXIL Corporation*1 *2
LIXIL Total Service Corporation
Dinaone Corporation
TM.S Corporation
GROHE Group S.à r.l.*3
Grohe AG
Location
Koto-ku, Tokyo
Koto-ku, Tokyo
Tokoname, Aichi
Chiyoda-ku, Tokyo
Luxembourg
Paid-in capital
(¥ million)
Equity owned
by the holding
company (%)
34,600
100
90
60
C thousand 57,143
Düsseldorf, Germany
C thousand 60,885
Other 45 affiliate companies of GROHE Group S.à r.l.
—
—
ASD Holding Corp.
New Jersey, USA
US$ thousand 412,949
10 affiliate companies of ASD Holding Corp.
—
A-S CHINA PLUMBING PRODUCTS Ltd.
A-S (China) Co., Ltd.
LIXIL Vietnam Corporation
LIXIL (China) Investment Co., Ltd.
LIXIL Building Materials Manufacturing (Suzhou)
Corporation
LIXIL Sanitary Fitting Manufacturing (Suzhou)
Corporation
Cayman Islands
Shanghai, China
Hanoi, Vietnam
Shanghai, China
Suzhou, Jiangsu, China
Suzhou, Jiangsu, China
—
US$ thousand 24,907
US$ thousand 30,000
VND million 743,386
CNY thousand 298,975
6,200
1,730
Taiwan Inax Corporation
Taipei, Taiwan
NT$ thousand 282,677
LIXIL India Sanitaryware Private Limited
Andhra Pradesh, India
INR thousand 62,905
LIXIL AFRICA HOLDINGS (Pty) Ltd.
Krugersdorp, South Africa
ZAR million 2,025
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 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.
Chiyoda-ku, Tokyo
Shinjuku-ku, Tokyo
Suma-ku, Kobe, Hyogo
Oita, Oita
Saga, Saga
Koto-ku, Tokyo
Singapore
75
9,382
316
2,000
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
PT. LIXIL ALUMINIUM INDONESIA
Cileungsi, Indonesia
IDR million 173,617
LIXIL WINDOW SYSTEMS PRIVATE LIMITED
Haryana, India
INR thousand 727,818
Business
segment
LWT, LHT,
LBT
LWT, LHT
LWT
LWT
LWT
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
100
100
100
100
100
100
—
100
—
100
100
100
100
100
100
72
98
100
100
100
100
80
100
100
100
100
100
60
100
100
100
100
75
100
Name
LIXIL Renewal Corporation
Location
Koto-ku, Tokyo
LIXIL VIVA CORPORATION*4 *5
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
Permasteelisa S.p.A.*6
Veneto, Italy
C thousand 6,900
34 affiliate companies of Permasteelisa S.p.A.
—
—
54 other companies*7
Paid-in capital
(¥ million)
Equity owned
by the holding
company (%)
Business
segment
100
24,596
450
1,250
205
160
100
20
500
3,475
100
53
100
100
100
100
100
100
100
100
100
—
LBT
D&R
H&S
H&S
H&S
H&S
H&S
H&S
H&S
(Financing
services for
Group
companies)
—
—
Equity-Method Affiliates
Name
Location
Paid-in capital
(¥ million)
Equity owned
by the holding
company (%)
Business
segment
Sanyo Homes Corporation*4
Nishi-ku, Osaka, Osaka
5,945
28
H&S
59 other companies
*1 The Board of Directors resolved as of March 23, 2020 to conduct an absorption type merger of LIXIL Corporation and concluded a merger contract on the same date. Please refer to page 61 for an
overview.
*2 As of September 2, 2019, LIXIL Corporation succeeded the operation of assisted living retirement home business and the housing for the elderly, which was under the Housing & Services Business,
to the Senior Life Company Ltd. by absorption type company split and all issued shares were transferred to Trust Garden Co., Ltd.
*3 GROHE Group S.à r.l. changed its name to LIXIL Europe S.à r.l. in April 2020.
*4 The Company submits securities reports.
*5 The Company plans to transfer all shares of LIXIL VIVA CORPORATION held by the Company to LIXIL VIVA. For details, please refer to the timely disclosure on June 9, 2020 posted on our website.
www.lixil.com/en/investor/ir_news/
*6 At the Board of Directors’ meeting held on May 1, 2020, the Company decided to transfer 100% of the issued shares of Permasteelisa S.p.A. and concluded the share transfer agreement on the
same date.
*7 In other companies, the holding of shares of LG-TOSTEM BM Co., Ltd. is 50%, but it is treated as a subsidiary because it is effectively controlled by the Group. LIXIL SUZUKI SHUTTER
CORPORATION ceased to be an consolidated subsidiary due to transfer of all of shares held to Sanwa Holdings Corporation on September 30, 2019.
84
85
SECTION 5BUSINESS RESULTS Basic Policy for Investor Relations
LIXIL Group Corporation’s investor relations (IR)
activities facilitate communication with capital
markets in Japan and international markets 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
www.lixil.com/en/investor/
Activities for the Fiscal Year Ended
March 31, 2020
Annual General Meeting of Shareholders (AGM)
(held on June 30, 2020)
Shareholder attendance: 24 people
Shareholders who watched the live broadcast:
332 people
In consideration of the ongoing COVID-19 pandemic
and in order to prioritize the safety of our
shareholders, we requested that shareholders refrain
from attending in person on the day of the AGM and
broadcasted this year’s AGM live on the internet.
We sincerely appreciate shareholders’ understanding
and cooperation.
Communicated management message to the market
(for institutional investors and analysts)
Earnings briefing sessions–four times (every quarter)
Individual meetings–357 times
Management strategy and governance-related
briefing sessions–three times
Small meeting–once
Participated in investor conferences–
two times in Japan and once outside of Japan
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, 2019 to July 31, 2020)
Gomez IR Site Ranking 2019
Awarded silver prize in the overall IR site
ranking and second place in the “Metal
Products” industry category from
Morningstar Japan K.K. (December 2019)
DJSI Asia Pacific Index
Selected for three 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 2019)
MSCI Japan Empowering Women Index
Selected for four consecutive years as a
constituent of the MSCI Japan Empowering
Women Index (WIN), created by MSCI Inc.
(June 2020)
FTSE4Good Index Series,
FTSE Blossom Japan Index
Selected for four consecutive years as a
constituent of the FTSE4Good Index Series
and FTSE Blossom Japan Index, created
by FTSE Russell (June 2020)
S&P Japan 500 ESG Index
Selected as a component of the S&P Japan
500 ESG Index, created by S&P Dow Jones
Indices (May 2020)
DJSI World
Selected for Dow Jones World Index (DJSI
World) for the first time, created by S&P
Dow Jones Indicates and RobecoSAM
(September 2019)
Nadeshiko Brand
Selected for three consecutive years as a
component of the Nadeshiko Brand initiative,
jointly conducted by the Ministry of Economy,
Trade and Industry and the Tokyo Stock
Exchange (March 2020)
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 (March 2019)
Water Security A List 2019
Selected for two consecutive years as a
member of the CDP’s prestigious Water
Security A List (February 2020)
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, 2020
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 23,215,701 shares)
Number of shareholders
290,103,458
57,734
Distribution of ownership among shareholders (thousand shares)
E
D
TOTAL
313,319
thousand shares
C
A
B
A
B
C
D
E
Financial
institutions
Domestic
companies
Foreign
investors
Individuals
and others
25,322
105,820
61,407
Treasury stock
23,215
Name of shareholder
Number of
shares held
Ratio of
shareholdings
The Master Trust Bank of Japan, Ltd. (Trust Account)
19,352*1
6.67%
Japan Trustee Services Bank, Ltd. (Trust Account)
14,014*1
4.83%
The Nomura Trust & Banking Co., Ltd. (Trust Account)
8,896*1
3.07%
State Street Bank Client Omnibus OM04 (Standing
Proxy: The Hongkong and Shanghai Banking
Corporation Limited Tokyo Branch)
8,707
3.00%
Daiichi Life Insurance Company, Limited.
(Standing proxy: Trust & Custody Services Bank, Ltd.)
6,561
2.26%
JPMorgan Securities Japan Co., Ltd.
6,332
2.18%
Japan Trustee Services Bank, Ltd. (Trust Account 5)
5,943*1
2.05%
NORTHERN TRUST CO. (AVFC) SUB A/C AMERICAN
CLIENTS (Standing Proxy: The Hongkong and
Shanghai Banking Corporation Limited Tokyo Branch)
5,454
1.88%
97,552
LIXIL Employee Stock Ownership
7,584
2.61%
Total
313,319
Japan Trustee Services Bank, Ltd. (Trust Account 9)
4,982*1
1.72%
Monthly stock price range (Tokyo Stock Exchange)
For the years
ended March 31
2016
2017
2018
2019
2020
High*2 (¥)
2,959
2,999
3,255
2,639
2,156
Low*2 (¥)
2,233
1,593
2,285
1,270
1,065
*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 23,215 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
2015
April
2016
April
2017
April
2018
April
2019
March
2020
Stock trading volume (thousand shares)
60,000
50,000
40,000
30,000
20,000
10,000
0
April
2015
April
2016
April
2017
April
2018
April
2019
March
2020
86
87
SECTION 5BUSINESS RESULTS
Corporate Data
As of March 31, 2020
Company Name
LIXIL Group Corporation
(The company name will be LIXIL Corporation
on December 1, 2020)
Established
September 19, 1949
Registered Office
2-1-1 Ojima, Koto-ku,
Tokyo 136-8535, Japan
Paid-In Capital
¥68,418 million
Fiscal Year Closing
March 31
Employees
36 (Consolidated employees: 61,634)
Accounting Auditors
Deloitte Touche Tohmatsu LLC
Overview of Major Businesses
The Company controls and manages domestic and international
businesses 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 integrated 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.
88
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.
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.
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.
www.lixil.com/en/sustainability
SECTION 5BUSINESS RESULTS TSE Securities Code: 5938
LIXIL Group Corporation
www.lixil.com
2020.08.24発行