LIXIL
INTEGRATED REPORT
2021
MAKE BETTER
HOMES A REALITY
FOR EVERYONE,
EVERYWHERE
The world is evolving, lifestyles are
changing, but one thing remains the
same: every person on the planet
dreams of a better home.
At LIXIL, our purpose is to make better
homes a reality for everyone,
everywhere.
A better home is made up of
surprisingly simple things – showers
and faucets to experience water in
new ways, kitchens that unleash
creativity, toilets that provide
cleanliness and comfort, doors and
windows that connect you with the
world outside, interiors and exteriors
that bring spaces to life, and baths to
escape in after a long day.
Our purpose is the north star that
inspires and guides every decision we
make, helping us shape the future of
living, achieve sustainable growth and
contribute to society.
LIXIL BEHAVIORS
Driven by a strong sense of mission
to contribute to society, our
employees strive to realize our
purpose by practicing the LIXIL
Behaviors in their work every day.
01
1S E C T I O N
OVERVIEW
2S E C T I O N
VALUE CREATION
3S E C T I O N
STRATEGY
4S E C T I O N
GOVERNANCE
5S E C T I O N
DATA
An overview of LIXIL, our purpose,
our vision, and messages from
our leaders.
A look at how LIXIL creates
sustainable value for our
stakeholders and society.
The progress we are making on our
journey toward sustainable growth.
Our approach to corporate governance
and the steps we are taking
in this area.
A summary of the data that defines
our company and performance.
C
O
N
T
E
N
T
S
04
08
14
16
18
LIXIL AT A GLANCE
CEO INTERVIEW
CFO INTERVIEW
CR CHAIRPERSON MESSAGE
EXECUTIVE OFFICERS
20
22
24
26
28
MEGATRENDS
VALUE CREATION PROCESS
THE RESOURCES WE RELY ON
THE WAY WE CREATE VALUE
THE VALUE WE CREATE
30
32
34
35
36
CORPORATE RESPONSIBILITY
STRATEGY
LIXIL’S MATERIAL ISSUES
LIXIL’S EVOLUTION AND
10TH ANNIVERSARY
MANAGEMENT DIRECTION
THE LIXIL PLAYBOOK
1.
2.
FOCUS AND SIMPLIFY OUR
ORGANIZATION
IMPROVE PROFITABILITY OF
JAPANESE BUSINESS
Note:
Due to our decision to divest Permasteelisa in May 2020 (divestment completed in September
2020) and LIXIL VIVA in June 2020 (divestment completed in November 2020), we have classified
the operations of Permasteelisa and LIXIL VIVA as discontinued operations. Business results for
FYE2020 shown in LIXIL’ s Integrated Report 2020 have been retroactively restated.
Editorial Policy
This integrated report aims to enhance communication with LIXIL’s stakeholders, especially
investors, by presenting our 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 our latest news is available on our corporate website.
3.
PROMOTE GROWTH OF
INTERNATIONAL WATER
TECHNOLOGY BUSINESS
4.
ESTABLISH FOUNDATION FOR
LONG-TERM GROWTH THROUGH
INNOVATION
5.
EMPOWER OUR PEOPLE TO
DELIVER
44
SPECIAL FEATURE
GLOBAL PEOPLE ORGANIZATION
STRATEGY
46
SPECIAL FEATURE
DIGITAL TRANSFORMATION
48
50
53
56
58
60
66
RESPONSE TO COVID-19
LIXIL’S CORE BUSINESSES – LWT
LIXIL’S CORE BUSINESSES – LHT
FINANCIAL HIGHLIGHTS
NON-FINANCIAL HIGHLIGHTS
REVIEW AND ANALYSIS OF OPERATING
RESULTS AND FINANCIAL POSITION
PRINCIPAL RISKS AND
COUNTERMEASURES
86
88
90
91
92
CONSOLIDATED 11-YEAR SUMMARY
PRINCIPAL GROUP COMPANIES /
GLOBAL MANUFACTURING AND SALES
SITES
BASIC POLICY FOR INVESTOR
RELATIONS
SHAREHOLDER INFORMATION
CORPORATE DATA
68
71
72
74
77
78
79
81
82
MESSAGE FROM THE CHAIRPERSON
OF THE BOARD OF DIRECTORS
LIXIL BOARD OF DIRECTORS
CORPORATE GOVERNANCE
AT LIXIL
NOMINATION COMMITTEE
REPORT
AUDIT COMMITTEE REPORT
COMPENSATION
COMMITTEE REPORT
EXECUTIVE
COMPENSATION
GOVERNANCE
COMMITTEE REPORT
INTERNAL CONTROL SYSTEMS AND
COMPLIANCE
02
03
1S E C T I O N
OVERVIEW
LIXIL AT A GLANCE
This year we celebrate our 10 th anniversary as LIXIL. As we accelerate our transformation, we are
proud that our products touch the lives of more than a billion people every day and believe we
have the potential to do so much more.
FOR ALL LIFESTYLES
Construction
methods
Tiles
Solar energy
systems
Windows
Bathrooms
and toilets
Garden
rooms
Housing
exteriors
Entrance
doors
Housing
interiors
IoT systems
Kitchens
Smart water
products
04
A GLOBAL LEADER
Touching the lives of
over1billion people
every day
Over100 years
of brand history
Present in
over 150 countries
Approx. 55,000
employees
around the world
¥1,378.3 billion
consolidated
revenue
80 factories
¥57.3 billion
core earnings
116 showrooms
A PRODUCT LEADER
6 major
design studios
¥24 billion
invested in R&D
A SUSTAINABILITY LEADER
Products and services helped
eliminate 66 million tons
in CO2 emissions
LIXIL
LIXIL
16 household
product brands
Enabled access to
sanitation for 25 million
people in over 38 countries
12,000 +
patents and design
applications worldwide
48% of
new graduate hires
in Japan are women
05
SECTION 1
OVERVIEW
LIXIL AT A GLANCE
LIXIL BUSINESS
LIXIL BUSINESS
LIXIL BUSINESS
LIXIL BUSINESS
LWT LIXIL WATER TECHNOLOGY
LHT LIXIL HOUSING TECHNOLOGY
LBT LIXIL BUILDING TECHNOLOGY
H&S HOUSING & SERVICES BUSINESS
Revenue
Revenue
Revenue
Revenue
56.1%
¥ 783.8
billion
Core earnings ¥ 62.1 billion
Employees 31,412 people
¥ 15.9 billion
R&D
33.9%
¥474.3
billion
Core earnings ¥ 31.4 billion
Employees 17,044 people
¥ 7.1 billion
R&D
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 in Japan such as RICHELLE and SPAGE.
LHT's brands such as TOSTEM, EXSIOR, INTERIO, SUPER
WALL, and NODEA produce a range of housing-related
products, from window sashes to entrance doors, exterior
building materials, and interior furnishing materials, helping
to make better homes a reality.
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.
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, roofing materials, etc.
Other
Solar power systems, etc.
Direct customers
Dealers
Sales agencies
Construction
companies
Competitors
Kohler
Roca
Hansgrohe
Masco (Delta)
Product brands
Architectural firms
Developers
Wholesalers
Building material
trading companies
Volume retailers
General consumers
Fortune Brands
(Moen)
Geberit
TOTO
Takara Standard
Cleanup
Panasonic
Direct customers
Dealers
Sales agencies
Building materials
wholesalers
Competitors
YKK AP
Sankyo Tateyama
Product brands
Homebuilders
House
manufacturers
Construction
companies
Architectural firms
Developers
6.7%
¥93.4
billion
Core earnings
Employees
R&D
¥ 2.6 billion
1,427 people
¥ 0.9 billion
3.3%
¥46.6
billion
Core earnings
Employees
¥ 2.1 billion
715 people
LBT manufactures products and offers services to support the
construction of buildings that are environmentally conscious
and that provide better spaces to live, work, study, and play.
H&S offers comprehensive housing and lifestyle support to
consumers in Japan throughout all stages of their lives.
Principal products and services
Metal building materials
Curtain walls, building window
sashes, store facades, etc.
Direct customers
Construction companies
Architectural firms
Principal products and services
Housing solution businesses
Development of homebuilding
franchise chains and construction
on order, etc.
Real estate businesses
Land, building, and real estate
management services, support for
development of real estate
franchises, etc.
Financial services business
Housing loans, etc.
Direct customers
Housing franchise business:
Homebuilding franchise
members
Real estate brokerage franchise
business: General consumers
Product brands
06
07
SECTION 1
OVERVIEW
CEO INTERVIEW
WE ARE ON TRACK TO
DELIVER ON OUR KEY GOALS
AND WORKING TO FULFILL
OUR CORPORATE PURPOSE.
Q1
How are you progressing with
your vision for LIXIL and the goals
you’ve put in place?
This year we are celebrating our 10th anniversary as
LIXIL, during which time we have seen tremendous
change and progress. Simply put, we are a completely
different company in all the ways that matter. We
have made solid progress toward our corporate vision
and long-term strategy this year. But let me first say
how proud I am of our employees for how they
performed during this difficult and stressful period.
We covered significant ground together and I want to
thank them for their dedication and resilience.
We are on track to deliver on our key goals and
are consistently working to fulfill our corporate
purpose of making better homes a reality for
everyone, everywhere. To achieve this, we are
transforming LIXIL into a company that can create
the profits we need to invest in the future, achieve
sustainable long-term growth and, ultimately,
contribute to society through our success.
It is clear we must become a more agile,
entrepreneurial and purpose-led organization. This
is key to developing innovative and differentiated
products and solutions for our consumers, and
ensuring that we have management processes that
are more resilient to the external environment.
At the start of the pandemic, I mentioned that for
all its tragic aspects, corporate Japan must also see
this as a blessing in disguise; the moment to
embrace structural changes long overdue. We have
taken this to heart as a corporation. During the
pandemic we have accelerated changes that were
already underway, helping prepare us for the future.
Building on the progress made under our Medium
Term Plan (MTP), we have outlined our new
management direction see page 35 . We call this the
LIXIL Playbook and it is a continuation of the
fundamentals laid out in the MTP, focused on four
strategic initiatives that we must deliver:
1. Focus and simplify our organization
This was our first goal and has largely been
completed, as can be seen with the organizational
changes we made to accelerate decision-making,
improve productivity and strengthen
Kinya Seto
Director, Representative Executive Officer,
President, and CEO
08
09
SECTION 1
OVERVIEW
CEO INTERVIEW
enterprise-wide alignment. We also made
divestments to focus on our core businesses,
improve our balance sheet, and reduce our risk to
external market forces.
2. Improve profitability of Japanese business
Our home market is our largest, and to invest in
global expansion, our domestic business must be
profitable. We have taken a number of important
steps in that area and I am confident the results
will be clear within the 2022 fiscal year.
3. Promote growth of international
water technology business
With our world-class house of brands, we see this
as the best opportunity for immediate business
growth. We are maximizing synergies, improving
supply chains and leveraging our unique
capabilities to expand the product pipeline.
4. Establish foundation for long-term growth
through innovation
We are working to establish long-term growth
opportunities through innovation, such as digital
sales models, water purification products, new
building materials, while seeking out new markets.
These four strategies are underpinned by
empowering our people and by helping them to
become more agile and entrepreneurial. Management
is motivated by the rallying power of the LIXIL
Playbook, and we have already begun to
operationalize actions necessary to realize its goals.
We are confident the LIXIL Playbook sets the right
course for us to achieve our corporate vision and
purpose.
Q2
Turning to your finances,
how do you evaluate progress
against your goals?
Our goal is to achieve a 10% return on invested
capital (ROIC), a measure that we think best tracks
our overall performance. To achieve this, we need to
improve our core earnings (CE)*1. If we can achieve
a CE margin of 10%, it will mean that we have
established differentiated products and services and
will have the capital we need to pursue new
opportunities to expand our market share organically.
During FYE2021, we made significant headway
toward achieving these targets. Our gross margin
improved by 0.9 points thanks to the progress we
have made in the transformation of our production
process, which has enabled us to be more resilient
against changes in our external environment, and
sales of higher value, differentiated products. At the
same time, we reduced our selling, general and
administrative expenses over the full year by ¥38.4
billion – an 8.5% decrease – thanks to productivity
improvements in the organization. Therefore, in spite
of the impact of COVID-19 on our operations and
markets, we were able to raise our core earnings
margin by 0.7 points to 4.2%.
For FYE2022, we are now targeting a CE margin
of 5.6%, and believe that in the medium term we
can achieve 7.5% before growing the margin to
10%. At that point we believe that we can also
achieve a 10% ROIC.
In addition, through our efforts to strengthen our
financial foundation, such as through the
divestments of several subsidiaries, improving our
business profitability, and prioritizing capital
investment with an emphasis on ROIC over the
years, I am pleased that we improved our ratio of
equity attributable to owners of the parent*2 to
31.7% – a 7.7 point improvement – and achieved
our MTP target for net debt-to-EBITDA ratio of 3.5
times last year.
*1 Equivalent to operating profit in JGAAP
*2 Equity ratio under JGAAP
Q3
Sustainable growth also requires
success across a range of
stakeholder commitments that
go beyond financial metrics.
What are your ESG goals?
We must start with a clear and simple question: “Why
do we exist and where can we have a unique and
positive impact on society?” This is where we come
back to our corporate purpose: to make better homes
a reality for everyone, everywhere.
I believe that our employees, business partners
and consumers all want to be associated with a
company they can respect and view positively. This is
one reason our environmental, social and governance
(ESG) program is not peripheral to what we do; it is
closely integrated with our core business strategy and
key to our long-term business prospects.
We have a unique Corporate Responsibility
Strategy that reflects our business operations and
expertise. It focuses on three core pillars: Global
Sanitation & Hygiene, Water Conservation &
Environmental Sustainability, and Diversity &
Inclusion. These activities directly contribute to our
Value Creation Process, projecting to all our
stakeholders and ultimately helping us to deliver on
our corporate purpose.
Q4
Let me ask further about your
recently announced Diversity &
Inclusion (D&I) goals. What is your
view on how they work together?
I believe that inclusion is where we should focus our
attention. If we can create a fully inclusive corporate
culture where everyone is respected equally, then we
will not only empower our people, but we will also
attract talented people keen to be part of a more
diverse global workforce. This is necessary for us to
continue to innovate and grow.
Gender diversity is an important metric for us
because it is central to being consumer focused. And
while it is only one form of diversity, it also serves as
a proxy for measuring our progress toward becoming
a more inclusive culture. We serve a consumer base
as diverse as society itself and women are decision
makers when it comes to most of our products.
We need a workforce that truly understands the
needs of our consumers. That is why D&I is a
business imperative. It must be at the heart of our
cultural transformation. It is not only the right thing
to do, it is strategically important for LIXIL to stay
relevant and competitive.
Q5
D&I is a global issue but is it
particularly difficult to bring about
change of this kind in Japan?
Japan is of course our largest market and we have
worked hard to motivate and empower our people
here. We have shifted to a more agile and
meritocratic approach to enhance productivity, and
now offer more flexible work styles that cater to the
individual needs of employees, accommodating to all
different stages in life. Gender equity issues are,
10
11
SECTION 1
OVERVIEW
CEO INTERVIEW
however, unfortunately prevalent throughout society,
including within LIXIL, where we hired and provided
opportunities to fewer female employees in the past.
While this has been openly recognized for some
time, we must aggressively and consciously tackle it
to achieve sustainable diversity. We will focus our
efforts on building a more inclusive culture but we
have also set strong targets for hiring 50% women in
our new graduate program. We achieved this goal for
the first time this year. We also aim to have women in
30% of leadership positions across the company by
2030 and to achieve a 50:50 gender ratio at the
corporate officer and Board levels of the company by
2030.
Q6
While working to empower people
as the foundation of your strategy,
how are you approaching
the shrinking Japan market?
We are seeing a decline in new housing and we
expect this trend to continue as the Japanese
population shrinks. This is a risk for the traditional
business model in the housing technology business
but also an opportunity. Despite fewer new houses,
there are increasing opportunities for householders
to renovate their current homes, especially as they
spend more time at home. An increasing range of
renovation products cover both our water and
housing sectors. It also brings higher profit margins,
helping us move out of lower-margin basic goods.
Growth of the renovation market, however, has
traditionally been slowed by the declining number of
skilled laborers and, compared to new housing,
renovation is more labor intensive and less efficient
in terms of sales for our business partners. Until now,
home renovation has also been predominantly
focused on water technology products and not
housing products, such as windows, doors and wall
exteriors. In response, we are focused on developing
products and services that are easier, faster and less
complex to install, addressing consumer and
business partner pain points through diversified
products, and improving the efficiency of the sales
process such as through our LIXIL Online Showroom.
At the same time, we are continuing work to
reduce costs, such as in our housing business with
the creation of a platform manufacturing system, and
aligning this with a more efficient sales structure.
Our overall goal is to turn Japan into a cash
generator that can provide the capital we need for
investments globally to build a sustainable long-
term future.
Q7
Over the past year you have seen
strong performance in Europe,
the Americas and China, while
Asia Pacific is recovering.
What are the global opportunities?
Solid, sustainable growth in the global market is
probably the most critical element to our long-term
success and is a key area of focus for our
management team. Our well-known brands in the
water sector, such as INAX, GROHE, and American
Standard, provide strong platforms for growth. Our
strategy is to bridge “portfolio gaps” that we can fill
across our markets using our brand and product
portfolio, manufacturing assets and advanced
technologies.
Not only do these gaps represent new business
opportunities, but many are in higher-margin
segments that can give us a greater profit impact if
properly utilized. To do so, we are looking at
technologies and products that have been successful
in one geography or brand and utilizing them
elsewhere to create true global synergies.
There is clearly strong demand momentum in the
Americas, Europe and China, with Asian countries
such as India, Vietnam and Indonesia also expected
to grow. At the same time, we are watching for
potential risks including those related to COVID-19,
such as subdued business activity in the hospitality
and commercial buildings segments, and potential
supply chain shortages.
Q8
LIXIL is a leader in product
innovation. How do you see the role
of digital in transforming LIXIL and
supporting innovation?
In the end, it is about managing the future. In our
technology and design labs, innovation is at the core,
and we want to expand this throughout the
organization. We have implemented a company-wide
approach and adopted a common language around
innovation, while conducting new training programs
starting with leaders.
It would be wrong to think we can achieve
sustainable growth with only our current resources
and technology. We have to think about what kind of
businesses we can create in 10 years’ time, and from
that standpoint, we need to invest in and develop
these new opportunities today.
One of the biggest changes currently underway is
the transformation of our entire sales model in an
omnichannel retail landscape, which we have greatly
accelerated through the implementation of new ideas
and innovations as a result of the COVID-19
pandemic. This work was actually underway before
COVID-19 and we are now able to digitally interact at
a personal level through such innovations as the
LIXIL Online Showroom in Japan and GROHE X, an
online brand platform.
The potential benefits are multi-faceted. For
example, the LIXIL Online Showroom overcomes the
hesitancy for a consumer to come to a physical
showroom, while creating an entirely new digital
ecosystem that improves the productivity of our
business partners, creating value for all. This is
among the most forward-thinking yet challenging
work to redefine the consumer journey and our
business partner experience in a world being
redefined by the pandemic.
Digital is more than a set of tools; it is
transforming the way we work together as a
company. In the end, it all comes down to enabling
our people to work digitally and use digital technology
to be more efficient and more innovative. We have
been able to quickly adapt our work styles to allow
for greater flexibility as employees balance the needs
of work and home. This in turn makes us a more
attractive employer, enabling us to attract the
talented individuals we need as labor markets tighten
in many of the countries where we operate.
The world around us is changing in rapid and
unprecedented ways, and digital is one of the more
important means by which we will transform not just
LIXIL, but also our industry.
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CFO INTERVIEW
WE WILL IMPROVE CAPITAL
EFFICIENCY WHILE SUPPORTING
LIXIL’S SUSTAINABLE GROWTH.
Q1
How do you evaluate your business
results for FYE2021?
Throughout FYE2021, we continued to operate within
an uncertain environment caused by the COVID-19
pandemic. Under these circumstances, we focused
on first ensuring cash on hand, followed by prioritizing
capital investment projects, rigorously managing
inventory and accounts receivable, and controlling
selling, general and administrative expenses.
Despite the difficult environment, we made
headway in realigning our business portfolio,
implementing our voluntary retirement program “New
Life,” and transitioning to a platform manufacturing
approach within LIXIL Housing Technology.
In terms of business performance, therefore, we
were able to improve our gross profit margin and
increase core earnings for the full year.
Q2
What is your goal, progress, and
outlook with regard to strengthening
the balance sheet?
Building a stable and strong financial foundation is
essential to achieving sustainable growth. With that
in mind, we are targeting a net debt-to-EBITDA ratio
of no more than 3.5 times as one of our key
financial indicators.
In FYE2021, our net interest-bearing debt
decreased by ¥252.2 billion, net debt-to-EBITDA ratio
improved to reach the target of 3.5 times, and the
ratio of equity attributable to owners of the parent*1
also improved by 7.7 points year on year to 31.7%.
These are the result of measures that included the
divestment of several subsidiaries as part of optimizing
our business portfolio, improving our business
profitability, and prioritizing capital investment with an
emphasis on return on invested capital (ROIC). I
believe that, overall, we have made significant
progress in improving our financial fundamentals.
Regarding our future outlook, we will continue to
emphasize improving our net debt-to-EBITDA ratio,
investing in areas with high ROIC to generate future
cash flow, and striving to improve profitability to
strengthen our overall financial position. However,
¥60 billion of convertible bonds*2 will mature in the
latter half of this fiscal year, so we plan to deal with
these in a comprehensive manner while paying
close attention to future stock price trends and
business conditions.
*1 Equity ratio in JGAAP
*2 Zero Coupon Convertible Bonds due 2022
Q3
We understand the focus will be on
growth, but what about your future
capital investment policy?
We have reached the point at which we can focus on
growth, but I do not think we need to make high-risk
investments. While not impossible, in general I do
not think large-scale acquisitions such as those
made in the past are necessary for the time being. In
that sense, we will focus our investments in areas of
future growth designed to improve productivity,
including our digital transformation.
Since we introduced ROIC as a key performance
indicator on a global basis three years ago, LIXIL has
placed great importance on investment decisions.
Therefore, our policy is to invest efficiently to
generate future cash flow. In other words, we are
investing in new products, products that set us apart
from our competitors, and in digital technology to
improve productivity. When it comes to budget
formulation for each fiscal year, we identify the
amounts, areas, and the ratio of investments in
advance. This year’s investments are more than
before, the next fiscal year’s will be more than the
14
Sachio Matsumoto
Director, Representative Executive Officer,
Executive Vice President, Finance,
Treasury, and M&A, and CFO
current fiscal year, and with each passing year, we
will allocate funds to investments that generate more
cash in the years ahead.
Q4
Based on the progress and
the results achieved in FYE2021,
what is your outlook for the future?
With regard to strengthening our financial position,
we achieved our medium-term goals. When it comes
to generating reliable returns, however, there are still
issues we must address. Above all, I believe that
digitalization is the key to improving the productivity
of our sales and management departments, and
although we have a company-wide asset-light policy,
we are increasing investment in IT.
In the years to come, we will continue to reap the
benefits from our investments, establishing a stronger
system that can continuously generate returns that
exceed capital costs. In turn, we will also endeavor to
generate higher returns for all our shareholders.
Net debt-to-EBITDA ratio
ROIC*3
5.5
(Times)
7
6
5
4
3
2
3.5
(forecast)
2.7
(%)
10
5
0
-5
-10
(forecast)
5.1
2.0
2.3
(FYE)
2020
2021
2022
(FYE)
2020
2021
2022
*3 Calculation: Operating profit x (1 - Effective tax rate) / (Working capital + Fixed assets)
15
SECTION 1
OVERVIEW
CR CHAIRPERSON
MESSAGE
WE ARE ACCELERATING
CR INITIATIVES BASED
ON OUR CLEAR
CORPORATE PURPOSE.
At LIXIL, Corporate Responsibility (CR) is directly tied
to our core business strategy and forms an integral
part of our Value Creation Process. We execute our
CR Strategy through our business activities, with the
ultimate objective of delivering on our corporate
purpose to make better homes a reality for everyone,
everywhere. LIXIL's approach is a source of great
pride for our employees, who are motivated and
engaged by our commitment to make a positive
impact on the world.
In FYE2021, we updated our material issues,
and defined the 20 issues that matter most to LIXIL
and our stakeholders, factoring in the latest
sustainability trends and the current social and
business environment. We also reaffirmed that the
priority areas in which LIXIL can play a significant
role by using our unique expertise are in line with the
three strategic pillars of our CR Strategy.
Jin Song Montesano
Director, Executive Officer, Executive Vice President,
Human Resources and General Affairs, Public Affairs,
Investor Relations, External Affairs, and
Corporate Responsibility, and Chief People Officer
16
Global Sanitation & Hygiene
opportunities, formulate strategies, and reflect them
in our business plans.
Diversity & Inclusion (D&I) Strategy
As a maker of pioneering water and housing
products, LIXIL serves a consumer base as diverse
as society itself. To become a company that can
achieve sustainable growth and deliver on our
purpose, we must become a truly consumer-centric
organization that can understand our users and offer
innovative products and solutions in anticipation of
their needs. D&I is fundamental to achieving this
cultural transformation, as new ideas and
technologies can only come to life in a truly inclusive
working environment.
At LIXIL, we are accelerating our transformation
to foster a corporate culture in which our employees
want to work and thrive. In March, we renewed our
D&I vision and goals for 2030, focusing on inclusion
as our goal, with the belief that achieving inclusion
will lead to sustainable diversity. Based on this
enterprise-wide D&I strategy, we have set cross-
organizational and region-specific targets to address
gender imbalance, which we believe serves as a
proxy for measuring our progress toward a more
inclusive culture see pages 44 – 45 .
The challenges that COVID-19 has imposed on
the world reinforces our belief that we can contribute
to society by delivering on our corporate purpose.
Active participation of our engaged employees will be
vital in achieving this. We will continue to drive our
CR Strategy by facilitating our initiatives in a strategic
and agile manner.
With the significant development of our SATO social
business, we are on track to meet our ambitious goal
to improve the lives of 100 million people through
safe sanitation and hygiene by 2025. We are very
proud of our progress, not only because this work is
truly unique to LIXIL, but also because it taps into
our fundamental expertise and passion for bringing
life-changing innovations to those who need them
most. SATO’s focus now is to expand its product
lineup to meet specific local needs and challenges
worldwide. Harnessing the power of collaboration, we
work closely with valued partners such as UNICEF,
USAID, JICA, the Toilet Board Coalition, and local
NGOs to strengthen local sanitation ecosystems as
well as engage in advocacy to advance the
importance of and appreciation for the value of
improved sanitation.
In 2020, amid the urgent need for handwashing
(the first line of defense against COVID-19), we
launched the affordable off-grid handwashing station,
SATO Tap, and started production in India. Featuring
a simple design that uses widely available plastic
bottles as its water source, SATO Tap was named one
of TIME ’s 100 Best Inventions of 2020, as an
innovation that facilitates effective handwashing.
Driving Environmental Sustainability
The world’s consumption of energy, water, and other
natural resources has been increasing dramatically
every year. Against this backdrop, countries
worldwide have pledged to accelerate their drive to
reach net-zero carbon emissions by 2050.
It is imperative that we recognize and fulfill our
responsibility to help protect the planet. Our
Environmental Vision 2050 aims for LIXIL to become
a leading company that has achieved carbon
neutrality through business processes, products, and
services, and passes on the benefits of water and
other limited resources to future generations. We are
focusing on climate change mitigation and
adaptation, water sustainability, and circular
economy to achieve our goals. We are also
formulating environmental milestones for 2030 and
will use the TCFD framework to monitor and disclose
our climate change progress, analyze risks and
17
SECTION 1
OVERVIEW
EXECUTIVE OFFICERS
(As of June 22, 2021)*
* The number of Company shares and Phantom Stocks
are as of April 1, 2021.
Profiles and reasons for election of executive officers of
LIXIL Corporation are available on our corporate website.
www.lixil.com/en/about/board/
Kinya Seto
Director, Representative Executive Officer,
President, and Chief Executive Officer
Number of Company shares owned
243,308
Number of Phantom Stocks granted
239,988
Jin Song Montesano
Director, Executive Officer, Executive Vice President,
Human Resources and General Affairs, Public Affairs,
Investor Relations, External Affairs, and
Corporate Responsibility, and Chief People Officer
Number of Company shares owned
Number of Phantom Stocks granted
8,058
33,233
Bijoy Mohan
Executive Officer, Executive Vice President,
LIXIL International
Number of Company shares owned
0
Number of Phantom Stocks granted 200,535
Hiroyuki Oonishi
Executive Officer, Executive Vice President,
LIXIL Water Technology (LWT) Japan
Number of Company shares owned
13,910
Number of Phantom Stocks granted
19,576
Sachio Matsumoto
Director, Representative Executive Officer,
Executive Vice President, Finance, Treasury, and
M&A, and Chief Financial Officer
Number of Company shares owned
Number of Phantom Stocks granted
94,644
69,619
Satoshi Yoshida
Executive Officer, Executive Vice President, LIXIL
Housing Technology (LHT) Japan
Number of Company shares owned
Number of Phantom Stocks granted
10,043
21,549
Yugo Kanazawa
Executive Officer, Executive Vice President,
Marketing, Digital, and IT, and
Chief Digital Officer
Number of Company shares owned
12,186
Number of Phantom Stocks granted
27,299
Shoko Kimijima
Executive Officer, Executive Vice President,
Legal and Compliance, and
Chief Legal and Compliance Officer
Number of Company shares owned
100
Number of Phantom Stocks granted
14,409
18
19
MEGATRENDS2S E C T I O N
VALUE CREATION
THE WORLD SHAPING
AND GUIDING LIXIL
4
All Things Digital
5
Environmental
Sustainability
6
Water Scarcity
From automated assembly lines using
artificial intelligence to virtual offices with
video meetings and the ubiquity of
e-commerce models for busy
consumers*8, the digital revolution has left
no stone unturned. The goods we buy and
the way we buy them are transforming at
Internet speeds. The business challenge is
to provide truly personal service in a virtual
world.
Consumers around the world are now
demanding real and visible action on
achieving a carbon-neutral society through
the introduction of a circular economy.
Nearly eight in ten*9 consumers say that
sustainability is an important factor in their
purchasing decisions. The impact of
climate change also affects access to raw
materials, supply networks and product
life cycles.
One of the most worrying effects of climate
change has been sudden shifts in the
supply of water even as global demand is
increasing due to demographic trends and
the overall improvement in people’s living
standards. As droughts and floods become
more common*10, comprehensive water
resource management is a vital priority for
nations, companies, agriculture and the
individual.
Opportunity
There is a transformative business
potential for a company that can
move quickly and with confidence
Opportunity
Risk
New platforms mean changes in the
way our channels operate and
require high levels of investment
Risk
To show leadership in design and
technology, starting from the concept
of a product to its daily use by
consumers
Adapting to the changing climate
brings new technological challenges
and may require large investments in
the supply chain
Opportunity
Filtration technologies as well as
innovative water-saving products and
services can become highly valued by
consumers and customers globally
Risk
The proper use of water impacts our
manufacturing processes, requiring
new technologies to achieve the
sustainable use of water
1
The COVID-19
Global Crisis
The COVID-19 pandemic represents the
worst public health crisis in a century,
affecting richer and poorer countries alike.
Amid this human tragedy, global
policymakers have largely been able to
avoid an economic crisis*1, although the
prospect of further waves remains. In this
new environment, the role of the home as a
hygienic and comfortable living space is
more important than ever for many people*2.
2
The Rise of the Global
Middle Class
The global pandemic is having a
disproportionate impact on the global
middle class, bringing a temporary halt to
the long-term rise in living standards*3.
The setback is expected to be temporary,
however, with an expected return to the
30-year trend of declining world poverty*4.
Those considered to be financially secure
are forecast to grow to five billion people
by 2030*5.
3
Japan’s Maturing Market
Japan’s society continues to age at the fastest
rate in the world. This will have an ongoing
impact on consumption patterns, especially in
the housing market, where new construction
continues to decline*6. At the same time, with
more people working from home, many
consumers are showing greater interest in
improving their surroundings*7. Growth is
being seen in high-quality construction and
home renovation.
Opportunity
Risk
An expected rise in global growth will
create higher demand, especially for
COVID-related products and
improvements to the home
The long-term impact from a health
perspective is far from certain.
Renewed waves of infection could
undermine economic recovery and
continue to disrupt supply chains
Opportunity
Risk
Upgraded hygiene and better housing
conditions are among the first
priorities for people as they gain more
disposable income
Meeting the demands of this segment
requires innovation at competitive
prices, while ongoing economic
problems could affect short-term
demand and supply
Opportunity
Risk
Consumers are more conscious of
quality and styling in their
purchasing decisions, and open to
renovation
COVID-19 has accelerated a longer-
term trend of declining new
construction. The Company’s
product line-up must adapt to the
changing circumstances
20
7
The Changing World
of Work
The COVID-19 pandemic has given
sudden impetus to longer-term shifts away
from large offices and toward more flexible
working styles*11. Companies seeking to
retain and recruit the best staff will need
to offer greater alternatives in their work
models to cater to the changing needs of
employees. The concept of a “home
office” will be a reality for millions more,
even after the pandemic.
8
What Does a Company
Stand For?
ESG-related issues are at the core of a
company’s purpose and vital to its long-
term viability. Contributing to broader
social good and demonstrating a clear
purpose, beyond profits, is of interest to all
stakeholders*12. These factors will also be
critical in measuring brand value,
establishing public trust, helping to attract
and retain talent and strengthening
relationships with partners.
Opportunity
To be a leader in transforming work
styles to create an innovation-led
culture that attracts highly engaged
and diverse team members
Opportunity
In a strong position to lead in critical
areas driving sustainable growth:
environmental, social and
governance (ESG)
Risk
Failing to understand the needs of
employees and to change the
organization could impact the ability
to attract and maintain talent
Risk
Socially aware consumers will be
unforgiving in how they treat
companies that they feel have failed
to deliver
*1 OECD, 2021
*2 Nikkei Asia, 2021
*3 Pew Research Center, 2021
*4 The World Bank, 2021
*5 Brookings, 2018
*6 Japan MLIT
*7 Unruly Group, 2020
*8 Hitachi Solutions
*9 IBM, 2020
*10 NASA, 2019
*11 McKinsey Global Institute, 2021
*12 Harvard Law School Forum on Corporate
Governance, 2020
21
SECTION 2
VALUE CREATION
VALUE CREATION
PROCESS
External Environment
Megatrends
P.20
Make better homes a reality
for everyone, everywhere
Diverse and Purpose-Led People
Approximately 55,000 employees providing the necessary
competencies to achieve LIXIL’s purpose
Global Sales Infrastructure
Established infrastructure in over 150 countries enhanced
by new digital business models
Unrivalled Portfolio of Brands
16 leading product brands meeting the needs of a broad
base of consumers around the world
Meaningfully Designed Products
Consumer-centric technology and designs to enhance user
experience and solve social issues
“Monozukuri” Manufacturing Platform
80 factories worldwide making multi-brand products better,
faster, and more responsibly
Sustainable Resource Management
Reducing our environmental footprint through innovation in
key areas like sanitation and water
Financial Foundation
Balanced investment for medium- and long-term
sustainable growth and reliable returns
ORATE PURP O S E
P
R
O
R C
U
O
.
1
2
.
T
H
E
R
P.24
E
S
O
U
R
CES WE RELY ON
Outcomes for LIXIL
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.
P.28
Outcomes for Stakeholders
4. THE VALU
E W
E C
R
E
A
T
E
Employees
are proud of their
company, thriving
in an engaging and
Societies
benefit from
contribution that
addresses social
inclusive workplace that finds
issues, including promoting global
shared value in the LIXIL
sanitation, innovating to mitigate
Behaviors and draws
climate change, and embodying
competitiveness from its diversity.
diversity and inclusion.
Consumers
have access to brands
and meaningfully
designed products for
Shareholders
benefit from improved
future earnings
potential and a strong
the home which improve comfort in a
commitment to ESG principles.
sustainable and responsible manner.
Key SDG goals LIXIL contributes to
Partners
benefit from
differentiated and
high-quality products
provided worldwide on a reliable
basis, in addition to industry
initiatives that create shared value.
E
U
L
A
E V
3. T H E W AY WE CREAT
P.26
A strong
governance
foundation
Clear
strategic
goals
A modern
work
environment
LIXIL’s
people
A clear
corporate
purpose
LIXIL’s value creation comes from
our people, who are empowered to
act and create value for
stakeholders via six enablers:
Universal
“LIXIL
Behaviors”
An efficient
operating
structure
OUR VALUE
CREATION
PROCESS
How we create value
in a sustainable
and meaningful way
for our stakeholders
and society
22
23
SECTION 2
VALUE CREATION
THE RESOURCES
WE RELY ON
To be successful in building true value for
our stakeholders, we have identified seven
critical resources. These represent unique
capabilities within LIXIL and each plays a
role in the Value Creation Process.
Diverse and Purpose-Led People
Global Sales Infrastructure
Unrivalled Portfolio of Brands
Approx. 55,000 employees
worldwide
Present in over
150 countries
LIXIL’s people are not only an important part of our strategy,
they form the Human Capital that we need to guarantee our
future success. This begins with building a fully diverse
workforce of the right people that a truly global purpose-
driven company like LIXIL requires. To do so, we need to
demonstrate that LIXIL is a company built on the principles
of contributing to society.
To properly harness this unique and dynamic resource,
we must create a unified organization in which every
employee is thinking entrepreneurially, charting their own
career path and seeing clearly the local and global
opportunities for learning and professional growth in the
company. Traditional seniority-based employment models
must be swept away, to be replaced by a dynamic
meritocracy that will engage a workforce that is as diverse as
the markets and the consumers we serve.
LIXIL’s global footprint of sales channels and industry-leading
brands provide us with the unique ability to identify and act
on market opportunities as they emerge virtually anywhere in
the world.
To be fully effective in capitalizing on these opportunities,
we have created LIXIL International. This common structure
ensures that members of our sales force, anywhere in the
world, for any of our brands, has the backing of the resources
of the entire company. This global presence is also at the
center of our strategy to capitalize on specific market
opportunities by introducing high-value products from within
our portfolio that consumers will appreciate and that can
help improve our overall profit margins.
Such initiatives were accelerated during COVID-19, with
enhancements to hybrid online-offline business ecosystems
that benefit both our consumers and our business partners.
Over 70% consumer
recognition rate in key
markets in each region
LIXIL’s brands cover all market segments and underpin our
global sales strategy. Our brand portfolio has been
strategically assembled, leveraging leading regional power
brands to offer a gateway into markets and channels for our
other brands to be introduced or expanded.
This branding powerhouse is managed as an integrated
global portfolio, with key inputs from experts in each area of
product creation and delivery to ensure they are the best in
class. Through this we are strengthening touch points with
consumers, building engagement and creating brand equity
for the long term.
Bringing brand identity and design closer together under
a single organizational structure ensures the consumer
journey is relevant, consistent and a differentiated experience.
This ensures our products deliver on their promise set out at
the beginning of the consumer journey and create consumers
who will recommend our products to their peers.
Meaningfully Designed Products
“Monozukuri” Manufacturing Platform
Sustainable Resource Management
Financial Foundation
6 major global in-house
design studios
80 factories worldwide
To be truly unique, each brand and the product portfolio they
represent must clearly express its own set of values and
insight-driven design. Our design teams, under unified
leadership, collaborate and share information, technologies,
global trends, and consumer and environmental insights.
Our team of more than 100 in-house design experts in
six major design studios worldwide create products and
experiences which have been internationally recognized for
their quality, innovation and consideration for the
environment. LIXIL’s brands have won more than 400 design
prizes globally, including the Green Good Design, IF and Red
Dot Design awards.
Taking into account the long lifecycles of durable
products, the vast amount of resources they consume are
actually consumed in use. Through our design, for example,
we use product psychology to guide consumers to intuitively
reduce water consumption by understanding the total process
of use.
Manufacturing top-quality products at competitive prices is
another key element to creating value. Once operated by
individual regions and product lines, LIXIL’s manufacturing is
today a globally integrated supply chain network. The value
of this approach has been reinforced by recent disruptions to
international commerce through COVID-19 and has helped
us to meet demand anywhere, anytime.
Our factories today have multi-product and multi-brand
production capabilities, giving us the capability to efficiently
“go to market” with new and innovative products, and
without the need for expensive plant construction and
related capital investments. Our shift to platform-based
products in our housing business has achieved the same
benefits, while improving productivity and resilience against
demand fluctuations.
Meanwhile, our “monozukuri” model of paying attention
to every part of the manufacturing process translates into
products of the highest quality.
1,295kg-CO2/ ¥1 million in
economic output, down 18.7%
compared to base year (FYE2016)
We believe we have an important responsibility to society to
ensure that we contribute to the global effort for better
environmental management. We are focused on not only the
manufacturing processes we use but also the resources our
products require in their daily use. As a maker of durable
consumer goods with very long life cycles, we understand that
90% of our environmental impact comes from our products
in use. We are also looking at procurement and disposal.
Across the company we are accelerating our activities,
and we are committed to pursuing a net-zero carbon
footprint and helping the world transition to a circular
economy through our products by 2050.
One of the biggest areas where we can make a
difference around the world is through creating products
that use less water, saving this most valuable resource for
future generations.
Long-term goal of
10% core earnings margin
A healthy return to stockholders and a solid balance sheet
to fund investment are two central needs to keep the
company prosperous. We have already made important
strides in both areas, despite the global economic volatility
caused by COVID-19.
To ensure a profitable future, we are targeting core
earnings, with a goal of achieving a 10% core earnings
margin to revenue. This requires the commitment of
everyone in the company and we include specific earnings-
linked targets on return on invested capital (ROIC) for each
executive officer. We have also strengthened the balance
sheet, divesting businesses that were not part of our core
business but that were tying up capital resources.
Internally we have consolidated a wide range of treasury
operations to improve efficiency, and as of June 30, 2021,
we have four Regional Treasury Centers worldwide, along
with three Financial Shared Service Centers.
24
25
SECTION 2
VALUE CREATION
THE WAY
WE CREATE VALUE
Our corporate strategy is vital to success, but it
cannot on its own create value. Only people
can do that, and so at LIXIL, the idea of putting
our people first is not just a saying, it is central
to what we do every day.
We developed the Value Creation Process model to serve as
a roadmap for this process, with our people at the center. We
then looked at the most important areas of support to enable
their success.
From this discussion, we have identified six core
elements to support our teams. These include a shared
corporate strategy and a clear vision of what the company
stands for at a time when all stakeholders are demanding
more from a company than just profitability. With LIXIL’s
global operations, we also have a set of shared values that
govern how employees interact.
In addition, we need an operating structure and work
environment that meet today’s new world of working, allowing
employees the flexibility and empowerment to do their best.
This needs to be backed up by strong corporate governance
starting from the Board of Directors and spreading out to the
entire company.
1
Clear Strategic Goals
2
A Clear Corporate Purpose
3
An Efficient Operating Structure
Successful companies share one common attribute, a strategy
that can be articulated and accepted throughout its operations.
At LIXIL, our culturally and geographically diverse workforce
needs to share the same vision of where we are going.
We are confident in the management direction that we
have outlined see page 35 , which builds on our plans to
create a purpose-driven entrepreneurial company able to
deliver sustained growth. We have also focused on a series of
structural reforms for growth, a simplified and more robust
balance sheet, and higher profit margins in our businesses to
fund future expansion.
Just as important is the Corporate Responsibility Strategy,
which is integrated with our management direction. In this,
we commit to global sanitation and hygiene, reaching a zero-
carbon and circular living environment, and working toward
inclusivity for all.
At LIXIL, our corporate purpose is 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. In today’s changing corporate
environment, our employees, business partners and
consumers have all made clear that they want to do business
with a company that they can respect. Serving the public
good is no longer a “nice to have,” it is central to business
success.
Through our commitments to improve global sanitation,
water conservation and to reduce our environmental impact,
we not only help to find solutions for pressing social issues,
we also give our employees a sense of pride. And by
improving the engagement of our business partners and
consumers we can contribute not only to society, but also to
our own long-term future.
By having a more efficient operating structure, we are able to
cut costs through the elimination of needless bureaucratic
chores that exist only because of outdated practices and top-
heavy layers of management. We have, therefore, simplified
our entire organization and sales structures in Japan, while
integrating operations elsewhere through LIXIL International.
Support functions have been streamlined and centralized to
strengthen functional expertise and governance.
By modernizing our working models, we also position
ourselves better for the new world of business that has been
hastened by the restrictions imposed by COVID-19. We help
to motivate employees and, by extension, we can retain and
attract desired employees. By making our employees
entrepreneurial and consumer-focused, we allow them to
focus on the work and further enable their success.
4
Universal “LIXIL Behaviors”
5
A Modern Work Environment
6
A Strong Governance Foundation
LIXIL brings together experts in design, manufacturing and
customer service with a presence in more than 150 markets.
Amidst this diverse business, the way we work is based on a
universal set of “LIXIL Behaviors,” which are simply: Do the
Right Thing, Work with Respect, and Experiment and Learn.
These straightforward concepts are a critical way to ensure
that LIXIL works as one team, under a common set of
behavioral expectations, even as our people undertake many
types of work.
Together they speak to the notion that every employee is
working with an entrepreneurial mindset within the company,
with the same privileges and responsibilities of any leader in
a start-up. And they apply to all levels within the company.
We believe that rather than hierarchies being the path to
success, it is the learning opportunities in the form of
challenging experiences and stretch assignments that
advance professional growth.
The last year has seen a revolution in how business is
conducted and we have been a leader in offering new and
more flexible work styles that cater to the needs of a diverse
work force. Remote working helps enhance productivity and
engagement and enables employees to better manage their
own work and personal life commitments. This in turn helps
us to attract a wider range of talented individuals at all stages
of their professional lives and makes them able to benefit
from equal opportunities in a meritocratic environment.
This shift has accelerated changes to a digital world that
have already been underway. Our cutting-edge technologies
allow for seamless online meetings with business partners
and also offer virtual showrooms that turn consumer
meetings into a virtual world that allow families to
immediately imagine what their new home will be like.
LIXIL today is a leader in the critical area of corporate
governance. This is at the core of how we run the company
in an open and transparent manner with a clear vision. The
Board of Directors plays an active role in guiding
management. Following global best practice, the Board
maintains separate committees for compensation, auditing
and nominations for company officers. All are chaired by
outside directors, who also make up a majority of the Board.
Beyond the Board level, we maintain a fully open and
inclusive corporate culture where anyone can raise issues
through our “Speak Up!” platform. The LIXIL Code of
Conduct governs all employees while training programs help
to ensure compliance with financial and accounting policies.
Risk management systems ensure the reliability of
operations as well as the accuracy and appropriateness of
financial reporting.
26
27
SECTION 2
VALUE CREATION
THE VALUE
WE CREATE
Outcomes for LIXIL –
The Results of Our Work
Corporate success is today more complex than ever. A company
must stand for more than profits; it must have a clear social
purpose and the pursuit of profits is done in concert with the
need to benefit society. At the same time, the traditional metrics
of financial strength and a capability to generate profits reliably
for the long term remain vital, not only to reward shareholders
but also to provide the financing needed for further growth. This
in turn provides the platform to enable us to create value for all
of our stakeholders.
We believe that we are uniquely positioned to fulfill both the
financial security we need for long-term growth and, through our
products and services, to provide benefits to people around the
world. That is why our corporate purpose is in making better
homes a reality for everyone, everywhere.
The Value Creation Process has been a central element in
preparing us for the future. We have seen employee engagement
rise, an important metric when competition for the best people is
clearly growing, especially in Japan amid a shrinking population.
We believe this is due to the freedom that we give our people to
manage their work day, focus on real business needs, and to
chart their own career paths.
We are transforming ourselves into a more consumer-centric
organization, developing products that improve living while
speaking to lifestyle tastes and preferences. To empathize and
respond to these changing tastes and preferences, we have made
diversity and inclusion an important strategic focus for our future.
We have also made steady progress in removing some of the
roadblocks to success. In the company’s formation just 10 years
ago we assembled an unrivaled lineup of globally recognized
brands. More recently we have worked to focus on the core
businesses that fit our future missions and to bring down our debt
levels to help provide the leverage we need for future investment.
Value creation is the standard against which all
companies are evaluated. Only through the
generation of capital, both tangible and
intangible, can we reward our shareholders and
have the financial resources we need to invest
for growth in the future.
Employees –
The people who contribute to
LIXIL’s growth
SDGs
72% engagement score
Within the Value Creation Process, the Human Capital
element is an area where we have made considerable
progress. We are focused on key areas including diversity
and inclusion, coupled with building a meritocracy where
anyone in the company has the opportunity and the means
to succeed.
One important proxy for diversity is through gender
diversity in what has been a traditionally male-dominated
industry. In Japan, for the 2022 fiscal year, 48% of newly
graduated employees are women, with women constituting
31% of the global workforce. Looking forward, we are
targeting a Board and executive team that is each 50%
female, with women also to hold at least 30% of manager-
level positions.
For all employees, we are focused on improving the
employee experience. This has taken many forms, with
advancement and reward now based on contribution to the
company, not the number of years on the job. With the
company’s commitment to be more resilient and agile, every
employee is encouraged to chart their own career at LIXIL.
We are also investing in our manager class to become
stronger coaches and enablers of their teams’ success. We
believe these initiatives have helped us to regularly push up
our engagement ratings, with a 72% positive engagement
score in January 2021.
Consumers –
The end users who enjoy
our products
Partners –
The architects, distributors and
builders who help create a home
SDGs
SDGs
Approx. $290 million
cross sales in FYE2021
The work we have done on our brands means that our
consumers now have a wide range of options to suit their
lifestyles, from the most basic products for proper sanitation
to innovative designs and stylings that can bring a feeling of
luxury. We can also offer the consumer the best technology
and functionality to help them reduce their environmental
impact and to play their part in conserving water, our most
precious resource. A global sales network in more than 150
countries, augmented by a strong lineup of digital tools,
allows us to provide an unrivaled lineup to consumers
anywhere and an innovative sales experience.
79% commercial partner satisfaction
for products (Japan)
Meeting the needs of consumers requires the help of our
business partners and professionals across many disciplines.
Our commitment is to provide high-quality products
worldwide that are fully compatible and meet all safety and
regulatory standards in each market. We help our partners in
their own success by providing them with a broad range of
differentiated products that will appeal to their consumers.
We also work together to meet our shared challenges, with
programs ranging from the PATTO Reform initiative to
simplify home renovation, to our new LIXIL Online Showroom
digital environment that transforms the traditional shopping
experience for business partners and consumers alike.
Societies –
The communities and social issues
we contribute to globally and locally
Shareholders –
Those who believe
in and support us
SDGs
SDGs
Improved access to sanitation for
25 million people in over 38 countries
Listed on the Dow Jones Sustainability
World Index and FTSE4Good Index
Benefiting society is a central focus for LIXIL. Our Corporate
Responsibility Strategy, with a focus on Global Sanitation &
Hygiene, Water Conservation & Environmental Sustainability,
and Diversity & Inclusion, is integrated into the company’s
broader strategy. The SATO line of products provides basic
sanitation for millions of people, while our environmental
strategy focuses on innovations for low-carbon and water-
efficient technologies. By pursuing these programs, we meet
the concerns of other stakeholders. Our employees want to
see LIXIL be a force for good, our consumers want to do
business with a company they can believe in, and shareholders
want to own a company that puts society at the forefront.
All of our efforts in value creation accrue to the benefit of
our shareholders. These range from the direct benefits of
higher profit margins, a more efficient workforce and a
robust balance sheet, to the equally important areas of
what the brand stands for and a commitment to society.
A commitment to ESG principles benefits shareholders
in the long term and pushes up valuations. We are today
included in respected indices including the Dow Jones
Sustainability World Index and the FTSE4Good Index.
Our leadership in transparency and strong corporate
governance helps to reduce our business risks and
protect the interests of our owners.
28
29
3S E C T I O N
STRATEGY
CORPORATE RESPONSIBILITY STRATEGY
PURSUING RESPONSIBLE AND
SUSTAINABLE INNOVATIONS
LIXIL’s Purpose:
Make better homes a reality for everyone, everywhere
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
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
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
Sanitation for All
Zero Carbon and Circular Living
Inclusive for All
By 2025, improve the livelihood of 100
million people through sanitation and
hygiene initiatives
Promote research and development of products that
actively contribute to resolving sanitation issues
Expand and ensure self-sustainability of businesses
that improve sanitation in developing economies
around the world
Foster a range of initiatives to tackle global sanitation
and hygiene issues across LIXIL’s global business
units
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
Design products and services with consideration to
lifecycle impacts and environmental efficiencies, and
increase the sales share of this product portfolio
Lower environmental impact through efficient energy
usage and adoption of recyclable energy to minimize
carbon emissions, and realize higher water usage
efficiency and resource circulation throughout all of
business operations
By 2030, embed a culture of inclusion across
LIXIL and achieve key gender equity goals
By 2030, ensure all products and services*
are based on LIXIL’s Universal Design concept
50% of Board Directors and Executive Officers to be
women by 2030
30% of our leaders globally to be women by 2030
Maintain gender parity in new graduate hires in Japan
Promote the development of Universal Design
products and services that are “Good for one, Good
for all, Good for a lifetime”
*Scope: Products and services in Japan
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 Corporate Responsibility
Commitment to SDGs
LIXIL reflects the SDGs approach in our CR Strategy
and uses the goals as an important guideline when
forming management decisions.
In our commitment to the SDGs, we partner with
various stakeholders, including our customers,
business partners, local governments and residents,
shareholders and investors, international
organizations, and non-governmental and non-profit
organizations. One such initiative is LIXIL x SDGs
NEXT STAGE, launched in December 2020. Focusing
on partnership with customers, the next generation,
and business partners, we disseminate information
and hold events and campaigns related to the SDGs
and LIXIL’s initiatives in order to accelerate action on
the 2030 agenda.
Our corporate purpose is to make better homes a
reality for everyone, everywhere. To that aim, we
pursue responsible and sustainable innovation and
develop safe and comfortable products and services
based on our Corporate Responsibility (CR) Strategy.
The CR Strategy forms an essential part of our
ambition to achieve sustainable growth and corporate
value creation in that it is deeply linked to our core
business strategy, our material issues see pages 32– 33 ,
and our Value Creation Process (VCP), through which
LIXIL creates value for all of its stakeholders.
The CR Strategy outlines three core pillars of
activity where we will use our unique expertise and
business operations to drive positive change on global
issues that require urgent action: Global Sanitation &
Hygiene, Water Conservation & Environmental
Sustainability, and Diversity & Inclusion. In pursuing
the CR Strategy, we ensure our business activities are
built on a fundamental commitment to ethical
business practices in the areas of governance, fair
business practices, human rights, labor practices,
quality and customer satisfaction, supply chain, and
stakeholder engagement.
Supporting International Initiatives
As a global company that develops and provides
pioneering water and housing products, LIXIL plays an
important role in supporting people’s healthy and
comfortable living. To do our part in resolving a range of
social issues through our business activities, we support
and participate in various international initiatives.
In addition to addressing the Sustainable
Development Goals (SDGs) adopted by the United
Nations (UN) General Assembly, LIXIL endorsed the
UN Global Compact in full support of the Ten
Principles in the four areas of human rights, labor,
environment, and anti-corruption. We also conduct
scenario analysis in line with the recommendations of
the Task Force on Climate-related Financial
Disclosures (TCFD).
30
31
SECTION 3
STRATEGY
LIXIL’S
MATERIAL ISSUES
LIXIL has identified material issues that we, our stakeholders, and
society in general consider to be of the highest importance for
improving our company’s sustainable growth and corporate value
for driving progress on sustainable development. We are working
to resolve these issues through our business activities while
monitoring the progress against our goals.
Our material issues are determined by selecting and
evaluating issues from both a risk and opportunity perspective
using our determined selection process, taking into consideration
LIXIL’s Purpose, VCP, Medium Term Plan, CR Strategy, and other
business strategies. It also takes into account stakeholder needs
and expectations, on top of current social circumstances and
issues. We review these material issues to accommodate any
changes in LIXIL’s immediate environment or society at large.
Value Creation Process (VCP)
Make better homes a reality
for everyone, everywhere
Positioning of the Material Issues
Material Issues Selection Process
The process of selecting our material issues is deeply linked to
our Value Creation Process (VCP), which creates value for
stakeholders and broader society based on LIXIL’s corporate
purpose and available resources, as well as to our business and
CR strategies. By defining a clear strategic direction based on
these principles, we aim to build an organization that can achieve
sustainable growth and value creation.
IDENTIFY
Selection of issues
DISCUSS
REFINE
Discussion on issues
Detailed evaluation of issues
Selection of candidate issues based on
the evaluation criteria by ESG-rating
organizations (DJSI and MSCI), as well as
themes addressed in global standards
such as SASB, GRI and SDGs
Define the impact of each issue based on
the weighting of evaluation criteria
Discussion at Corporate Responsibility
Committee, focusing on candidate issues
Interviews with business units and
corporate functions
Detailed evaluation of the selected issues
at executive level
Selection of key issues and prioritization
based on the above feedback and the
impact on society and LIXIL
Approval at Board of Executive Officers
Following the
process, we will
continuously
review the
material issues
Material Issues Selected in FYE2021
In FYE2021, we reviewed the material issues selected in FYE2016
and selected 20 new material issues based on the selection
process. We categorized these issues into the following priority
levels in terms of degree of risk as weighted by ESG evaluation
organizations and their impact on LIXIL, our stakeholders, and
society at large. Material issues that are labeled as “Priority” are
deeply related to the three pillars of our CR Strategy. We will
continue to accelerate our CR activities with a focus on these
material issues.
Outcomes for LIXIL
A Path to Sustainable Growth
Outcomes for Stakeholders
Employees
Societies
Priority:
High:
Medium:
Areas in which LIXIL is able to proactively
exploit its unique strengths to greatly help solve
issues and have a significant positive impact
on stakeholders and society. Areas where
initiatives should be strengthened in view of
stakeholder needs.
Areas that should be addressed from the
perspective of responding to stakeholder needs
and appropriately managing risks to ensure
business continuity.
Areas requested by stakeholders and that
should be appropriately addressed as the basis
for our business activities.
Consumers
Shareholders
Priority
High
Medium
Partners
Global Sanitation & Hygiene
Product Safety
Information Security
E
S
O
P
R
U
4. THE V
A
L
U
E
W
E
C
R
E
A
T
E
OUR VALUE
CREATION PROCESS
How we create value in a
sustainable and meaningful way
for our stakeholders and society
R CORPORATE P
U
1. O
2
.
T
H
E
R
E
S
O
U
R
C
E
S
W
E RELY ON
A Y W E CREATE VALUE
E W
H
T
3 .
A strong
governance
foundation
Clear
strategic
goals
LIXIL’s
people
A modern
work
environment
A clear
corporate
purpose
LIXIL’s value creation comes from
our people, who are empowered
to act and create value for
stakeholders via six enablers:
Universal
“LIXIL
Behaviors”
An efficient
operating
structure
Diverse and
Purpose-Led People
Global Sales
Infrastructure
Unrivalled Portfolio
of Brands
Meaningfully
Designed Products
“Monozukuri”
Manufacturing Platform
Sustainable Resource
Management
Financial
Foundation
32
Water Sustainability
Environmental Impact of
Product Lifecycle
Climate Change Mitigation
and Adaptation
Circular Economy
Environmental Management
Diversity & Inclusion
Customer Satisfaction
Tax Transparency
Employee Safety & Wellbeing
Responsible Marketing & Advertising
Talent & Development
Ethics & Integrity
Human Rights
Supply Chain Management
Corporate Governance
Risk Management
Stakeholder Engagement
Three pillars of our CR Strategy
Global Sanitation & Hygiene
Water Conservation &
Environmental Sustainability
Diversity & Inclusion
33
SECTION 3
STRATEGY
LIXIL’S EVOLUTION AND
10TH ANNIVERSARY
This year we are proud to be celebrating 10 years as LIXIL.
Having been formed through the merger of leading global
brands, each with their own systems and cultures, we have
undergone tremendous change to become One LIXIL,
to make better homes a reality for everyone, everywhere.
FYE2012 – 2013
FYE2014 – 2016
FYE2017 –
Net sales (JGAAP) / Revenue (IFRS) (Years ended March 31) (¥ billion)
Core
earnings
margin
1.4%
1,291.4
1,436.4
1,628.7 1,705.4
1,890.5
2,000
1,500
1,000
500
0
Core
earnings
margin
3.7%
Permasteelisa and LIXIL VIVA classified
as discontinued operations
1,829.3
1,633.2
1,692.4 1,694.4
1,514.4
1,378.3
Core
earnings
margin
4.2%
Japan
International
MANAGEMENT
DIRECTION
At LIXIL, we are working to become an agile and entrepreneurial company that can achieve sustainable
competitiveness and growth in order to fulfill our corporate purpose. To achieve this, we are taking steps to
transform our operations, including optimizing our business portfolio to accelerate growth and strengthen
our finances, actively managing our core businesses to enhance productivity and efficiency, driving
synergies to create new growth, and strengthening governance to build trust and manage risk.
Through these efforts, in the medium term we aim to achieve 7.5% core earnings margin before
growing the margin to 10%. At that point we believe, we can also achieve a 10% ROIC.
(Structural Reform for Growth)
Simplify & Strengthen
Balance Sheet
Improve Profitability
MEDIUM-TERM TARGETS
Core earnings margin 7.5%
Establish management process that enables profitable and
sustainable growth
Net debt-to-EBITDA ratio of 3.5 times or below
Provide a stable foundation to support mid- to long-term growth
2012
2013
2014
2015
2016
2017
2018
2019
2020
2020
2021
JGAAP
IFRS
THE LIXIL PLAYBOOK
BUSINESS PHASE
LIXIL created through
the merger of five companies
Established the foundation for
business expansion and
global growth
Simplifying the balance sheet,
improving organizational structure, and
strengthening profitability
• Opened the way to delivering a
comprehensive lineup of products
that cover all aspects of living
spaces
• Obtained product and brand
portfolio, as well as global
infrastructure, to establish our
foothold in key markets around
the world
• Focusing on actively managing our core businesses to enhance
productivity and efficiency
• Driving synergies across our core business areas
• Optimizing our business portfolio to accelerate growth and
strengthen financial conditions
A COMBINATION OF STRUCTURAL AND CULTURAL CHANGE
S
T
R
U
C
T
U
R
A
L
C
U
L
T
U
R
A
L
• LIXIL born out of the merger
of Tostem, INAX, Shin Nikkei,
SUNWAVE, and Toyo Exterior
in 2011
• Globalize business rapidly through
• Launch comprehensive initiatives for revitalizing Japan business,
a series of acquisitions and
investments (major M&As:
American Standard, GROHE)
“Kawaranaito LIXIL”
• Integrate global business under LIXIL International
• Consolidate global headquarters functions into LIXIL’s WING
campus (Tokyo)
• Divest Permasteelisa, LIXIL VIVA
• Shift from holding company to operating company
• Start production and sales
of the SATO Toilet System
(American Standard)
• Conduct first employee engagement
• Establish LIXIL’s Corporate
survey globally
Purpose
• Launch LIXIL Behaviors
• Simplify titles
• Rollout Workplace* and
other digital tools
• Embed flexible working styles
• Set common language around
innovation
Under LIXIL’s management direction, we first took
measures to simplify and strengthen our balance sheet,
establishing the foundation for growth, before shifting our
focus to improving profitability. This direction has been
shared across the entire organization and is what we call
our LIXIL Playbook, covering four strategic initiatives, as
well as a foundation based on empowering our people for
sustainable growth.
Our Corporate
Purpose
Make better homes a reality for everyone, everywhere
FOCUS
TRANSFORM
GROW
1
2
3
4
Strategic
Initiatives
Focus and simplify
our organization
Improve profitability
of Japanese business
Promote growth of
international water
technology business
Establish foundation for
long-term growth
through innovation
P.36
P.37
P.38
P.40
Our
Foundation
Empower our people to deliver
P.42
34
*Social platform by Facebook
35
SECTION 3
STRATEGY
THE LIXIL
PLAYBOOK
11
FOCUS AND SIMPLIFY OUR ORGANIZATION
22
IMPROVE PROFITABILITY OF JAPANESE BUSINESS
Our future depends on having
a lean and efficient organization
that can respond quickly to
market needs. To accomplish
this, we are moving away from
peripheral businesses,
eliminating layers of
management and optimizing
core businesses to capitalize
on growth opportunities.
Divest Non-Core Businesses
We have strengthened our balance sheet
this past year through the divestment of
two non-core businesses. The sale of the
building exteriors group Permasteelisa
takes us out of the volatile international
curtain wall market. We also completed
the divestiture of our holdings in the LIXIL
VIVA chain of home improvement centers,
an action that has brought two benefits: a
lower debt ratio since we were able to
eliminate the liabilities of related building
leases, and the opportunity to strengthen
business ties with other competing retail
brands in this sector. These moves have
had a positive impact on our balance
sheet, with the overall equity attributable
to owners of the parent improving to
31.7% of the total from 24.0% in
FYE2020. They have also helped
management to better focus on the
operations central to our future.
Simplify Japan Organization
The creation of LIXIL brought together a
unique set of well-known brands. It also
resulted in a highly complex corporate
structure in our home market of Japan as
we tried to amalgamate five separate
companies. We are now building a new
structure that radically simplifies the
organization, lowers costs and enables
faster decision-making. To achieve this,
we simplified our management hierarchy,
reducing the number of organizational
layers and optimizing span of control, and
reduced the number of corporate officers
by more than 50%. These actions are
part of the broader program to empower
employees, improve teamwork and to
spur greater innovation. This work is a
key element in the larger transformation
of LIXIL into a truly agile and
entrepreneurial company.
Integrate International Business
Driving international business expansion
is one of our key strategies for creating
long-term sustainable growth for the
company. To achieve this, we have
brought together all global operations
under LIXIL International to accelerate
global alignment. This international unit
combines the strengths of our brands,
technologies and manufacturing assets to
create solutions more seamlessly and
efficiently in each region and market. A
primary area of focus is in our water
technology business, which brings
together leading global brands. Our global
presence also gives us the chance to find
new market opportunities that have been
previously unexploited, using our
technology and design resources from
around the world. Backing up global sales
and marketing efforts is a centralized
support function covering finance, HR,
legal and IT, standardizing core functions
enterprise-wide and allowing the regions
to focus on consumers, partners, and
channels to market.
As we take advantage of our
global opportunities, Japan is
the critical financial engine to
power our growth. Despite the
broader trends of a shrinking
population, we believe Japan
can be a center of profitability.
LHT Japan Initiatives
LWT Japan Initiatives
The housing technology business has
undergone significant transformation to
become a more profitable and
sustainable business. For example, we
have introduced a platform
manufacturing model to improve
production efficiency, enabling multiple
products to be produced using the same
line. This has made us more resilient
against demand fluctuations amid the
economic downturn caused by the
COVID-19 pandemic. Our growth strategy
is focused on four key areas: growing our
renovation and Zero Energy House-
related businesses, developing
differentiated products that add value,
strengthening our power brands, and
targeting profitable niche markets. Even
as overall home building in Japan
declines, we see fresh opportunities
through changing lifestyles and greater
consumer interest in home renovation.
Bringing fundamental innovation to
Japan’s housing market represents a key
opportunity for LIXIL.
LIXIL Water Technology Japan has a
twofold mission: transform its business
structure and support international
growth.
In Japan, people are increasingly
looking to upgrade their surroundings as
they spend more time at home. It is no
longer just about replacing what no
longer works but also about a growing
desire to improve one’s quality of life. To
spur and capture demand for renovation,
we are capitalizing on this shift,
developing business processes that
create new value for consumers while
strengthening our direct approach to
them. In parallel, we are transforming
our business structure to enable
sustainable growth - optimizing our sales
structure and processes, strengthening
our supply chain, and implementing cost
reduction measures.
Anticipating growth under LIXIL
International, we are further leveraging
our leading core product technology
from Japan in global markets, helping to
drive growth through differentiated
products and improved cost
competitiveness.
“Kawaranaito LIXIL”
“Kawaranaito LIXIL”
Work Consumer-
Centrically
Create a more consumer-centric
organization, enhancing
consumer experience
Manage Career Paths
Change Working Styles
Encourage all employees to
own their career journey
and embed a meritocratic
and agile culture
Enable more flexible
working styles, allowing greater
efficiency and a more inclusive
working environment
To engage consumers more
directly, we are investing in
digital initiatives to further
improve showrooms and sales
offices. These efforts also
include increased
opportunities for employees
with strong LIXIL DNA to take
up more direct consumer
engagement roles.
An entrepreneurial company
values empowerment over top-
down management and
meritocracy over seniority.
Each LIXIL employee is
encouraged to actively manage
their own career through
programs meant to build
innovation capabilities and
accelerate talent development.
Today’s workforce seeks and
thrives in new working styles.
The ability to work at home
and structure their day to meet
lifestyle needs enables
employees to be more
productive.
The concept of “LIXIL, We must change”
was introduced to create momentum for
organizational change, improve
employee engagement and bring
productivity improvements to Japan
operations. By making the company
more agile and entrepreneurial, we can
unlock our greatest source of value,
LIXIL’s employees.
36
37
SECTION 3
STRATEGY
THE LIXIL
PLAYBOOK
33
PROMOTE GROWTH OF INTERNATIONAL WATER TECHNOLOGY BUSINESS
With our leading brands such as
INAX, GROHE and American
Standard, and with a presence
across key geographies and
markets, LIXIL International
provides a strong platform for
global growth. We are focused
on new market opportunities,
improving internal synergies and
expanding our product lineup.
Bridging the Gaps
Central to our strategy is to strategically
enter competitive gaps in markets around
the world. By leveraging our brand
portfolio, global manufacturing assets
and advanced technologies, we can bring
new and innovative products to a market
more quickly and efficiently than our
competitors.
These “portfolio gaps” exist today
because of the traditionally regional focus
of water products. With our global
outlook, we can take technologies or
business models developed for one
brand or region and apply them to
market opportunities elsewhere. In
addition, our global manufacturing base
and supply chain means that we can
ramp up production in an asset-light
manner that reduces the amount of
required capital.
This strategy is bolstered by the fact
that while water products have
traditionally been unique to specific
markets due to different purchase
processes, end-use mix and channel
structures, the requirements of end users
such as architects, builders and
consumers are similar around the world.
As such, we are working with customers
and partners to bring innovative ideas
that meet their needs.
Many of these market opportunities
CR SPOTLIGHT
LIXIL Environmental Vision 2050
services; achieving water sustainability
to enhance the environmental value of
water resources by saving, circulating,
and purifying water; and realizing a
circular economy across the entire life
cycle of our products and services.
Climate Change Mitigation
and Adaptation
We have switched to 100% renewable
electricity at all our LIXIL International
water faucet factories and distribution
centers (10 sites) as well as at four
offices, including LIXIL’s headquarters,
two distribution centers, and 36 sales
bases in Japan.
We provide products and services
that help reduce household energy use
and contribute to the wider adoption of
Our modern lifestyles use significant
energy and other natural resources. In
FYE2020, we formulated the LIXIL
Environmental Vision 2050, recognizing
environmental conservation as one of
the priority areas of our Corporate
Responsibility Strategy. Based on the
environmental vision, we are committed
to achieving our Zero Carbon and
Circular Living policy with a focus on
three areas: promoting climate change
mitigation and adaptation to achieve
net-zero CO2 emissions through our
business operations, products, and
38
GROHE's fitting plants which is 100% operated
by renewable energy (Thailand)
net zero energy houses (ZEH) and net
zero energy buildings (ZEB). In
particular, LIXIL plans to increase the
sales ratio of thermal window products
with superior insulation performance to
100% by FYE2026.
are in high-margin segments for LIXIL,
enabling us to enter new segments while
pushing up overall profit margins. At the
same time, for our own traditional
product base, competitors are hampered
by the challenge of entering these areas
without diluting their profitability.
Synergy Creation Office
The success seen in the work of the
Synergy Creation Office demonstrates the
much larger potential ahead in this area.
The office, created in 2018, takes the
technologies and expertise in Japan and
applies them overseas to create
innovative products for new market
opportunities. For FYE2021, cross sales
were at approximately US$290 million,
more than double the level three years
ago, a success driven by the company’s
multi-year commitment to drive product
synergies and best practice sharing. The
technologies that have been leveraged
more broadly include AQUA CERAMIC, a
ceramic material that prevents dirt and
water stains, and the award-winning
GROHE SmartControl, a push-button
shower control panel offering infinite
choices for the perfect shower.
Global House of Brands and Design
Through our original creation and later
acquisitions, LIXIL has amassed some of
the best brands in the industry. We have
now made them better. This is now the
ongoing work of the newly created Brand
Identity Team, which works hand-in-hand
with LIXIL Global Design, both under the
direction of Paul Flowers, as well as with
global marketing teams. Under Flowers,
each major brand has been positioned to
provide a unique offering. Design teams
are sharing information, technologies,
global trends and consumer insights,
ensuring they design and develop
products that appeal to different
consumer segments and that the brands
complement each other while building
brand equity over the long term.
Sustainable Water Use
At sites that use water for
manufacturing, we identify water-related
business risks specific to each region
and take appropriate steps to improve
water efficiency, recycle water, and
manage wastewater. In FYE2022, we
expanded the scope of management to
include risks related to water quality and
regulations. We will seek to implement
plans and measures to deal with
relevant issues in individual countries
and regions.
We provide a wide range of water-
related products and services that help
save water in the home, purify water, or
allow early detection of water leakage to
create value for our customers. As one
such product, our AQUA CERAMIC
material maintains cleanliness over a
long period of time. We also provide
water purification cartridges that use
our proprietary ceramic materials. By
deploying these technologies globally,
we help improve the safety and quality
of water while reducing environmental
impacts.
Circular Economy
We are striving to reduce waste at our
manufacturing sites by closing resource
loops. In collaboration with various
stakeholders, we are making continued
efforts to promote reuse and recycling,
and minimize new resource inputs. In
FYE2021, we announced our LIXIL
Plastics Action Statement and are
seeking to accelerate efforts to reuse
plastics and develop alternative
materials.
GROHE has recently launched
Cradle to Cradle Certified ® products that
promote circular manufacturing. Three
GROHE water faucet products and a
shower rail set received Gold level
certification, meeting criteria in five
categories: material health, material
reutilization, renewable energy, water
stewardship, and social fairness.
Cradle to Cradle Certified ® products
39
SECTION 3
STRATEGY
THE LIXIL
PLAYBOOK
44
ESTABLISH FOUNDATION FOR LONG-TERM GROWTH THROUGH INNOVATION
Strong short-term performance is
not enough to ensure long-term
success. The phenomenon is
sometimes called the “success
trap,” in which a company is
focused on what works today at
the expense of vital longer-term
structural change. At LIXIL, we
are deploying our current
resources in order to be ready
for the changing global market.
Applying Three Box Solutions
thinking, our executives are
focused on managing innovations
for the present while creating the
future. To do so, we have
embraced a common language
across LIXIL to talk about
innovation to see how we can
re-invent our business for long-
term growth.
CR SPOTLIGHT
Water Filtration Business
Within the next 100 years, water will be
one of the scarcest vital natural
resources, one that we have taken for
granted for too long. Today, consumers
are increasingly concerned about the
safety and taste of their water. At the
same time, there is growing concern
about the vast waste caused by single-
use plastic water bottles. Research
suggests that by 2050 there will be more
plastic waste than fish in our oceans.
An important element in solving this
environmental problem is in the
introduction of differentiated point of use
filtration. LIXIL has competencies in
developing and integrating filters into
kitchen faucets for water safety and
space savings, and enhancing water
through sparkling, chilled, and hot water
systems. These units can not only
ensure high-quality drinking water but
also improve the taste of tap water. Aside
from their lower environmental impact,
they are also much more economical
than the purchase of bottled water.
Water filtration is also another
example of where our expertise and
attractive repeat consumable sales
models in specific markets can be
leveraged globally. In Japan, LIXIL has the
capability to develop in-spout filters,
which it has built over the past 20 years.
This technology has now been exported
to American Standard with the
introduction of a new filtered kitchen
faucet. GROHE has meanwhile introduced
a range of water enhancement solutions
over the last 10 years. The environmental
benefits of GROHE Water Systems have
recently been acknowledged by winning
the German Sustainability Award in
December 2020 for the reduction of
plastic waste and CO2 emissions.
LIXIL Online Showroom
One of the toughest challenges for any
business is to change long-standing
business practices. For LIXIL, our 88
showrooms were a traditional way to
Filtered Kitchen Faucets that Help Reduce
Plastic Bottle Consumption
American Standard's Saybrook Filtered
Kitchen Faucet, which uses Japanese
filtration technology, removes impurities
such as lead, chlorine, and small particles
contained in tap water to provide safe
drinking water at the touch of a button. It
comes with a small, innovatively designed
filter that can be installed for easy access
above deck at countertop level or on the
inside wall of the cabinet. The faucet is
equipped with an LED indicator that lets
you know when the filter needs to be
replaced. The easy-to-use product not
only helps to keep families safe but also
helps reduce plastic water bottle usage,
bringing down a household’s
environmental footprint. It joins LIXIL’s
range of safe and environmentally
conscious kitchen faucets, including
GROHE Blue and INAX’s Navish.
helps reduce costs and shorten the sales
cycle. Business partners also benefit. Not
only can they use the platform to interact
with clients, but they can also obtain
product specifications and other
important information online to make
their own work more efficient.
The LIXIL Online Showroom has truly
been a game changer, one that is
perfectly suited for the new social and
economic environment.
greater levels of customer satisfaction.
In the traditional model, a consumer
had to make the decision to come to the
showroom, often with an installer or
contractor. Consumers not certain if they
were ready to make a purchase were
sometimes reluctant, and not ready to
make a purchasing decision. Sitting down
with staff also took considerable time and
required the presence of architects,
designers and builders, the professionals
who are vital to good decision-making.
After these discussions, a price quote
would take another three to four days. In
all, it is a laborious and slow process.
With the LIXIL Online Showroom
application, the consumer experience
changes completely. A potential buyer
can explore possibilities whenever it is
convenient for them, with their builders
and designers also able to take part.
Pricing information updates in real time,
bringing greater certainty to budget-
conscious families. The app can also
show virtual 3D mockups of what the
new space will look like. The approach
serve consumers in Japan but they had a
high level of associated costs. The
disruptive moment came in 2020 with
the closure of all our locations at the
height of the COVID-19 pandemic.
Fortunately, we were already ready
with a new sales model. Through the
LIXIL Online Showroom, clients, LIXIL
staff and our business partners can all
work together more efficiently and with
LIXIL Online Showroom: Enhancing Consumer Experience and
Supporting Flexible Work Styles for Employees
LIXIL’s Online Showroom enables
consumers to meet with our showroom
coordinators online. The new service
has already resulted in more than
14,000 sessions with consumers within
a year of launch. Without any time or
geographical constraints, the LIXIL
Online Showroom is more convenient
for consumers, making it easier for
families with small children or family
members living apart to participate,
while preventing the spread of COVID-
19. We also launched a new evening
service, which is popular among
working couples, who make up 20% of
evening service users, satisfying the
diverse needs of consumers. At the
same time, the LIXIL Online Showroom
has enabled coordinators to work from
home and allowed for more flexible
working styles, leading to higher
satisfaction levels of employees. Going
forward, we will continue to further
enhance our services.
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41
SECTION 3
STRATEGY
THE LIXIL
PLAYBOOK
55
EMPOWER OUR PEOPLE TO DELIVER
Our employees are at the center
of everything we do and are also
the vital element in our ability to
transform the organization.
Through our measures, we can
turn everyone in the organization
into an agent of change.
A Common Foundation
Supporting the four strategic initiatives of
The LIXIL Playbook is a foundation
focused on empowering our people. We
are taking a multi-faceted approach to
help foster a more purpose-driven, agile
and entrepreneurial workforce.
Bringing us together is our purpose
to make better homes a reality for
everyone, everywhere. Contributing to
society is key to how we operate, building
pride among our employees and forming
a basis for long-term growth. The SATO
social business serves as a symbol of
what we stand for.
A more inclusive, employee-focused
culture must be at the heart of our
transformation. By creating an inclusive
culture, we can ensure that everyone
feels equal and able to speak their
minds. This is vital to fostering the views
and ideas that will generate the
innovations we need to drive us forward.
Agile work styles also require new
technical solutions. As LIXIL was born
through mergers and acquisitions, we
had inherited multiple mainframe legacy
systems. We are now harmonizing and
consolidating our data processes to
establish a truly global IT and digital
infrastructure that make it easier for
employees to collaborate and innovate.
Combined with common goals, a
clear financial framework and a robust
compliance culture, we are building a
common foundation to underpin our
strategy.
CR SPOTLIGHT
Driving initiatives to improve Global Sanitation & Hygiene
surpassed their targets within 24 hours.
As LIXIL pivots toward becoming an
entrepreneurial and consumer-centric
company, our shared framework for
innovation will be critical to driving new
sources of growth in both the short and
long term.
A Shared Framework for Innovation
We must ensure that innovation is not left
to chance. Innovation is the product of
methodology and structure as much as it
is the embodiment of vision. To transform
LIXIL into a more entrepreneurial
company, we are working to align how we
talk about innovation across our
geographically dispersed and diverse
colleagues.
In 2020, award-winning Professor
Vijay “VG” Govindarajan from the Tuck
School of Business was invited to run a
tailored program for 90 LIXIL leaders
from around the world, focusing on his
Three Box Solutions framework for
managing innovation. A shared language
around transformation and innovation
took shape very quickly and the company
is now reviewing and advancing ideas
that emerged from the program. This
methodology is now being cascaded
across the organization to strengthen
conversations and collaborations on
potential new sources of growth for LIXIL.
Another important framework for
innovation that was introduced in Japan
is LIXIL Housing Technology Japan’s
Business Incubation Center. Established
in 2019 to quickly bring new and unique
products and solutions that may not
currently exist in markets, it adopts a
collaborative approach to ensure targeted
product development. Many of its latest
products are first released on
crowdfunding site Makuake to gauge
demand: ATMO, a delivery box attached
to entrance doors, and Nyanpeki, a wall
designed for cats to climb and rest,
Two billion people, or about one-
quarter of the global population, live
without access to safe and sanitary
toilets, while three billion people do not
have basic handwashing facilities at
home. LIXIL is committed to improving
the livelihood of 100 million people by
2025 through improved hygiene and
sanitation. Since 2013, our SATO social
business has shipped 5.1 million SATO
toilet products to over 38 countries (as
of April 2021), and last year, it
developed the SATO Tap in response to
the COVID-19 pandemic, providing
access to a handwashing solution for
people without access to running water.
With their simple design, SATO
total of €140,000. Accelerating our
contributions, we expanded this
program to 13 countries with the
Energy for Life Campaign in 2021.
partnership combines UNICEF’s WASH
sector leadership with our global
expertise in toilet design and
innovation. Through this shared value
partnership, LIXIL and UNICEF are
working to expand market-driven
programs to build markets for
sanitation and hygiene products such
as toilets and handwashing stations, by
ensuring the availability of affordable
products in developing economies.
End users, business partners and
employees join us in our commitment
through a series of initiatives. Last year,
GROHE introduced a campaign
designed to make a donation for every
shower or thermostat sold, raising a
products are affordable and accessible
for all. We are working to further
expand SATO’s production and sales
ecosystem in regions that lack access
to water and sewage systems.
Committed to improving sanitation
for children around the world, we
entered the MAKE A SPLASH!
partnership with UNICEF in 2018. The
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43
SECTION 3
STRATEGY
SPECIAL
FEATURE
GLOBAL PEOPLE
ORGANIZATION
STRATEGY
Becoming an agile and entrepreneurial organization requires us to
reinvent how we manage our people. Breaking from our older,
established ways of human capital management, we have a new
vision to create a more empowered, inclusive community of people
at LIXIL – proud of what we do and innovative with how we do it.
Committee, chaired by CEO Kinya Seto,
supervises the process to ensure top-level
business commitment, while the GPO
and its partners ensure our D&I strategy
is directly embedded into our HR policies
and practices, from recruitment and
training to promotions and performance
management.
Progress requires clear metrics
globally and locally. With gender equity
serving as a proxy for progress toward
inclusive culture, our enterprise aims to
achieve 50% representation of women at
the Board and executive officer levels,
and 30% ratio of female managers across
the company, by 2030.
Key initiatives through FYE2025
include improving the hiring and
promotion processes by designing policy
and processes to remove bias and
promote D&I considerations, and rolling
out education programs for employees,
managers and executives to help them
understand and embed in their actions
D&I concepts and behaviors.
2. Accelerate cultural transformation
Enterprise Center of Excellence
organizations have been established to
accelerate transformation into a more
agile and innovative culture. We have
enhanced LIXIL’s in-house change
management capabilities, established
enterprise-wide manager effectiveness
programs, initiated harmonization of
performance management, and invested
in tailored leadership development
initiatives such as with the TUCK faculty.
We started a multi-year plan toward
organization simplification with initiatives
Activating LIXIL’s Transformation
Enabling this transformation is our Global
People Organization (GPO), which is
designing and delivering an ambitious
change agenda in line with the
company’s strategy. We are working to
create a radically simplified organization,
a transparent and meritocracy-based
performance management system, and
an agile and inclusive culture. The GPO
strategy is built around three interlinked
pillars: culture and engagement,
developing more effective managers who
can enable and support their people, and
empowering employees to manage their
own career paths at LIXIL. Building on
this foundation, the GPO is now
implementing clear actions to further
accelerate the next phase of LIXIL’s
global strategy.
Key Actions
1. Create an inclusive workplace
Our approach is rooted in the belief that
we must create a truly inclusive workplace
to attract and enable a diverse workforce.
The Diversity & Inclusion (D&I)
such as title harmonization, early
retirement programs and review of global
grading structures. Also, as the lifespan
of skills is shortening due to technology,
we are focused on upskilling and
reskilling our existing workforce while
focusing our talent acquisition efforts to
close critical skill gaps in areas such as
digital and brand.
3. Enhance employee experience
To enable employees to fully realize their
potential and enhance engagement, we
need to improve our listening skills. Key
initiatives in FYE2022 include sharpening
our employee listening strategy,
leveraging digital tools to provide insight
and analysis on current sentiment across
cohorts. From frontline staff to salaried
employees, we have set targeted actions
that will enhance engagement at all
stages of our employees’ journey with the
company. This includes designing a
system to capture, analyze and improve
the “moments that matter,” from
onboarding and promotion to life events
(such as marriage or having a baby), to
personalized employee experiences.
Such insights will help managers to tailor
career development options for their
team members.
4. Strengthen governance and capabilities
To strengthen governance at enterprise
level, we are designing and implementing
global and regional compensation and
benefits standards across employee,
managerial and executive levels
worldwide. Historical inconsistencies are
being addressed through the newly
formed Compensation and Benefits
Committee, chaired by Chief People
Officer Jin Song Montesano. We are also
strengthening oversight over the GPO
itself to ensure transparency and
fairness in HR operations, while taking
important steps to build capabilities
within the GPO to be more responsive to
the company’s needs.
CR SPOTLIGHT
Fostering Inclusion through
Gender Equity Practices and Policies
broader range of childcare facilities.
Furthermore, we support
employees at different life stages
through our extended paid leave
system in managing personal priorities
such as childcare or nursing. We set
up a Self-Care Leave system that
covers morning sickness and fertility
treatment in addition to the existing
menstruation leave. All these systems
are designed to support women in
developing their careers.
improvement of the lives of diverse
people, DOAC won the 8th Social
Products Award in 2021.
By setting goals and measures
focusing on gender equity, we are
implementing our D&I strategy to
create an inclusive working
environment and culture where all
employees can perform to their full
potential no matter what life stage they
are in.
To date, we have established a
range of systems that support working
parents, including financial support for
employees who wish to return to work
early after maternity or childcare leave,
and a paternity leave system for male
employees. We also introduced shorter
working hours, and subsidies for
extended daycare fees or the use of a
Agile Development of
Inclusive Products and Services
In September 2020, we launched
DOAC, a front door electric opening
system. DOAC enables people to lock
and unlock, as well as open and close,
their front door with a remote control.
This helps people with physical
impairments, wheelchair users, elderly
people, and others get in and out of
the house easily.
DOAC was developed by our new
Business Incubation Center, which is
focused on agile development of value-
added products and services. Our
team adopted an inclusive design
approach when developing this
product, inviting potentially interested
users who are having troubles with
existing products to act as advisors. In
recognition of our agile development
approach based on a clear
understanding of the needs of potential
users and contribution to the
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45
SECTION 3
STRATEGY
SPECIAL
FEATURE
DIGITAL
TRANSFORMATION
Now is the time to embrace structural change. Our rapid
digitalization during the COVID-19 outbreak is transforming our
business, answering new consumer needs, and enhancing
productivity and employee engagement. Digitalization is about more
than a set of tools, it is at the core of our transformation.
DIGITAL TRANSFORMATION (DX) STRATEGY
DX Mission:
Foundation:
Go beyond the norms of a traditional manufacturer through digital means that bring us
closer to the consumer and empower our people
IT Infrastructure
IT Organization
Cybersecurity
Enterprise-Level Infrastructure
Enterprise-Level Org.
Information Security Committee
Regional & Business-Level Org.
LIXIL-CSIRT
Growth Drivers:
Transform Existing Businesses
Develop New Businesses
Improve Productivity
Digital Services
Consumer Marketing
Consumer Insight
IoT Products
IoT Business Models
Employee Engagement
Communications
Education
Outcome:
Key Beneficiaries:
Consumer-centric and agile organization
Consumers
Business Partners
Employees
Strengthening Global Infrastructure
A focus on transformation is at the core of
our digital strategy. Rather than attempting
incremental changes that would be time-
consuming and expensive, we have
leapfrogged into the new world. This
includes the concept of “Zero Trust” in
Japan. Instead of ring-fencing the entire
network, users connect only to the parts
of the network that they need, helping to
increase overall agility and security.
Another example is globally migrating our
ERP system from our legacy mainframe
servers to Google Cloud, enabling us to
keep up with the times while maintaining
the freedom to customize.
To further enhance our infrastructure
and create a seamless global experience,
we established the Global Infrastructure
Team, reporting into headquarters and
with a presence in all regions. The new
team designs LIXIL’s infrastructure at
enterprise level, from security to networks,
identity management and server systems,
reducing lag in decision making and
driving efficiency.
Transform Existing Businesses
Through advanced digital capabilities, we
can enhance our consumer experience
and make the sales process more
efficient. In Japan, for example, we
launched the LIXIL Online Showroom, a
digital ecosystem that unlocks a wealth of
opportunities: online encounters can save
travel time and provide consumers with
real-time estimates, while distributors and
architects can join to offer professional
guidance, creating value for all. Another
example is our new GROHE X platform,
which creates an entire brand experience
online, offering tailored content for
consumers and a platform for business
partners to engage directly with
representatives.
Develop New Businesses
Digital technology opens a new world of
products that are suited to busy lifestyles.
These include products that harness the
power of the Internet such as the IoT-
Enabled Smart Delivery Box, which
enables users to remotely manage pick-
ups and deliveries to suit their needs.
GROHE Sense Guard is a home
monitoring system that automatically
detects water leakages and shuts off
incoming water lines before damage can
be done, even if the householder is away.
This innovation has attracted interest
from the insurance industry,
demonstrating new areas of potential
partnership.
Improving Productivity and
Engagement
Digital tools are also being deployed to
drive productivity. Workplace, an internal
social network, enables our people to
collaborate faster across regions and
departments, avoiding the need for
information to travel vertically. To enhance
engagement, for example, we leverage
applications that facilitate real-time
employee feedback, enabling us to
continuously course correct policies to
demonstrate our commitment to our
people. We also enable people to
empower themselves, using digital
solutions such as LinkedIn Learning to
enable employees to raise their skills.
To fully leverage digital technology
and agile ways of working, however, we
must invest in reskilling and upskilling
our people. That means investing in
talent, from Data Analysts who can
uncover new levels of insight to inform
business decisions to Business Process
Developers who can create the digital
tools that improve business models and
processes. Becoming an agile
organization also means democratizing
digital capabilities by going beyond the
specialists. We are raising the bar by
investing in Citizen Developers, enabling
our people to develop their own tools
and improve processes through low-code
and no-code.
CR SPOTLIGHT
IoT-Enabled Smart Delivery Box
The growth of online shopping in recent
years is driving up the number of home
deliveries. However, it is increasing the
number of redeliveries as well, a cause
of reduced labor productivity and
increased CO2 emissions. LIXIL’s IoT-
Enabled Smart Delivery Box can be
unlocked with a smartphone, notify the
user when a parcel arrives, and send a
pickup request to available shipping
companies, allowing users to receive or
send multiple parcels even when not
home. A demonstration experiment
conducted in 2019 in the Koto and
Edogawa districts of Tokyo helped
reduce the redelivery rate from 41.7%
to 14.9%, cutting CO2 emissions and
reducing working hours of staff of
delivery companies.
Accelerating Work-Style Transformation
and Consumer-Centric Approach
To expedite our commitment to
work-style transformation and to
accelerate consumer-centricity we
introduced SAP’s digital transformation
(DX) solution Qualtrics® in FYE2021.
By using this tool, we aim to
understand and respond to the needs
of our consumers and employees in a
quicker and more accurate manner.
Our new LIXIL VOICE employee opinion
survey uses Qualtrics to gather a large
number of survey responses in just two
weeks and conduct advanced analysis
of uncovered issues and potential
countermeasures. We increased the
frequency of the surveys from every
two years to four times a year, which
allows us to implement solutions more
swiftly and enhance employee
engagement. We also use the DX tool
to collect and analyze end user
feedback and examine how we can
further improve consumers satisfaction
at our showrooms. In recognition of
these DX efforts, we received the SAP
Japan Customer Award in 2020.
Bolstering Information Security
Chaired by the Chief Digital Officer, the
Information Security Committee
determines and approves information
security policies, shares global trends, and
reports on the status of security measures.
Based on reports and audits from its sub-
committees, the Committee formulates
further information security plans, confirms
the progress against LIXIL’s strategy, and
works to strengthen security measures.
In addition, the LIXIL Computer
Security Incident Response Team (LIXIL-
CSIRT) works to prevent and 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.
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47
SECTION 3
STRATEGY
RESPONSE TO
COVID-19
The COVID-19 pandemic is
upending entire industries, but at
the same time it is accelerating
the adoption of new ideas and
changes long overdue. At LIXIL,
we established a global team to
mitigate the impact of the
pandemic, enacting
countermeasures across the entire
value chain to protect our
consumers, business partners,
employees, and communities.
Building on changes already
underway, we have rapidly
pursued initiatives that encourage
work-style transformation,
digitalization, product
development, and globalization to
help shape our post-COVID world.
DEVELOPMENT /
DESIGN
PROCUREMENT
PRODUCTION
SALES
CONSUMER
STRATEGIC RISKS
STRATEGIC RISKS
STRATEGIC RISKS
STRATEGIC RISKS
STRATEGIC RISKS
Change in consumer needs due
to increased work-from-home
and infection prevention
practices
Insufficient handwashing
equipment and water supply,
especially in under-resourced
communities
Delay in material procurement
due to temporary and intermittent
closures of suppliers’ factories
amid the pandemic
Delay in production and
distribution due to factory
closures amid lockdown
Risk of infection in factories and
subsequent delay in production
and distribution
Production function’s inability to
respond to abrupt changes in
demand
Fewer chances to have face-to-
face business meetings and to
provide customer service at
stores due to COVID restrictions
Call center agents choosing to
commute less during closures of
schools and daycare centers
Negative impact of the pandemic
on overall business climate
Fewer chances to have face-to-
face communication due to
COVID restrictions
Surge in e-commerce demand
and inquiries during COVID
restrictions
Higher demand for products and
information that help mitigate the
risk of infection
COUNTERMEASURES
COUNTERMEASURES
COUNTERMEASURES
COUNTERMEASURES
COUNTERMEASURES
Expanded our range of touchless
products, products with superior
ventilation capabilities, and
solutions amid the increased
focus on the home
Expanded distribution
of new SATO Tap
handwashing station.
The simple materials,
design, and manufacturing
methods keep costs and
prices low, facilitating
production
and sales in
under-resourced
communities
SATO Tap
Established more resilient supply
chains that involve multiple
suppliers and production sites,
leveraging learnings from past
disasters. Also increased the
purchase volume of important
parts to ensure a stable supply of
products in high demand
Established a global production
system located in multiple sites
so we can switch between
locations in times of disaster
Ensured key components are
produced at multiple sites and
purchased in higher volume to
stabilize supply of products in
high demand
Quickly shifted to online
meetings using internally
developed software and third-
party products
Introduced online-offline hybrid
sales model, setting up LIXIL
Online Showroom and an
automated response system
Secured investment capital
needed to achieve organic
growth and fulfill targets
Introduced online-offline hybrid
sales model, setting up the LIXIL
Online Showroom and an
automated response system
Launched touchless products,
products with superior ventilation
capabilities, and solutions
designed for people choosing to
work from home
Provided advice on how to
ventilate homes and other topics
related to infection prevention
EMPLOYEES
Introduced Superflex and work-from-home systems, a flexible shift
system at manufacturing sites, and expanded the use of digital tools
to promote better internal communication and raise productivity
Defined clear guidelines for COVID-19 vaccinations to ensure our
employees are provided correct information and necessary support
Provided employees ongoing advice and guidance through internal
social media on relevant topics such as infection prevention, mental
wellbeing, and remote work communication
48
Message offering guidance on how to communicate while working
remotely
LOCAL COMMUNITIES
Established a working group of employee volunteers to discuss
ideas and create products and services to help prevent the spread
of COVID-19 infections
Developed and produced medical masks, face shields, and
foot-operated sanitizer pumps using 3D printing technology and
donated them to healthcare workers and schools
Donated sanitary products such as sanitizers, soap, masks, and
handwashing equipment to local communities
Healthcare workers
show appreciation for
face shields made and
donated by LIXIL
employee volunteers
49
SECTION 3
STRATEGY
LIXIL’S
CORE BUSINESSES
LWT
LIXIL WATER TECHNOLOGY
Strategic Goals
Japan
Improve profitability and create
new renovation business to strengthen
cost competitiveness and achieve
sustainable growth
Merge Japanese technology with global
design to develop competitive products,
and leverage global production and
procurement to lower cost
International
Leverage global portfolio of brands,
products and assets to enter into
profitable market segments in each
geography and grow global market share
Accelerate the development process
for synergy creation, including for
products and technologies
from Japan
11
22
11
22
50
GROHE Sensia Arena
Market Overview
Global plumbing fixtures and fittings market worth five trillion yen today,
forecast to continue growing
Demand for new housing in Japan forecast to decrease over
the medium to long term due to population decline
COVID-19 pandemic driving new demand for health and hygiene-related
products, home improvements, while growing share of the consumer
journey and transactions are moving online
Key Strengths
Combined global capabilities managed by core global team
Sales network in more than 150 countries, with strong market position
in each region
Highly regarded and clearly differentiated house of brands
Comprehensive product portfolio covering luxurious to base-of-pyramid
market segments
Global in-house design organization
Globally integrated supply chain network
Growth Opportunities and Management Strategy
Growth Opportunities
Management Strategy
Increased demand for solutions related
Expand sales and accelerate development of health and
to health, hygiene, wellness and
wellbeing due to COVID-19
hygiene-related products
Respond to new demand in the new normal with sales expansion of
Changing lifestyles in the new normal
renovation products
Growing population and increasing income
levels driving international market growth
Leverage digital platforms to increase reach of sales channels
Enter into profitable market segments while using strength of brands,
Advanced technology developed in Japan
products and services to gain market share
enables product differentiation
Leverage platform-based, global product pipeline across
Increased environmental awareness is
all brands to achieve synergies and enter new market segments
driving new demand for sustainable products
Create more sustainable products and materials
Risks and Countermeasures
Risks
Countermeasures
Decrease in new housing starts in Japan
Increase in labor cost, material and
shipping costs, including also shortages of
certain materials or sourced components
Shortage of skilled labor
Rapid commoditization due to
new business models
Rise of highly cost-competitive
manufacturers from developing countries
Slower-than-forecast recovery from
COVID-19 including temporary setbacks
Create and drive new demand by strengthening renovation and
new business strategy
Improve productivity through platform-based production, optimize global
sourcing and manufacturing footprint, and utilize digital tools
to improve margins
Develop easy-to-install and prefabricated products and expand installer network
Develop new business models
Continue targeted investment in innovation, brands, and design
Allocate resources to growth markets and pursue reverse innovation
Provide clearly differentiated value
Respond to market needs while leveraging our global operations footprint
Progress on Major Initiatives
Responding to demand in the new normal
In response to growing interest in health and hygiene, the demand for
“hands-free” applications in the home has increased worldwide. Japan
sales of INAX’s Navish increased by 76% year on year in FYE2021,
while sales of vanities equipped with touchless faucets also increased
steadily in the second half. LIXIL currently owns 43 patents*1 and has
an 77% share of the touchless faucet market in Japan*2, and we are
now growing this opportunity through our faucet businesses in more
than 150 countries. Internationally, we also continue to expand our
product lineup to meet new demand, including touchless toilets that
can be easily installed by consumers.
*1 Touchless faucets for residential and kitchen; according to Company research (as of March 2021)
*2 Calculated from valve industry association data and Company shipping data (as of March 2021)
INAX Navish Touchless faucet
American Standard Cadet Suite
Touchless toilet
51
LHT
LIXIL HOUSING TECHNOLOGY
SECTION 3
STRATEGY
LIXIL’S
CORE BUSINESSES
Developing products with greater social applications
Innovating for sustainable growth
During natural disasters, when water and other lifeline services are often
disrupted, securing sanitary toilets as well as water and food is vital to
protecting people’s health and wellbeing. After the 2011 Japan earthquake
and tsunami, LIXIL developed the Resilience Toilet, which can continue to be
used during disasters. The volume of water required to flush can be switched
from five liters to one liter without compromising its functionality, helping
adapt to water supply disruptions and other issues. We are not only
promoting the installation of these toilets in schools and public buildings that
serve as disaster response bases, but are also providing them for local
community disaster response training in Japan.
As an example of a new business in Japan, LIXIL
is developing new applications for withCUBE, a
mobile and modular bathroom that is available for
rent. Originally designed to improve access to
toilets in distribution centers and other facilities, it
can now also be used to set up temporary isolation
rooms, on-site clinics, and private spaces for
disaster evacuees at medical facilities.
In international markets, LIXIL launched
GROHE X, an online platform providing a new
digital brand experience*. In addition to introducing
products and technologies to consumers, business
partners can engage directly with sales
representatives over the platform. GROHE X has
been well received by visitors and we are planning
to expand it to Japan.
* www.grohe-x.com/
INAX Resilience Toilet Outdoor toilet at Yoyogi National Stadium first gymnasium
Strategic Goals
Market Overview
EXSIOR Plus G Exterior
withCUBE external
appearance
11
22
Shift to a business model
focused on profitability
Create demand to establish
a foundation for growth
Developing solutions
contributing to circular economy
At LIXIL, we promote circular
manufacturing across the entire value
chain, from material procurement through
production, end use, and product
disposal. LIXIL’s GROHE brand launched
the Less Plastics Initiative in 2018 and
achieved reduction of approximately 23.5
million pieces of plastic packaging. The
INAX brand has also significantly reduced
plastic use by replacing plastic with paper
in packaging for its hand shower product
destined to the global market.
In line with our company-wide LIXIL
Plastics Action Statement announced in
FYE2021, we will continue to develop
environmentally conscious products and
services.
GROHE X
INAX’s Aqua Power Showerhead
packaging made from paper
52
Demand for new housing in Japan forecast to decrease over the medium to
long term due to population decline
Building material manufacturers shifting focus to the home renovation
sector due to decline in new housing demand
The COVID-19 pandemic and, in recent years, a higher number of
natural disasters are increasing interest in new ways of living as well as
in safe and secure homes
Building materials markets, particularly in Asia, continue to expand as
a result of mid- to long-term economic, population, and income growth
Key Strengths
Leading market share in residential window sashes and exterior product
market segments in Japan
Extensive nationwide sales and distribution network in Japan
Wide range of products and product categories, enabling coordination
for the entire home
Simple organization structure that facilitates the rapid development,
manufacture, and sale of products
Business alliances with companies that possess differentiated technology
and know-how
53
SECTION 3
STRATEGY
LIXIL’S
CORE BUSINESSES
Growth Opportunities and Management Strategy
Growth Opportunities
Management Strategy
Increasing need for highly functional products
Develop differentiated products and business models
with high insulation due to increasing
awareness of environmental and health factors
Growing demand for new products and
services suitable for Japan’s aging society
Changing lifestyles due to the COVID-19
pandemic
Growing market for highly affluent consumers
Increasing need for differentiated products
due to population growth and rising income
levels in Asian markets
Risks and Countermeasures
Expand market share in net zero energy houses (ZEH)*
Provide products and services that meet social needs
Respond to changing lifestyles by expanding range of products and
materials as well as sales in home renovation market
Develop differentiated and high value-added products to meet consumer
needs (by working with companies that have advanced technologies)
Develop products to meet market needs, utilizing technologies and
resources from Japan
Strengthen sales structure to meet market characteristics for each country
* Homes that have a net energy consumption of zero, achieved through a combination of energy
efficiency – using highly insulated and highly efficient materials and products – and energy generation,
such as through solar power systems.
Risks
Countermeasures
Decrease in new housing starts in Japan
Increase in material prices
Create new demand by strengthening renovation and new business
strategies
Improve material procurement methods
Pricing products in line with market conditions
Progress on Major Initiatives
Responding to demand in the new normal
Demand for products that reduce close interaction, are touchless, or improve
ventilation in the home increased during the “new normal” in Japan. This led to
strong revenue growth in FYE2021 for our IoT-Enabled Smart Delivery Box, up
53% year on year, and for screen doors, up 61% year on year. In addition,
stronger typhoons making landfall in Japan in recent years have been causing
more extensive damage. This boosted demand for renovation-related shutters, for
which sales rose 55% year on year. Moreover, we are rapidly responding to new
demand such as increasing interest in products that enable spaces to be utilized
for both work and personal life, as well as products for home office space.
Launch of luxury brand NODEA
In FYE2021 we launched luxury brand NODEA, targeting the
highly affluent market in Japan, which is ranked the second
largest in the world.* Through NODEA’s brand concept,
“Openness, Space, Encounters,” we are introducing to the
Japan market a range of large-scale windows that deliver a
completely new level of indoor-outdoor connectivity, as well
as other interior and exterior products. NODEA’s large
panoramic windows were jointly developed with Swiss
company Sky-Frame. We will continue to expand our product
range through tie-ups with companies with leading
technologies in Japan and international markets.
*¥63 billion market as of 2019 (based on LIXIL research)
NODEA SKY-FRAME window
Promoting ZEH by installing solar panels and
energy storage systems
THINK HEAT initiative to promote climate
change mitigation and adaptation
LIXIL TEPCO Smart Partners Inc. (LTSP), a company jointly
established by LIXIL and TEPCO Energy Partner, launched a
new service called Tatetoku Denchi. Designed for consumers
building a new ZEH-type home that uses designated LIXIL
products, the service allows consumers to install a solar-
power generation and energy storage system at a reduced
initial cost in exchange for any revenue generated from
surplus energy sales for a period of 10 years. The service
helps boost the construction of ZEHs while reducing energy
consumption through building materials and equipment with
higher environmental performance, cutting energy bills, and
improving preparedness for blackouts and other disruptions
in times of natural disasters.
A service example:
Tatetoku Value that combines high-performance building
materials, a solar-power system, and surplus energy sales
LIXIL is working on an awareness-raising initiative called
“THINK HEAT: Let’s THINK about Eco- and People-Friendly
Temperatures,” to help mitigate and adapt to climate change.
We work with local authorities and business partners on a wide
range of activities: building awareness of the importance of
indoor temperature and the efficient use of heaters and air
conditioners, as well as how to prevent indoor heatstroke;
donating sunshades funded by a portion of the revenue earned
from sales of our products that help reduce CO2 emissions; and
conducting educational programs for future generations,
including our original outreach classes at elementary schools.
In recognition of these efforts, THINK HEAT was awarded the
2020 Japanese Minister of the Environment Award for Climate
Change Action.
54
TOSTEM Rechent Entrance Door 3
(with ventilation function)
Installed sunshades at a classroom in a joint experiment with an elementary school
55
FINANCIAL HIGHLIGHTS
LIXIL Corporation and Consolidated Subsidiaries (Years ended March 31)
Revenue
Japan
International
(¥ billion)
2,000
1,500
1,000
500
0
Core earnings / Core earnings margin
EBITDA / EBITDA to sales ratio
Net interest-bearing debt / Net debt-to-equity ratio
Core earnings (left)
Core earnings margin (right)
EBITDA (left)
EBITDA to sales ratio (right)
Net interest-bearing debt (left)
Net debt-to-equity ratio (right)
1,378.3
987.5
390.8
(¥ billion)
120
100
80
60
40
20
0
(%)
6.0
5.0
4.0
3.0
2.0
1.0
0
4.2
57.3
(¥ billion)
200
150
100
50
0
10.0
137.9
(%)
12
9
6
3
0
(¥ billion)
1,000
800
600
400
200
0
87.7
484.4
(%)
150.0
120.0
90.0
60.0
30.0
0.0
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
Revenue decreased by 9.0% year on year to ¥1,378.3 billion due to the impact
of the COVID-19 pandemic in the first half. Demand, however, showed signs of
recovery in the second half, especially in US and European markets.
Core earnings increased by 9.6% year on year to ¥57.3 billion due to lower
SG&A expenses, the result of productivity improvements and cost control efforts
in response to the COVID-19 situation, and an improved gross profit margin
resulting from a higher ratio of revenue from renovation-related products.
EBITDA to sales ratio increased by 1.1 percentage points year on year to ¥137.9
billion due to increased core earnings, which made up for the impact of
decreased revenue.
Net interest-bearing debt as of March 31, 2021 decreased by ¥252.2 billion
year on year to ¥484.4 billion due to the deconsolidation of major subsidiaries*.
*Major subsidiaries include Permasteelisa and LIXIL VIVA
SG&A expenses / SG&A ratio
SG&A expenses (left)
SG&A ratio (right)
Earnings (loss) per share (EPS) / Dividends per share /
Dividend payout ratio
Earnings (loss) per share (EPS) (left)
Dividend payout ratio (right)
Dividends per share (left)
(¥ billion)
600
500
400
300
200
100
0
411.9
29.9
(%)
60.0
50.0
40.0
30.0
20.0
10.0
0.0
(Yen)
200
100
0
-100
-200
162.2
113.92
34.4
65.8
75
-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)
3.5
(¥ billion)
800
600
400
200
0
31.7
552.3
(%)
40.0
30.0
20.0
10.0
0.0
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
SG&A expenses decreased by 8.5% year on year to ¥411.9 billion due to
productivity improvements; the SG&A ratio increased by 0.2 percentage points,
however, due to the impact of decreased revenue.
Earnings per share increased year on year by ¥70.77 to ¥113.92 while annual
dividends increased by ¥5 to ¥75 per share.
Achieved net debt-to-EBITDA ratio of 3.5 times, a key medium-term financial
indicator, due to the deconsolidation of major subsidiaries*, improvement in
business profitability, and the result of measures such as prioritizing investments
by focusing on ROIC.
Net interest-bearing debt decreased by ¥252.2 billion and the ratio of equity
attributable to owners of the parent as of March 31, 2021 was 31.7%, increasing
7.7 percentage points year on year due to the improvement of business
profitability and measures such as prioritizing investments by focusing on ROIC.
*Major subsidiaries include Permasteelisa and LIXIL VIVA
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
H&S
LWT
LHT
LBT
H&S
(¥ billion)
60
30
0
-30
-60
6.3
33.0
(%)
10.0
5.0
0
-5.0
-10.0
(¥ billion)
2,400
1,200
0
1,741.8
1.7
(%)
4.0
2.0
0.0
-2.0
-4.0
(¥ billion)
40
30
20
10
0
33.3
14.4
1.8
0.7
(¥ billion)
40
30
20
10
0
31.6
26.3
0.9
0.8
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
Profit for the year attributable to owners of the parent increased by ¥20.5 billion
year on year to ¥33.0 billion due to a recovery in business in the second half
and progress on structural reforms.
Total assets decreased by ¥349.7 billion year on year to ¥1,741.8 billion due to
the deconsolidation of major subsidiaries* upon the completion of divestiture
of shares.
*Major subsidiaries include Permasteelisa and LIXIL VIVA
56
Expenditures derived mainly from investment in new product development,
business rationalization, and maintenance costs in core businesses. Capital
expenditures decreased due to limited expenditure during the COVID-19
pandemic and improved production efficiency in LIXIL Housing Technology (LHT).
Notes: 1. Excluding the impact of IFRS 16 “Leases” applied from FYE2020
Depreciation was mainly attributable to developing LIXIL’s group-wide IT systems
and maintaining facilities. For LWT, depreciation remained flat due to initiatives
to develop products for the Japan and international markets, while for LHT,
depreciation decreased due to progress of initiatives to improve efficiencies of
production processes.
2. LWT: LIXIL Water Technology, LBT: LIXIL Building Technology, H&S: Housing
Note: Excluding the impact of IFRS 16 “Leases” applied from FYE2020
57
& Services Business
STRATEGYSECTION 3
NON-FINANCIAL HIGHLIGHTS
(Years ended March 31)
Environment
Contribution to reduction in CO2 emissions from products and services
(Ratio of decline from 1.0 level in FYE2016)
CO2 emissions from Group activities (Scope 1 and 2)*1
Responsible Procurement Survey (conformity rate)*5
Community development expenditures*6
LIXIL’s sustainability policies and initiatives are on pages 30-33.
For more information on ESG-related data, please visit our corporate website.
www.lixil.com/en/sustainability/data/
(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
(%)
0
-20
922
456
466
-18.7
(%)
100
90
80
70
60
50
91
89
(¥ million)
2,000
1,500
1,000
500
0
1,484.7
2016
(Base year)
2019
2020
2021
2016
(Base year)
2019
2020
2021
2019
2020
2021
2019
2020
2021
We conduct environmental assessments on products at every stage of the
development process to make our products and services more energy efficient,
achieving 1.29 times greater reduction in CO2 emissions from FYE2016.
By seeking to increase energy efficiency and utilize renewable energy to further
reduce CO2 emissions, we achieved a 18.7% reduction in carbon intensity per
unit of output.
We updated past data based on the review of calculation this year.
We conduct surveys of suppliers to promote responsible procurement.
We achieved the target of 90% conformity rate in Japan.
* Targets for companies outside Japan are not determined yet as the scope is now
under review.
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.
In FYE2021, social contribution activities and scale decreased due to the impact of
the COVID-19 pandemic.
Water intake and discharge*2
Waste recycling ratio*1
Number and ratio of outside directors
Reports of possible compliance issues
Governance
Water intake
Water discharge
(Million m3)
20
15
10
5
0
13.3 12.3
Japan and Europe
Asia (excluding Japan)
North America
(%)
100
80
60
40
20
0
97
92
39
Outside
directors
6
Internal
directors
3
(Number)
500
400
300
200
100
0
(Ratio per hundred employees)
343
0.60
1.0
0.8
0.6
0.4
0.2
0
2019
2020
2021
2019
2020
2021
2019
2020
2021
By promoting water recycling, we reduced water intake to 13.3 million m3 and
water discharge to 12.3 million m3.
By working with stakeholders to minimize the use of newly introduced resources
and by promoting reuse and recycling, we achieved waste recycling ratios of 97%
in Japan and Europe, 92% in Asia (excluding Japan), and 39% in North America.
The Board of Directors consists of nine members including six outside directors
and three internal directors (including two women). The ratio of independent
outside directors was 66.6%.
We collect information on any compliance violations, ensure early action on any
wrongdoings and violations, and implement preventive measures. No serious
violations of laws and regulations occurred.
Social
Ratio of female new graduate recruitment*3
Ratio of female managers
Attendance rate at Board of Directors’ meetings (in FYE2021)
Number of females (left)
Ratio of female recruitment (right)
The LIXIL group of companies*4
LIXIL Corporation, Japan
(People)
100
80
60
40
20
0
(%)
100
(%)
57
47.9
80
60
40
20
0
20
15
10
5
0
15
6
98.6%
2019
2020
2021
2019
2020
2021
We have achieved the FYE2021 target of 30% and set a new 50% target.
We have updated our Diversity & Inclusion strategy and set a target of 30%
female managers across the organization by 2030.
The Board of Directors met 17 times in FYE2021. The attendance rate for the
meetings was 98.6%.
58
*1 “Scope of coverage: The LIXIL group of companies (production and non-production
bases in Japan, and production bases outside Japan)”
*2 “Scope of coverage: The LIXIL group of companies (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 Scope of coverage: LIXIL Corporation, Japan
Ratio of female new graduates employed
(incl. those who completed graduate studies)
*4 Directly hired employees only, FYE2020 data excludes consolidated subsidiaries in
Japan with 100 or less directly hired employees.
*5 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
FYE2019 excludes GROHE Group and American Standard Brands
FYE2020 excludes American Standard Brands
*6 FYE2019 and FYE2020 include Permasteelisa Group, FYE2021 includes China
and Asia Pacific
59
STRATEGYSECTION 3
REVIEW AND ANALYSIS OF OPERATING RESULTS
AND FINANCIAL POSITION
During the consolidated fiscal year ended March 31, 2021
(FYE2021), the Japanese economy remained in a weakened
state. Consumer spending and corporate profits rapidly
deteriorated due to the impact of the COVID-19 pandemic.
While observing signs of an economic recovery toward the end
of the year as socio-economic activities resumed and
expectations grew for the early rollout of COVID-19 vaccines,
following a renewed spread of COVID-19, Japan declared a
third state of emergency at the start of FYE2022. Therefore,
Japan’s economic outlook remains uncertain. Regarding the
housing sector, the level of investment in houses for rent and
for sale stayed below the previous year’s level. Furthermore,
while seeing signs of growth in owner-occupied houses, the
number of new housing starts is still expected to decline over
the medium to long term. Therefore, LIXIL Corporation (“LIXIL”)
and our consolidated subsidiaries (together, the “LIXIL group”)
face an overall challenging business environment in Japan.
In terms of the global economy, the COVID-19 pandemic
has had a significant impact on many international markets,
where lockdowns and curfews in major cities have greatly
restricted socio-economic activities. While various fiscal
policies and other measures are gradually helping these
economies recover, the outlook of the global economy remains
no less uncertain as there is still no clear resolution to the
COVID-19 pandemic in sight. The LIXIL group will need to
continuously monitor economic trends closely, while
recognizing other factors of uncertainty, including the rate of
demand recovery in each country and region brought by
easing of socio-economic restrictions and other economic
policies, tightening of maritime logistics due to a global
container shortage, soaring material prices, and a shortage of
wooden materials supply.
Status of Operating Results
Since we decided to divest our shares in consolidated
subsidiaries Permasteelisa S.p.A. (Permasteelisa) and LIXIL
VIVA CORPORATION (LIXIL VIVA) in May 2020 and June
2020, respectively (share transfer completed in September
2020 and November 2020, respectively), the operations of
Permasteelisa and its subsidiaries and LIXIL VIVA have been
classified as discontinued operations. Accordingly, revenue,
core earnings*, operating profit, and profit (loss) before tax
stated in this section are for continuing operations only and
exclude discontinued operations. The results of the previous
fiscal year have also been revised to reflect the stated
reclassifications.
*Equivalent to operating profit in JGAAP
Overall Business Results in FYE2021
In FYE2021, LIXIL operated in an uncertain business
environment due to the COVID-19 pandemic. Under these
circumstances, we first focused on securing liquidity on hand,
followed by prioritizing investments, thoroughly managing
inventory and accounts receivable, and controlling selling,
general and administrative (SG&A) expenses. Moreover,
despite the challenging business environment, we made
progress reviewing our business portfolio, implementing HR
initiatives such as the voluntary retirement program “New Life,”
and transitioning to a platform-based production system in
LIXIL Housing Technology (LHT). As a result, the LIXIL group
achieved a higher gross profit margin and increased core
earnings for the full year.
Operating Results in FYE2021
The LIXIL group’s business results for FYE2021 deteriorated
significantly in the first half of the fiscal year due to the impact
of the COVID-19 pandemic on global economic activities.
Although demand in international businesses recovered in the
second half of the fiscal year, especially in the Americas and
Europe, consolidated revenue for the full fiscal year decreased
to ¥1,378.3 billion (down by 9.0% year on year).
Despite lower revenue, however, core earnings increased to
¥57.3 billion (up by 9.6% year on year). Continuous
improvements to the Japan businesses’ gross profit margin,
Overview of Financial Results for the Fiscal Year Ended March 2021
(¥ billion)
Year
Revenue
Gross profit
(%)
Selling, general and administrative expenses
Core earnings
(%)
60
FYE2020
1,514.4
502.6
33.2%
450.3
52.3
3.5%
FYE2021
Increase / decrease
Rate of change
1,378.3
469.2
34.0%
411.9
57.3
4.2%
-136.2
-33.4
+0.9pp
-38.4
5.0
+0.7pp
-9.0%
-6.6%
—
-8.5%
9.6%
—
An overview of operating results by segment is shown in the
table below. In accordance with LIXIL’s decision to transfer its
shares in Permasteelisa, the operations of Permasteelisa and its
subsidiaries, which were part of LIXIL Building Technology (LBT),
have been classified as discontinued operations. Also, in
accordance with the decision to transfer shares of LIXIL VIVA,
the operations of LIXIL VIVA, which had been included in
Distribution & Retail Business, have been classified as
discontinued operations. Accordingly, the figures for the
previous fiscal year have been revised to reflect the stated
reclassification.
initiatives to improve employee productivity, and cost control
efforts to reduce SG&A expenses all contributed to improving the
core earnings margin and covered the impact of reduced revenue.
Operating profit also increased to ¥35.8 billion (up by
12.0% year on year). While LIXIL recorded a one-time expense
in relation to the “New Life” voluntary retirement program
implemented in March 2021 as part of the Company’s
comprehensive HR program, “Kawaranaito LIXIL,” launched to
revitalize the LIXIL group’s Japan businesses, this was offset by
the gain on the sale of subsidiaries and other profit factors.
Profit before tax from continuing operations, on the other
hand, decreased to ¥33.8 billion (down by 17.4% year on year)
due to the absence of ¥11.0 billion profit from disposal of share
of associates recorded in the previous fiscal year. Profit for the
year from continuing operations also declined to ¥16.4 billion
(down by 41.0% year on year). Profit for the year from
discontinued operations stood at ¥21.2 billion (¥14.1 billion
loss recorded in the previous fiscal year), which included profit
and loss from the sale of Permasteelisa and LIXIL VIVA.
As a result of the above, profit for the year attributable to
owners of the parent, which excludes that attributable to non-
controlling interests, significantly rose to ¥33.0 billion (2.6
times year on year).
Overview of Financial Results by Segment
(¥ billion)
FYE2020
FYE2021
Increase / decrease
Rate of change
LIXIL Water Technology
Revenue
Core earnings
(%)
Revenue
LIXIL Housing Technology
Core earnings
(%)
Revenue
LIXIL Building Technology
Core earnings
Housing & Services Business
Core earnings
(%)
Revenue
Adjustment
Total
(%)
Revenue
Core earnings
(%)
Revenue
Core earnings
(%)
828.5
61.5
7.4%
542.2
28.3
5.2%
112.8
2.7
2.4%
54.0
3.0
5.5%
-23.1
-43.2
—
783.8
62.1
7.9%
474.3
31.4
6.6%
93.4
2.6
2.8%
46.6
2.1
4.6%
-19.8
-41.0
—
1,514.4
1,378.3
52.3
3.5%
57.3
4.2%
-44.7
0.6
+0.5pp
-67.9
3.1
+1.4pp
-19.4
-0.1
+0.4pp
-7.5
-0.8
-0.9pp
3.3
2.1
—
-136.2
5.0
+0.7pp
-5.4%
1.0%
—
-12.5%
11.1%
—
-17.2%
-2.2%
—
-13.8%
-28.4%
—
-14.3%
-4.9%
—
-9.0%
9.6%
—
61
STRATEGYSECTION 3
REVIEW AND ANALYSIS OF OPERATING RESULTS
AND FINANCIAL POSITION
LIXIL Water Technology
LIXIL Water Technology (LWT) faced a challenging business
environment as the COVID-19 pandemic significantly affected
both Japan and global operations throughout FYE2021. Demand
in Japan especially declined due to the drop in new housing
starts and the absence of demand generated prior to the
consumption tax hike in the previous fiscal year. On the other
hand, international businesses saw a rapid recovery in demand
in the Americas, EMEA, and China regions in the second half of
the fiscal year. As a result, revenue decreased to ¥783.8 billion
(down by 5.4% year on year). In contrast, core earnings
increased to ¥62.1 billion (up by 1.0% year on year) due to
product price adjustments and controlled SG&A expenses
offsetting the decrease in gross profit from lower revenue.
LIXIL Housing Technology
LHT’s operations were severely affected by the decrease in
demand due to the impact of the COVID-19 pandemic, sluggish
new housing starts and the absence of demand generated prior
to the consumption tax hike in the previous fiscal year. As a
result, revenue decreased to ¥474.3 billion (down by 12.5%
year on year). On the other hand, core earnings rose to ¥31.4
billion (up by 11.1% year on year) due to a higher gross profit
margin, which resulted from improved production efficiency
achieved through the ongoing implementation of
platform-based production, the increase in the sales ratio of
renovation products, and the reduction in SG&A expenses.
LIXIL Building Technology
LBT faced a severely challenging business environment not
only due to the effect of the COVID-19 outbreak, but also due
to reduced domestic demand related to the Tokyo 2020
Olympic and Paralympic Games. As a result, revenue
decreased to ¥93.4 billion (down by 17.2% year on year). Core
earnings also declined, despite measures to improve order
gross profit margins and the restriction of SG&A expenses, to
¥2.6 billion (down by 2.2% year on year).
Housing & Services Business
H&S experienced growth in new business areas such as the
B-to-C business, which continues to be a prioritized area.
However, due to the absence of demand generated prior to the
consumption tax hike in the previous fiscal year, in addition to
the impact of the COVID-19 pandemic, both revenue and core
earnings dropped to ¥46.6 billion and ¥2.1 billion, respectively
(down by 13.8% and 28.4%, respectively).
Revenue by segment is before elimination of inter-segment
transactions, and core earnings is before deduction of
corporate expenses.
Financial Position as of March 31, 2021
LIXIL aims to build a solid and stable financial base in order to
achieve sustainable growth. Thus, we are working to strengthen
our balance sheet through various measures. In FYE2021, we
made significant progress in this area, including our decision to
divest shares in Permasteelisa and LIXIL VIVA in May 2020 and
June 2020, respectively (share transfer completed in
September 2020 and November 2020, respectively). As a
result, 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.
Assets, Liabilities, and Equity as of March 31, 2021
Total assets as of March 31, 2021 amounted to ¥1,741.8 billion,
down by ¥349.7 billion from the previous fiscal year end.
Current assets decreased by ¥105.0 billion year on year to
¥637.8 billion. Although cash and cash equivalents increased
due to the procurement of short-term funds to secure liquidity
on hand, this was exceeded by factors such as decreases in
trade and other receivables and inventories reflecting the
decline in revenue, as well as decreases in assets held for sale
and other accounts due to the removal of Permasteelisa and
LIXIL VIVA from the scope of consolidation as the share transfers
of these subsidiaries had been completed. Non-current assets
also declined by ¥244.7 billion from the previous fiscal year end
to ¥1,104.0 billion. The increase generated by foreign currency
translation was offset by decreases in various accounts due to
the removal of LIXIL VIVA from the scope of consolidation as
same as in current assets.
Total equity as of March 31, 2021 was ¥554.8 billion, and
the ratio of equity attributable to owners of the parent was
31.7% (up by 7.7 percentage points year on year). Regarding
the net debt-to-EBITDA ratio, LIXIL achieved the target of 3.5
times as one of the indicators of financial soundness, as a
result of measures such as the review of the business portfolio
followed by the divestment of subsidiaries, the improvement in
the profitability of businesses, and the prioritization of
investments with an emphasis on ROIC.
Cash Flows in FYE2021
Cash and cash equivalents as of March 31, 2021 amounted to
¥111.1 billion, up by ¥15.2 billion year on year.
Cash Flows from Operating Activities
Net cash provided by operating activities for FYE2021
amounted to ¥151.0 billion, down by ¥6.7 billion year on year.
Major factors of this decrease were the fluctuations in working
capital, including inventories, trade and other receivables, and
Consolidated financial position (¥ billion)
Cash flow status and cash balance*1 (¥ billion)
Assets
Liabilities and Equities
Cash and Cash Equivalents
-349.7 (impact from
the divestment of major
subsidiaries* is -386.4)
-349.7 (impact from
the divestment of major
subsidiaries* is -358.7)
95.9
111.1
Current
assets
742.8
Current
assets
637.8
Non-current
assets
1,348.7
Non-current
assets
1,104.0
Current
liabilities
807.1
Current
liabilities
586.9
Non-current
liabilities
749.3
Non-current
liabilities
600.1
Equity
535.1
Equity
554.8
Interest-bearing
debt
-484.4
-736.7
-595.5
-832.6
Net
Interest-bearing
debt
March
2020
March
2021
March
2020
March
2021
March
2020
March
2021
62
*Major subsidiaries include Permasteelisa and LIXIL VIVA
Cash and cash
equivalents at the
beginning of the year
Net cash flows from
operating activities
Net cash flows from
investing activities
Net cash flows from
financing activities
FYE2020
141.4
Free
Cash
Flow*2
116.4
157.7
-41.3
-153.3
Cash and cash
equivalents at the
beginning of the year
Net cash flows from
operating activities
Net cash flows from
investing activities
Net cash flows from
financing activities
FYE2021
95.9
Free
Cash
Flow*2
96.9
151.0
-54.2
-93.4
Other*3
-8.7
Other*3
11.7
Cash and cash
equivalents at
the end of the year
95.9
* Profit before tax*1
-23.4
Cash and cash
equivalents at
the end of the year
111.1
* Profit before tax*1
59.3
*1 Includes discontinued operations
*2 Free cash flow = Net cash flows from operating activities + Net cash flows from investing activities
*3 Other = 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
63
STRATEGYSECTION 3
REVIEW AND ANALYSIS OF OPERATING RESULTS
AND FINANCIAL POSITION
trade and other payables; the decrease in profit before tax from
continuing operations; and the increase in income taxes paid.
Core earnings margin
Cash Flows from Investing Activities
Net cash used for investing activities was ¥54.2 billion, up by
¥12.8 billion year on year. Major cash-flow factors included
purchase of property, plant and equipment; purchase of
intangible assets; payments for sale of subsidiaries; and
proceeds from sale of subsidiaries.
Cash Flows from Financing Activities
Net cash used for financing activities was at ¥93.4 billion,
down by ¥59.9 billion year on year. While there were cash
outflow factors such as payments of dividends and lease
liabilities, flexible fund procurement, and repayment of interest-
bearing debt, including the issuance of new bonds, were
successful.
Outlook for FYE2022
The economic environment is expected to continue to improve
as vaccinations and other measures to prevent the spread of
COVID-19 are implemented both in Japan and international
markets. However, we continue to expect an uncertain
operating environment due to risk factors such as price hikes
caused by shortages in the supply of semiconductors, resin
materials, and lumber, as well as rising transportation costs
reflecting container shortages.
Under these business circumstances, we will continue to
transform our organization in order to become less susceptible
to our external environment and to achieve profitable and
sustainable growth. With LWT and LHT positioned as our core
businesses, we will concentrate our management resources in
both businesses, while working to improve the profitability of
our Japan businesses in order to generate higher cash. In
addition, we will invest the cash flow generated into the growth
of the international businesses to increase the profits of the
entire group and strengthen our financial position.
At the LIXIL group, we have now achieved our medium-
term goal of strengthening our financial structure. However, we
still recognize issues to be addressed in terms of capital
efficiency. In particular, we believe that digitalization is the key
to improving the productivity of sales and administrative
departments. Accordingly, we have been increasing our
investment in our digital transformation (DX) while continuing
to apply an asset-light policy across the Company.
Going forward, we will strive to continue benefitting from
investments in the business and from strengthening our
organizational structure, which will enable us to continuously
generate returns in excess of cost of capital and, as a result,
provide higher returns to our shareholders.
(forecast)
5.6
4.2
3.5
(%)
5
4
3
2
1
0
(FYE)
2020
2021
2022
ROE
(%)
10
5
0
-5
-10
(forecast)
8.3
6.3
2.4
FYE2022 Forecasts
Revenue: ¥1,440.0 billion (up by 5% year on year)
Core earnings: ¥80.0 billion (up by 40% year on year; core
earnings margin 5.6%)
Operating profit: ¥78.0 billion (up by 118% year on year)
Profit before tax: ¥75.5 billion (up by 123% year on year)
Profit for the year attributable to owners of the parent: ¥47.0
billion (up by 42% year on year)
Cash dividends: Planned to be increased to ¥80 per share for
the full year, with interim and year-end dividends of ¥40 each
The above forecasts for FYE2022 state the judgment of LIXIL
based on the information available as of the date of publication,
and include risks and uncertainties. Actual results may differ
materially from the forecasts above due to various factors.
Revenue
(¥ trillion)
1.6
1.5
1.4
1.3
1.2
1.51
(forecast)
1.44
1.38
(FYE)
2020
2021
2022
Net debt-to-EBITDA ratio
(Times)
7
6
5
4
3
2
5.5
3.5
(forecast)
2.7
2022
(FYE)
2020
2021
2022
(FYE)
2020
2021
ROIC*1
(%)
10
5
0
-5
-10
(forecast)
5.1
2.0
2.3
Ratio of equity attributable to owners
of the parent*2
(forecast)
34*3
31.7
（%）
35
30
25
20
15
24.0
(FYE)
2020
2021
2022
*1 Calculation: Operating profit x (1-Effective tax rate) ÷ (Working capital + Fixed assets)
*2 Equity ratio under Japanese GAAP
*3 Calculated on the premise of "redemption" for the Zero Coupon Convertible Bonds due 2022
(FYE)
2020
2021
2022
64
65
STRATEGYSECTION 3
PRINCIPAL RISKS AND
COUNTERMEASURES
To achieve our business objectives, we regularly identify, assess, and monitor risks according to criteria
common across LIXIL and its group companies. This enables us to better understand the nature of the
world we operate in and make informed management decisions, ensuring we continue to generate value
for our stakeholders.
Strategic Risks
Strategic risks can affect the implementation of LIXIL’s business strategy. The following strategic risks were determined to have a
moderate to high degree of impact or possibility of occurrence.
LIXIL regularly monitors strategic and operational risks
and implements countermeasures at each level of the
business 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
Risks Related to the COVID-19 Pandemic
While the COVID-19 pandemic has undeniably
impacted LIXIL’s business activities, both
domestic and international businesses are,
despite regional differences, generally on a
path to recovery. Overall, failure to protect
employees through Occupational Health and
Safety (OH&S) safeguards could result in their
personal harm. At the same time, if the
pandemic worsens and governments implement
further regulations, such as lockdown
measures, this could impact business activities
in various locations, delay in supply of raw
materials, and slow down or halt production.
Moreover, with respect to the impact of the
COVID-19 pandemic on economic activity,
there are many uncertainties and any changes
in the situation 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 chains to
maintain product and material supply
D
e
g
r
e
e
o
f
i
m
p
a
c
t
H
i
g
h
M
i
d
d
l
e
L
o
w
11
13
1
4
6
15
16
3
8
17
5
10
12
14
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
7
9
Strategic risk: cross-business risk
Strategic risk: risks specific to the business
Operational risk
Low
Middle
High
Possibility of occurrence
Business Risk
Risks related to COVID-19
(1)
(2)
Risks related to changes in the economic
environment
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
S
t
r
a
t
e
g
c
i
r
i
s
k
Cross-business
risk
(5) Environmental risk
(6) Risks related to business restructuring
(7)
(8)
Risks related to tie-ups with other companies and
corporate acquisitions
Risks related to the acquisition and development of
human resources and the promotion of diversity
Business-
specific risk
(9) Risks related to the capacity of facilities
(10) Risks related to sales channels
(11) Brand risk
LWT*
LHT* (12)
Risks related to competition with competitors and
product prices
Operational risk
(13)
Risks related to disasters, accidents and infectious
diseases
(14) Risks related to information security
(15) Risks related to litigation and other legal proceedings
(16) Risks related to product liability and claims
(17) Recoverability risk of deferred tax assets
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 the 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
Group-wide
Fluctuations in
exchange rates
and interest
rates
Climate
change and
environmental
regulations
Sales channels
Brands
Competition
and
competitive
pricing
LWT
LHT
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 and issuance of
corporate bonds, a significant increase in market rates could
increase our interest burden, making it difficult to raise funds
through such borrowing and bond issuing and could increase
interest expenses.
The impact of climate change has led to new laws and regulations,
including ones that strengthen energy saving and introduce carbon
taxes. These changes could mean that production and sales
activities not regarded as a problem in the past could now be at
greater risk of possibly violating laws. Acceleration of the global
trend of decarbonization may cause an overhaul of production
processes that use fossil fuels. Moreover, business performance
and our financial position could be adversely affected if abnormal
weather damages manufacturing facilities.
LIXIL Americas offers a wide range of products to suit various
demands. As distribution structures shift to direct sales to
consumers, the organization is striving to grow sales and transform
its cost structure by transforming its business utilizing
e-commerce, among others. However, an inability to capture
sufficient consumer demand during this transition, or cost
structure transformation not going according to plan, could cause
sales growth to slow and cause LIXIL to record a potential
impairment loss on goodwill.
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, slow sales growth, or reduce the core earnings
margin. 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, which could result in slower
sales growth or a decreased core earnings margin, and could
cause LIXIL to record a potential impairment loss on goodwill.
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 to more
efficiently raise funds
Developing and utilizing Environmental Performance
Data Reporting Guidelines; promoting a reduction in
environmental impact across the group; and effectively
operating the Company’s environment management
system by conducting internal audits
Conducting research on manufacturing technology and
product materials toward achieving a decarbonized
society
Strengthening sales plans with authorized distributors
and expanding sales channels to include construction
companies
Utilizing our own e-commerce platform to capture
direct demand from end users
Implementing management systems to ensure
information security and prevent disruptions to digital
platforms
Investing to maintain the 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
Maintaining brand value and differentiating from other
brands in LWT’s portfolio through brand and design
signature elements
The building and construction materials market in Japan is
oligopolistic in nature, with the pricing decisions of competitors
potentially affecting 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 LIXIL’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
Further implementing platform strategy using general
purpose facilities for production of common parts, and
working to increase efficiency of invested capital as well
as to reduce timeframes for launching new products
66
*LWT: LIXIL Water Technology, LHT: LIXIL Housing Technology
*Note: Risks and countermeasures related to Permasteelisa S.p.A. are no longer included from this fiscal year as a result of all shares in the previously consolidated subsidiary being transferred
67
as of September 2020.
STRATEGYSECTION 3
4S E C T I O N
GOVERNANCE
MESSAGE FROM THE CHAIRPERSON OF
THE BOARD OF DIRECTORS
WE ARE ENHANCING
CORPORATE VALUE WITH
ACTIVE OVERSIGHT.
As the Chairperson of the Board of
Directors, I believe the Board’s role is to
actively oversee management and its
execution of the business. In other words,
we proactively ascertain what actions are
being taken by management, where the
risks are, and what the opportunities are. If
I feel a decision makes sense, I will support
the executive team, and if I believe it needs
to be revised, I will encourage modifications.
In other words, I lead the Board's activities
in the belief that helping the executive team
understand potential risks will lead to
increased corporate value.
Here is an overview of how the Board of
Directors was involved in the corporate
transformation initiatives of the executive
team over the past year. The LIXIL executive
team provides the Board with information in
advance on important matters or initiatives
that require the Board’s approval. The goals
of an initiative are confirmed by the Board
and a Q&A session is held on the
discussion points that require a decision. If
we can determine that an initiative will
contribute to the sustainable growth of
LIXIL, the Board will support it even if the
initiative’s goals are challenging. One
example was the voluntary retirement
program for employees who have been at
LIXIL for 10 or more years and who are 40
years of age or older. There was, of course,
a need to take a cautious approach,
especially during the COVID-19 pandemic.
The Board decided to approve and support
the initiative, however, as the intention of
the CEO – to transform LIXIL into a
company where an entrepreneurial younger
generation can thrive – is to overcome an
issue common to Japanese corporations.
The Board of Directors also approved
the ambitious goal of having an equal
number of male and female directors and
executive officers by 2030. The Board
decided to support this goal, despite some
initial concerns over the level of difficulty,
after confirming the milestones that will
enable us to achieve it. We concluded this
is a challenge LIXIL, a company that makes
products used in many people’s daily lives,
should systematically work to achieve over
the next 10 years.
Regarding the reorganization of
governance, outside directors have actively
led the work of creating a framework suited
to LIXIL. Based on LIXIL’s past, we have
worked to emphasize the importance of
building systems that ensure power does
not accumulate in the hands of individuals
such as the CEO, the Chairperson of the
Board of Directors, or the Chairperson of
the Nomination Committee. We have
established a CEO succession plan and
criteria for the election and removal of the
CEO. We will continue to review and to
update these criteria.
Masatoshi Matsuzaki
Chairperson of the Board of Directors
68
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 and its group companies,
the Company conducts an evaluation and analysis of the
effectiveness of its Board of Directors at least once a year.
In FYE2021, we conducted separate evaluations for the
Board of Directors’ operation and its composition.
Evaluation of Operation of the Board of Directors
The Governance Committee led the evaluation. The evaluation
included a questionnaire survey of all directors and executive
officers.
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 dialogue between the
Board of Directors 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 dialogue with
stakeholders
Evaluation Scoring Method: The evaluation used by both directors and executive officers
consisted of five choices (4 points [Sufficiently appropriate] to 0 points [Not appropriate at
all]). The average of all the ratings for each question was then calculated.
Overview of Evaluation Results
As the Company’s Board of Directors, we have concluded that
the Board of Directors “functioned effectively” during FYE2021.
Moreover, the overall average of all ratings evaluated by
directors was 3.3 points, an increase of 0.5 points from the
average of 2.8 points in FYE2020.
Future Efforts
The Board of Directors will improve the effectiveness of the
Board of Directors, setting the following two points as the priority
issues for FYE2022:
1) To ensure sufficient time to improve and discuss the
management structure of the Board of Directors
2) To define stakeholders, and organize the Board of Directors’
communication
Evaluation of Composition of the Board of Directors
The Nomination Committee led the evaluation. The
questionnaire survey of all directors covered primarily the
following perspectives, which have been used as the basis for
discussing the composition of the Board of Directors and
committees from June 2021 onward, and for identifying new
outside director candidates.
Appropriate number of directors in the Board of Directors
Appropriate allocation of persons to internal directors
concurrently serving as executive officers, non-executive
internal directors, and outside directors
Views on independence criteria of outside directors
Appropriate number of outside directors to be replaced
Whether or not concurrent posts of outside directors shall
be limited
Whether there should be any limitations on the number of
terms outside directors can serve
Whether there should be any limitation on the age of outside
directors when they are appointed (when newly appointed or
reappointed)
Diversity of outside directors
Board of Directors’ members, meetings convened,
and attendance in FYE2021
Directors
Independent
Directors
Meetings
convened
Attendance
Kinya Seto
Sachio Matsumoto*
Jin Song Montesano*
Tamio Uchibori
Kaoru Onimaru
Teruo Suzuki
Yuji Nishiura
Daisuke Hamaguchi
Masatoshi Matsuzaki
*Appointed June 30, 2020
17
11
11
17
17
17
17
17
17
17
11
11
17
16
16
17
17
17
Board of Directors’ members in FYE2022 (As of June 22, 2021)
Directors /
Executive officers
3
Directors who are concurrently
serving as executive officers
Internal directors /
Outside directors
3
Directors who are
not executive officers
7
7
Internal directors
Outside directors
Gender ratio
7
Nationality
Male
Japanese
9
3
Female
1
Foreign
69
Appointment Process of Director Candidates
A. Evaluation of
the composition of
Board of Directors
Summary of directors’ responses to survey on the composition of the Board of Directors (October 2020)
B. Review of criteria
for election of
outside directors
As part of our evaluation of the composition of the Board of Directors, we summarized the responses of all directors to a survey on
the need for age limitations for outside directors on their appointment (newly appointed or reappointed), terms of office, and the
number of concurrent posts they can hold (October 2020)
Internal directors
Outside directors
Kinya Seto
Sachio Matsumoto
Jin Song Montesano
Tamio Uchibori
LIXIL BOARD OF DIRECTORS
(As of June 22, 2021)*
* The number of Company shares and
Phantom Stocks are as of April 1, 2021.
• Organization of perspectives and key points for election
• Assessments by external specialized agency (including evaluations
as executive officers)
C. Appointment of
director candidates
• Evaluation of activities related to Nomination Committee
• Review of skills required by directors (experience, knowledge, and
expertise), and examination based on the skills matrix
• Exchange of opinions by the Chairperson of the Board of Directors,
Chairperson of the Nomination Committee, and CEO (January 2021)
• Discussions by the Nomination Committee on proposals from the
Chairperson of the Nomination Committee (February–March 2021)
Organization of perspectives and key points for election
Review of election criteria for outside directors
Organization of outside director candidate list
Interviews of newly appointed candidates by all
Nomination Committee members (January 2021)
Review of skills required by directors (experience,
knowledge, and expertise), and discussion of diversity
based on the skills matrix (February–April 2021)
Organization and consideration of outside director election
plan (January 2021–ongoing)
Based on the process above, the Nomination Committee
deliberates and determines director candidates. Moreover, we
continue to deliberate our plan to elect directors as we
recognize the importance of not only the composition but also
the continuity of the Board of Directors.
Skills Matrix
The Nomination Committee defines the experience and
knowledge that is particularly important for directors as
"Experience/knowledge/expertise needed for LIXIL" in the
following skills matrix, taking the following two perspectives into
consideration:
1) From the point of view of our corporate purpose, “make
better homes a reality for everyone, everywhere,” which is
core to LIXIL’s business.
2) From the point of view of improving management efficiency
and strengthening group governance in the present and into
the future.
Kinya
Seto
Matsumoto
Sachio
Jin Song
Montesano
Uchibori
Tamio
Teruo
Suzuki
Nishiura
Yuji
Hamaguchi
Daisuke
Masatoshi
Matsuzaki
Shiho
Konno
Mariko
Watahiki
Composition of the Board of Directors and
Committees in FYE2022*
Experience / knowledge / expertise needed for LIXIL
Corporate management
Overseas operations and management
Negotiation with admin. and regulatory agencies
Accounting, finance, and M&A
Legal and compliance
Risk management
Human resources development and labor
Sales and marketing
Manufacturing, technology, and R&D
IT and digital
Chairperson of the Board / Committee members
Chairperson of the Board of Directors
Nomination Committee
Audit Committee
Compensation Committee
Governance Committee
70
*Since June 22, 2021
Independent Director Chairperson Member
Director, Representative Executive
Officer, President, and
Chief Executive Officer
Number of Company shares owned:
243,308
Number of Phantom Stocks granted:
239,988
Director, Representative Executive
Officer, Executive Vice President,
Finance, Treasury, and M&A, and
Chief Financial Officer
Number of Company shares owned:
94,644
Number of Phantom Stocks granted:
69,619
Director, Executive Officer, Executive
Vice President, Human Resources
and General Affairs, Public Affairs,
Investor Relations, External Affairs,
and Corporate Responsibility,
and Chief People Officer
Number of Company shares owned:
8,058
Number of Phantom Stocks granted:
33,233
Outside Director, Member of
Audit Committee, Member of
Compensation Committee, and
Member of Governance Committee
Licensed tax accountant
Director and Senior Managing Executive
Officer of MinebeaMitsumi Inc. (former)
Number of Company shares owned: 0
Number of Phantom Stocks granted:
1,921
Teruo Suzuki
Yuji Nishiura
Daisuke Hamaguchi
Masatoshi Matsuzaki
Outside Director, Chairperson of
Audit Committee and Member of
Governance Committee
Certified public accountant
Outside Director, Chairperson of
Nomination Committee, Member of
Compensation Committee, and
Member of Governance Committee
Deputy Managing Director of AZSA & Co
(current KPMG AZSA LLC) (former)
Number of Company shares owned: 0
Number of Phantom Stocks granted:
1,921
Chairman and CEO, Sumitomo Mitsui
Trust Club Co., Ltd. (former)
Number of Company shares owned: 0
Number of Phantom Stocks granted:
1,921
Outside Director, Chairperson of
Compensation Committee, Member of
Nomination Committee, and
Member of Governance Committee
Senior Executive Director and
Chief Investment Officer, Pension Fund
Association (former)
Number of Company shares owned: 0
Number of Phantom Stocks granted:
1,921
Outside Director, Chairperson of the
Board, Chairperson of
Governance Committee, and
Member of Nomination Committee
Director and Chairman of the Board of
Directors of Konica Minolta, Inc.
(incumbent)
Number of Company shares owned: 0
Number of Phantom Stocks granted:
1,921
Shiho Konno
Mariko Watahiki
Outside Director, Member of Audit
Committee, and Member of Governance
Committee
Lawyer
Representative at Shiho Konno Habataki
Law Office (incumbent)
Number of Company shares owned: 0
Number of Phantom Stocks granted: 0
Outside Director, Member of Nomination
Committee, and Member of Governance
Committee
Lawyer
Sapporo High Court Chief Judge,
Nagoya High Court Chief Judge (former)
Number of Company shares owned: 0
Number of Phantom Stocks granted: 0
Profiles and reason for nomination of directors of
LIXIL Corporation are available on our corporate website.
www.lixil.com/en/about/board/
71
GOVERNANCESECTION 4 CORPORATE
GOVERNANCE AT LIXIL
LIXIL 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 enhance the Company’s corporate governance
the Company has established the Governance Committee
within the Board of Directors as a voluntary committee, and
also convenes meetings under the Investment Review
Committee, M&A Committee, Compliance Committee, Risk
Management Committee, and Corporate Responsibility
Committee, among other voluntary committees. 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 its governance.
Governance Structure (As of June 22, 2021)
LIXIL Corporation
n
o
i
s
i
v
r
e
p
u
S
n
o
i
t
u
c
e
x
E
Shareholders’ Meeting
Election and removal
Decides on proposals for
election/removal of directors
Appointment and
dismissal
Report
Audit
Board of
Directors
Appointment and
dismissal
Chairperson of
the Board
Nomination Committee
Audit Committee
Compensation Committee
Directors
Cooperation
Decides on
compensation
Discuss and advise
Governance Committee
(monitors and supervises corporate
governance)
Election and
removal
Report
Decides on
compensation
Voluntary committees
Board of Executive Officers
Audit
Election and
removal
Cooperation
F
i
n
a
n
c
i
a
l
A
u
d
i
t
o
r
s
Audit
Investment Review Committee,
M&A Committee,
Compliance Committee,
Risk Management Committee,
Corporate Responsibility Committee,
Diversity & Inclusion Committee,
Environmental Committee,
Information Security Committee,
Compensation and Benefits Committee,
Group Credit Committee,
Stock Sale and Purchase Review
Committee
Representative Executive Officers and Executive Officers
(Each division)
Headquarters division
Business divisions (such as the
Technology division)
Audit
Internal audit
divisions
Cooperation
Cooperation
Business management
supervision
Audit
Report and
cooperation
Group companies
Audit & Supervisory Board members (major subsidiaries in Japan)
Audit
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/
72
Number of meetings held during FYE2021
Environmental Committee
2
Board of Directors
17
Made decisions on matters specified by law, basic management policies, and
important management matters, while monitoring the conduct of duties of
directors and executive officers.
Nomination Committee
14
Made decisions on the content of proposals to be submitted to the Shareholders’
Meeting regarding the election and removal of directors. Reported its opinion to
the Board of Directors when requested, such as on the election, appointment,
removal, and dismissal of candidates for executive officer and Representative
Executive Officer (CEO), and on the appointment and dismissal of the Chairperson
of the Board, members, and chairpersons of each committee, etc.
Audit Committee
16
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 Shareholders’ Meeting regarding the election
and removal of financial auditors.
Discussed and decided on the overall LIXIL group of companies’ environmental
strategy and important measures as well as monitored and reviewed its plans to
enhance environmental management and performance.
Information Security Committee
3
This committee makes decisions related to information security issues. It made
decisions and approved information security policies, and reported on the status
of security measures throughout the LIXIL group of companies.
Compensation and Benefits Committee
7
Made decisions regarding compensation structures for executives of the Company
and the LIXIL group of companies and their individual compensation, except for
the matters to be exclusively resolved by the Compensation Committee.
Group Credit Committee
5
Resolved and deliberated on credit management related to business transactions
with third parties conducted by the Company and its subsidiaries in order to
accelerate decision-making and enhance effectiveness of governance.
Compensation Committee
13
Stock Sale and Purchase Review Committee
8
Made decisions regarding the compensation of directors and executive officers
and their individual compensation received from the Company as consideration
for duties.
Governance Committee
7
Continually enhances the Company’s corporate governance, discusses or advises
the Board of Directors on matters such as reviewing and amending the LIXIL
Corporate Governance General Policy, and manages the implementation of the
evaluation of the effectiveness of the Board of Directors.
Board of Executive Officers
21
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 LIXIL group of companies as a whole. All executive officers
attended all the Board of Executive Officers' meetings held.
Investment Review Committee
32
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 Board of Executive Officers.
M&A Committee
20
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 Board of Executive Officers.
Compliance Committee
4
Resolved the important compliance strategy and plans as well as reported on
training and promotional activities of the LIXIL group of companies.
Risk Management Committee*
0
Endeavors to improve the ability to deal with future risks by predicting
extraordinary risks of the Company and the LIXIL group of companies and
establishing systems to address them in advance.
Corporate Responsibility Committee
4
Selected and reviewed material issues for the overall LIXIL group of companies,
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.
Diversity & Inclusion Committee
3
Supervised formulation and implementation of basic diversity and inclusion
policies and roadmaps throughout the LIXIL group of companies.
Conducted reviews and examined insider trading regulations in order to prevent
rule violations as well as to fulfill the Company’s social responsibilities as a
business in the event that officers or employees give prior notification they will be
engaging in the sale or purchase of the Company's shares, etc.
* There was no meeting in FYE2021 due to the establishment of a task force for
risk management in each region and the flexible cooperation between
headquarters and the task force.
Policy on Holding and Reduction of
Cross Shareholdings
LIXIL and its group companies hold cross shareholdings in
cases where it is recognized as necessary to facilitate sales
activities or as part of an alliance with an outside company
required for the Company’s business activities. Every year, the
Company comprehensively evaluates each cross shareholding
in terms of total amount invested, whether the cost of capital
matches the benefits and risks of each the holding, and the
status of business dealings with the company. The Board of
Directors subsequently verifies the content of these evaluations.
Due to changes in the operating environment of the Company,
efforts are being made to reduce cross-held shares by
reevaluating whether the purpose of holding the cross
shareholding is appropriate. As a result, as of the end of March
2021, the total number of (listed) cross shareholdings was 53.
Track record of sale of cross-held shares over past three years*
Year
FYE2019
FYE2020
FYE2021
Number of cross shareholdings sold
1 cross shareholding (all shares sold)
1 cross shareholding (partial sale)
5 cross shareholdings (all shares sold)
* The number of sold (reduced) listed cross shareholdings that were held by LIXIL or the
former LIXIL Corporation.
73
GOVERNANCESECTION 4
NOMINATION
COMMITTEE REPORT
Yuji Nishiura
Chairperson of the Nomination Committee
Issues and Initiatives in FYE2021
To strengthen the Company’s corporate governance, the
Nomination Committee primarily focused on the following
five areas:
1. Revision of the Nomination Committee’s regulations, which
has been ongoing for the previous two fiscal years
2. Analysis of summaries of all directors’ opinions on the
composition of the Board of Directors for the next fiscal year
3. Taking into consideration the results of this analysis,
clarification of election criteria for outside directors and
searching for new outside director candidates
4. Formulation of a CEO Succession Plan, which had
remained unresolved
5. Implementation of executive officer assessments, and
based on the results of these assessments, deliberate and
resolve the draft report on the system for executive officers
for the next fiscal year in alignment with the processes
stipulated in our regulations
Progress on Issues in FYE2021
The Nomination Committee addressed the five areas as
planned, which significantly advanced the Company’s
corporate governance reforms. First, completion of the
Company’s very first CEO Succession Plan is an important
milestone toward establishing a strong and sustainable
governance system. We will annually review and update the
CEO Succession Plan and our candidate pipeline. Second, two
new outside directors were elected as a result of the search for
new outside director candidates. We believe this will create a
more diverse Board of Directors, including wider perspectives
in areas of expertise and gender. Furthermore, the Nomination
Committee considered how to make the most of the lessons
learned from this search process. Third, as a result of the
thorough implementation of the executive officer assessments
– including gathering the opinions of relevant parties – by a
third-party organization, we deliberated the executive officer
system and developed a draft report based on a deeper
understanding of executive officer candidates.
Issues to Address in FYE2022
The activities undertaken so far have generally achieved the
Company’s original intent of restructuring its corporate
governance system. This fiscal year we will comprehensively
review the results of our activities in order to strengthen our
management foundation. Specifically, we aim to further
qualitatively improve corporate governance through ongoing
initiatives such as reviewing regulations and updating the CEO
Succession Plan, as well as new initiatives such as introducing
a system for evaluating outside directors and verifying the
development and operation of committees. We will continue to
make every effort to strengthen the form of corporate
governance we have established while reacting to changes in
the environment and new demands.
Nomination Committee members, meetings convened, and attendance in FYE2021
Nomination Committee members*2 in FYE2022
Member
Meetings convened
Attendance
Member
Yuji Nishiura (Chairperson)
Kaoru Onimaru
Daisuke Hamaguchi*1
Masatoshi Matsuzaki
*1 Appointed June 30, 2020
74
14
14
11
14
14
14
11
14
Yuji Nishiura (Chairperson)
Daisuke Hamaguchi
Masatoshi Matsuzaki
Mariko Watahiki
*2 Since June 22, 2021
Formulation of CEO Succession Plan and Process to Draft Reports for the
Board of Directors on the System for Executive Officers
Until June 2020
(At the Nomination Committee held before the Annual Shareholders’ Meeting in June 2020) As part of the
formulation of the CEO Succession Plan, examined the requirements and qualities for the CEO of the Company
From July 2020
Newly restructured Nomination Committee commenced examination of the CEO Succession Plan
August–September 2020
Examined implementation method for the executive officer assessment
October 2020
Nomination Committee passed a resolution on the CEO Succession Plan
Directors and shared with relevant departments
Reported to the Board of
October–December 2020
Specialized external agency implemented executive officer assessment (360-degree evaluation of and
in-depth interviews with all seven executive officers, excluding CEO)
December 2020
Specialized external agency that implemented the assessment shared results with the Nomination Committee
and CEO, and gave feedback to executive officers
CEO Kinya Seto confirmed the policy for CEO succession
CEO Kinya Seto agreed to receive proposals for an executive officer system next fiscal year
January 2021
CEO Kinya Seto proposed a draft executive officer system to start April 2021 to the Nomination Committee
February 2021
Board of Directors discusses and tentatively resolves the draft report on the executive officer system
February-March 2021
Chairperson of the Nomination Committee, Chairperson of the Compensation Committee, and executive
officer candidates held meeting (to confirm that candidates intend to accept appointment, provide
notification of compensation, etc.)
March 2021
Board of Directors resolves the draft report on executive officer system
The Nomination Committee followed the above process to
establish the CEO Succession Plan, assess executive officers,
and formulate the draft report on the executive officer system
for the Board of Directors.
Main Items and Concept of CEO Succession Plan
Clarification of the roles of the Nomination Committee and current CEO
Key roles of Nomination Committee
Key roles of current CEO
Role 1: Active monitoring of formulation, revision, and operation of
Role 1: Prepare CEO succession candidate pipeline (lead election,
the CEO Succession Plan
addition and change of succession candidates)
Role 2: Definition and periodical review of qualities and requirements
Role 2: Formulate and implement development plan for CEO
LIXIL looks for in a new CEO
succession candidates
Role 3: Evaluation of the CEO succession candidates, maintenance
of pipeline, monitoring of development plan, etc.
Role 3: Implement new CEO appointment process in collaboration
with Nomination Committee during normal times
Role 4: Monitoring of the CEO replacement process during normal
times, formulation of Board of Directors’ proposals for CEO
appointment, etc.
Role 5: Implementation of CEO appointment and approval process if
urgent CEO replacement is required
75
GOVERNANCESECTION 4 Executive Officer Assessment
As one of the measures to evaluate and understand CEO
succession candidates, we conduct executive officer
assessments for all seven executive officers, excluding the CEO.
The method adopted was for an external specialized agency to
conduct the assessment to ensure objectivity, with individual
interviews conducted with the executive officers themselves,
other executive officers, and their subordinates.
Each officer is evaluated based on the requirements and
qualities for a CEO of the Company, and the results are shared
with the officer under assessment, the Nomination Committee,
and the CEO. While taking the assessment results into
consideration, the Nomination Committee is examining the
executive officer system from April 2021 onward, and
formulating draft reports on the executive officer system for the
Board of Directors. The results are also being used as reference
material to consider the development plan for CEO succession
candidates.
NOMINATION
COMMITTEE REPORT
CEO Appointment Process and Basic Concept
1. The basic concept for the CEO term of office is the required
time for LIXIL to achieve the management plan (including the
quantitative target value) agreed upon by the CEO at the
Board of Directors’ meeting. The Nomination Committee will
regularly monitor progress on the plan and targets held by
the CEO, and discuss the continuation and reappointment of
the CEO.
2. The appointment process for a new CEO is considered
separately during normal times and in the case of an
emergency. During normal times, the appointment process
shall commence based on the current CEO’s proposal or the
decision made by the Nomination Committee. CEO
succession candidates are appointed based on the pipeline
of candidates and an order of priority as discussed in
advance between the CEO and the Nomination Committee.
After the appointment process, the Nomination Committee
submits a recommendation for the new CEO to the Board of
Directors, which it will then discuss and decide upon.
In the case of an emergency, the Nomination Committee
shall undertake appointment and approval of a new CEO
according to the predetermined process.
3. Future CEO candidates of LIXIL will, as a rule, be appointed
from within the Company.
The current CEO will prepare a CEO succession candidate
pipeline categorized by the following timeframes, and will
subsequently update it annually based on the advice of the
Nomination Committee.
Measures to take in an emergency and to whom they apply
Medium-term CEO succession candidates (internal)
Personnel who could become CEO candidates in the future
Provision of Development Opportunities for
CEO Succession Candidates
The Nomination Committee oversees the implementation of the
CEO’s development plan for CEO succession candidates. The
CEO reports to the Nomination Committee once every six months
on the development status (progress) of the succession
candidates, and the Nomination Committee advises the CEO on
the provision of development opportunities and training statuses.
AUDIT
COMMITTEE REPORT
Teruo Suzuki
Chairperson of the Audit Committee
Initiatives in FYE2021
The Function of the Audit Committee
The Company’s Audit Committee aims to conduct efficient and
effective audits while collaborating closely with the internal
auditors of the Company and its subsidiaries. The Company is
strengthening corporate governance with more effective auditing
by assigning corporate auditors (“Kansayaku”) to key
subsidiaries as part of a system to strengthen internal control
within the group of companies. The Audit Committee Office was
established to provide support to the Audit Committee. The
Audit Committee is responsible for deciding on personnel
changes and performance evaluations for Audit Committee
Office members and corporate auditors to ensure independence
from executive officers.
The Activities of the Audit Committee
The Audit Committee convenes in the month before Board of
Directors’ meetings, as well as whenever necessary. This fiscal
year, the committee met 16 times. The Audit Committee took
sufficient precautions under the COVID-19 pandemic-induced
limitations on activities, and during the state of emergency most
activities were conducted using online meeting platforms. Under
the annual auditing plan, there were four opportunities for
exchanging opinions with the Representative Executive Officer
and six hearings were held with executive officers during the
year. At the monthly Audit Committee meetings, the internal
auditors and directly appointed corporate auditors gave audit
reports and the committee members gave directions as
appropriate. Also, three meetings of group company corporate
auditors were held to share information on each subsidiary and
group-wide auditing policies.
Site inspections of four subsidiaries and two factories in
Japan were also partially conducted using online meeting
platforms. Due to travel restrictions, site inspections of
international business premises were unable to be conducted.
However, hearings on the results of international audits from
internal audit departments and hearings with LIXIL International
representative executive officer with Asian and North American
offices were held via online meetings.
Eight information-exchange sessions were held with
financial auditors, and discussions took place regarding the
financial auditors’ management letter, reports on the status of
audits, and key audit matters (KAM).
Initiatives in FYE2022
Membership of the FYE2022 Audit Committee was decided at
the Board of Directors’ meeting that took place after the Annual
Shareholders’ Meeting held on June 22, 2021. The committee,
in continuation from FYE2021, will aim to establish and further
develop group-wide audit frameworks within and outside Japan,
as well as conduct effective and efficient auditing activities.
Audit Committee members, meetings convened, and attendance in FYE2021
Audit Committee members*3 in FYE2022
Member
Meetings convened
Attendance
Member
Teruo Suzuki (Chairperson)
Tamio Uchibori
Kaoru Onimaru*1
Daisuke Hamaguchi*2
16
16
9
7
*1 Appointed June 30, 2020 *2 Resigned June 30, 2020
15
16
9
7
Teruo Suzuki (Chairperson)
Tamio Uchibori
Shiho Konno
*3 Since June 22, 2021
76
77
GOVERNANCESECTION 4
COMPENSATION
COMMITTEE REPORT
Daisuke Hamaguchi
Chairperson of the Compensation Committee
Issues and Initiatives in FYE2021
In FYE2021, the Compensation Committee operated in line with
the Company’s management strategy to strongly promote
extensive structural reforms and optimize the Company’s
business portfolio despite challenging circumstances, including
uncertainty surrounding results due to the COVID-19 pandemic.
The Compensation Committee deliberated and made decisions
with a particular focus on the following issues:
1. Is the executive compensation system consistent with the
direction of our management strategy and does it strongly
motivate the management to work together toward achieving
management goals?
2. In order to retain leading talent and promote change, does
the compensation system take into account not just
compensation levels at Japanese corporations, but is it also
competitive in a global context?
3. Are compensation systems enabling the proactive
participation of highly experienced executives from within
and outside the Company, including foreign executives, to
promote a diverse and inclusive organization with a corporate
culture of change?
Compensation levels, the compensation mix, and various
allowances were reviewed, and in FYE2021 special measures
were implemented for performance-linked and stock-linked
compensation based on these perspectives.
Progress on Issues in FYE2021
First, as a special measure in FYE2021, the disbursement of
performance-linked compensation as a proportion of total
compensation was decreased and the proportion of stock-
linked compensation was increased. This measure was passed
to strongly incentivize the promotion of structural reforms by the
management and to mitigate the impact of performance-linked
compensation on total compensation because of the possibility
of performance results fluctuating significantly due to the
impact of the COVID-19 pandemic. Moreover, regarding
performance targets of performance-linked compensation, it
was decided to only use core earnings – which best reflect
business conditions – as a target because temporary factors
such as structural reforms were expected to have a significant
impact on business performance.
Furthermore, when deciding on the executive officer
compensation system, we gave consideration to each
individual’s role and responsibilities, business performance,
experience, and the priority of attracting and retaining
personnel, regardless of the position. Greater consideration was
also given to more closely matching global compensation levels
and maintaining competitiveness.
We also took into account the possibility that competition for
leading talent will increase and deliberated necessary revisions
to compensation for outside directors.
Issues to Address in FYE2022
We will continually monitor whether the executive
compensation structure is functioning appropriately in relation
to the management strategy and in response to changing
economic and social conditions, and consider revising the
structure as necessary.
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 necessary to foster business
growth globally
Ensure a fair and reasonable decision-making process with
regards to compensation that will provide accountability to
shareholders, employees, and all stakeholders
Based on the economic and social situation, consider and
discuss our business condition, objective indexes, and advice
of external specialized agencies in the Compensation
Committee
Manage individual compensation in consideration of each
individual’s responsibilities, performance, experience, and the
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 the business. In principle, when a director
concurrently serves as an executive officer, the compensation
system for executive officers shall be applied.
Compensation Structure and Compensation Mix
The previous compensation mix for each position shall be
abolished and changed to the following system. Based on the
previously mentioned compensation basic policies, the base
amount for performance-linked compensation, and the grant
amount for stock-linked compensation, is determined in
consideration of each individual’s duty, performance,
experience, and the priority of attracting and retaining
[President]
[Vice President]
10%
63%
personnel, etc. In the diagram, the compensation mix for
executive officers reflects the FYE2021 special measure
(mentioned later on in the report). The base amount for
performance-linked compensation and the grant amount for
stock-linked compensation shown in the diagrams may differ
from the actual disbursement amounts.
Annual Base Salary
Annual Base Salary is determined based on compensation
basic policies, taking into consideration responsibilities,
performance, experience, and the priority of attracting and
retaining personnel, etc., while referring to the compensation
levels inside and outside Japan as reference information.
Performance-Linked Compensation
To encourage the executive officers to work together to achieve
single-year management goals – and to ensure that they are
rewarded fairly and equitably in accordance with the results of
their performance – performance-linked compensation is
calculated only on company-wide performance.
Base amount of
performance-linked
compensation
Payout rate
according to
achievement rate of
performance targets
The base amount of performance-linked compensation is
determined as a certain ratio of the Annual Base Salary for each
executive officer in consideration of their responsibilities and
related factors. Moreover, for FYE2021, because of the
possibility of performance results fluctuating significantly due to
the impact of the COVID-19 pandemic, it was decided at the
August 2020 Compensation Committee meeting – in order to
mitigate the impact on total compensation – to halve the base
amount of performance-linked compensation set at the start of
the fiscal year, and to maintain minimum and maximum limits
on payout rates that are dependent on the rate of achievement
of business targets.
[Payout rates according to achievement rate of business targets]
Compensation Committee members, meetings convened, and attendance in FYE2021
Compensation Committee members*2 in FYE2022
[Executive Vice President]
Member
Meetings convened
Attendance
Member
15%
45%
Achievement level of performance target
Payout rate
If 50% or less
0%
14%
29%
If more than 50% but less than 100%
Same as achievement level
Daisuke Hamaguchi (Chairperson)
Median values have been used (excludes values for one executive officer residing in Singapore)
If 100% or more but less than 150%
Daisuke Hamaguchi (Chairperson)
Tamio Uchibori*1
Yuji Nishiura
*1 Appointed June 30, 2020
78
13
11
13
13
11
13
Tamio Uchibori
Yuji Nishiura
*2 Since June 22, 2021
[Outside Director]
12%
15%
If 150% or more
200%
Annual Base Salary
Allowance for chairpersons, etc.
Performance-linked compensation
Stock-linked compensation
79
([Achievement level of
performance target – 100]
× 2 + 100)%
GOVERNANCESECTION 4Performance-linked compensation40%73%27%57%
EXECUTIVE
COMPENSATION
Achievement Level of Performance Targets for FYE2021
As a special measure in FYE2021, because temporary factors
such as structural reforms were expected to have a significant
impact on operating profit and net profit, it was decided to limit
performance targets to core earnings, which best reflect business
conditions. The performance target was the core earnings forecast
of ¥25,000 million, as announced in the first quarter earnings
briefing session. Performance results for core earnings were
¥57,288 million, therefore the achievement level of performance
target was 229.2%. Thus, the payout rate was 200%.
Moreover, because investment efficiency continues to be an
important performance target, ROIC will be included again as a
performance target for FYE2022.
Clawback Clause and Others
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 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, by standardizing global
executives' compensation, attract and retain personnel from
around the world who will contribute to raising corporate value.
This compensation plan grants shares of Phantom Stock but
substantially has the same effect as granting shares.
Furthermore, Phantom Stock shall be granted to executive
officers on the day the business year starts and directors on the
day of the Annual Shareholders’ Meeting. The amount of the
grant is determined as a ratio of the Annual Base Salary 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. The holding periods for Phantom Stock are three
years for executive officers and one year for outside directors.
Information on the amounts of compensation for those officers with total
compensation of ¥100 million or more is posted on the Company’s website.
https://www.lixil.com/en/about/governance/compensation.html
Total amount of compensation by officer title, by compensation system, and number of officers receiving (FYE2021)
Officer title
Directors (excluding Outside Directors)
Executive Officers
Outside Directors
Total
Total amount of
the compensation
(¥ millions)
Total amount of the compensation by type (¥ millions)
Annual Base
Salary
Performance-linked
compensation
Stock-linked
compensation
Number of
officers
receiving
34
2,153*
154
2,341
18
429
120
567
—
293
—
293
16
1,250
34
1,300
3
8
9
20
Notes: 1. The total compensation shown above, which are amounts calculated under JGAAP, consists of both the compensation paid by the Company and the compensation paid by the Company’s subsidiaries.
2. The amount of compensation for Outside Directors includes chairperson allowances.
*The total compensation amount for Executive Officers includes additional payments, and therefore does not match the total amount of the compensation by type.
Each executive officer’s compensation is determined by the
Compensation Committee based on the above compensation
system and takes into consideration the performance targets
and ESG issues for which the executive officer is responsible.
Moreover, the results for these targets and issues are reflected
when revising Annual Base Salary. Adjustments, such as
increasing the ratio of stock-linked compensation within total
compensation, are made to the compensation mix of executive
officers who are expected to contribute significantly to
increasing corporate value from a medium- to long-term
perspective, especially through structural reform or initiatives
related to ESG issues.
80
GOVERNANCE
COMMITTEE REPORT
¥
Masatoshi Matsuzaki
Chairperson of the Governance Committee
Initiatives in FYE2021
The Governance Committee’s objective is to continuously
strengthen corporate governance at LIXIL. Taking into account
the interests of all stakeholders, we aim to enhance management
transparency and fairness, as well as increase corporate value. In
FYE2021, we primarily focused on the following four initiatives.
First, we evaluated the effectiveness of the Board of
Directors. As part of this, we oversaw the implementation of an
action plan developed to resolve issues that had become evident
during its previous evaluation. We also proactively carried out our
supervisory duty, which involved activities such as advising the
executive team when necessary and providing the Board of
Directors with proposals. Based on opinions received from the
Board of Directors and executive officers in the previous fiscal
year, we further aimed to conduct a more effective evaluation by
revising our questionnaire.
Second, we aimed to strengthen collaboration between the
Board of Directors and each committee. Since all outside
directors participate in the Governance Committee as of
FYE2021, we have established a system to hold comprehensive
discussions on corporate governance that encompasses all the
committees and the Board of Directors. The Chairperson of the
Board and the chairpersons of each committee share information
on their respective issues and initiatives with the chairperson of
the Governance Committee, ensuring the exchange of opinions is
not confined to just structured meetings.
Third, we revised the Company’s Corporate Governance
General Policy. We proceeded to lay the groundwork for
governance to function in accordance with the actual corporate
structure of the Company, collaborating with each committee and
executive team, and through a thorough analysis at the time of
the merger with the former LIXIL Corporation in December 2020.
Fourth, we provided a supervisory function to ensure
information is disclosed appropriately and in a timely manner.
We receive reports on the policies and schedules of various
information disclosure items such as securities reports. In addition
to supervising the appropriateness and timeliness of information
disclosure, we also advise on how to achieve greater transparency.
Reference Board of Directors’ effectiveness evaluation on page 69
Initiatives in FYE2022
The Governance Committee continues to be composed of only
outside directors in order to fulfill its most important role: to
continuously enhance corporate governance across the Board of
Directors and each committee.
This fiscal year, we will continue to perform our supervisory
function both to resolve issues uncovered in the Board of Directors’
effectiveness evaluation and to improve the effectiveness of the
Board of Directors and each committee. We will also continue to
work toward strengthening collaboration between the Board of
Directors, each committee, and executive team to support the
sustainable growth of the entire group of companies.
Governance Committee members, meetings convened, and attendance in FYE2021
Governance Committee members*2 in FYE2022
Member
Meetings convened
Attendance
Member
Kaoru Onimaru (Chairperson)
Tamio Uchibori*1
Teruo Suzuki (Former chairperson)
Yuji Nishiura
Daisuke Hamaguchi*1
Masatoshi Matsuzaki
*1 Appointed June 30, 2020
7
4
7
7
4
7
7
4
7
7
4
7
Masatoshi Matsuzaki (Chairperson)
Tamio Uchibori
Shiho Konno
Teruo Suzuki
Yuji Nishiura
Daisuke Hamaguchi
Mariko Watahiki
*2 Since June 22, 2021
81
GOVERNANCESECTION 4
INTERNAL CONTROL SYSTEMS
AND COMPLIANCE
Risk Management
report to headquarters.
Compliance
Internal Control Systems
LIXIL and its group companies build, operate, and evaluate
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 awareness and, as a corporate group that
emphasizes compliance management, building various systems
that comply with laws and regulations.
Enterprise Risk Management (ERM)
The LIXIL group strives to stably and continuously develop 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)
The LIXIL group promotes a system of managing risks whereby
leaders identify risks to management targets and become a risk
owner responsible for responding to each risk so that the system
helps to nurture an entrepreneurial spirit. Their role is to analyze
the risk and risk response from the perspective of its impact
and likelihood, and then to share, report on, and respond to the
risk. Risks are largely categorized into strategic risks and
operational risks. For strategic risks, efforts are made to
collaborate with various relevant departments to ensure the
framework encompasses a wide range of perspectives. This
includes medium- to long-term perspectives such as
management policies, business strategies, and Corporate
Responsibility Strategy, as well as the perspectives of
stakeholders. The risk management system established for
operational risks is autonomous, whereby each organization and
region holds meetings or sets agendas regularly, or as
necessary, to discuss and respond to risks, which they then
The LIXIL group takes both a top-down and bottom-up
approach to respond to various risks. Also, risk managers in
major regions ensure efficient coordination among those at
headquarters, regional operations, and local business
operations. Through these kinds of coordinated activities and
visualized risks, we aim to increase the risk awareness of LIXIL
officers and employees, and establish and implement ERM
where agile and appropriate decisions for risks to take or avoid
can be made as part of strategy implementation. A further result
of these activities is the internal and external disclosure of
important group risks and countermeasures.
Crisis Management (CM)
A crisis management framework has been established in each
group company. Crisis management policies and a handbook
have been created and distributed so that a swift initial response
and escalation is possible when a crisis occurs. Also,
frameworks are in place for crisis headquarters to be
established whenever necessary at various levels within group
companies such as at headquarters, departments, or at local
business premises. Moreover, quick decision-making at the
crisis management task force at headquarters is supported
through, in addition to the risk management reporting during
normal times, the establishment of the Issue Assessment Team
(IAT) that enables timely communication of crisis information to
management.
Understanding the importance of cybersecurity, the 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.
https://www.lixil.com/en/investor/strategy/risks.html
LIXIL Code of Conduct
The LIXIL Code of Conduct (the “Code of Conduct”) is a set of
rules to be adhered to by all employees worldwide in order to
undertake business activities appropriately and with a shared
sense of values and ethics. The Code of Conduct is available in
19 languages and is regularly updated. Every year, the
Company requires all group company officers and employees
to participate in training on the Code of Conduct and
acknowledge they will comply with its terms. Furthermore,
global policies and detailed rules aligned with the Code of
Conduct have been put in place for specific fields posing a
high risk to the LIXIL group of companies.
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
The LIXIL group management is working to raise compliance
awareness and embed a culture of compliance by discussing
compliance issues. We also plan educational events such as
online quizzes and contests in Japan and globally so that
employees can increase their compliance awareness in a fun
setting on their own accord.
Compliance Committees
In addition to the compliance committees of the LIXIL group
and within affiliates in Japan, compliance committees have
been established in each region. They provide a platform for
reviewing initiatives and discussing countermeasures.
Education and Training Programs
The LIXIL group holds education and training programs for new
employees, new managers, and executives to develop its
compliance culture. Programs are also held for all officers and
employees on global policies. The LIXIL group has developed
effective education and training programs – suited to the risks
of each area in which the group operates – utilizing e-learning,
webinars, and short videos. In addition, the LIXIL group
publishes newsletters both in and outside of Japan, and has
been striving to increase as well as cultivate employees’
knowledge and awareness of compliance.
Review Process
Compliance reviews are conducted regularly by management
to check the compliance systems of their own organizations.
Compliance questionnaires are also undertaken by all officers
and employees to understand to what extent the compliance
culture has been embraced within the LIXIL group. An effective
approach is taken by reporting the results of the above to the
compliance committees and the results are reflected in
initiatives.
Concern-Raising System “Speak Up!”
An internal concern-raising system has been established 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 it was established in 2017 in addition to the traditional
internal reporting system. The system has received more than
300 reported compliance concerns since 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.
Regular awareness activities are conducted to raise awareness
of correct usage of the system and reported compliance
concerns are investigated by appropriate divisions and
analyzed for trends. This work helps with the development of
the compliance structure and the employees’ education to
prevent fraudulent and unlawful behavior.
Risk Management Initiatives (Years ended March 31)
Compliance Initiatives (Years ended March 31)
RM
CM
82
Reviewed the Plan-Do-Check-Act (PDCA) cycle
for FYE2019
Identified material risks for FYE2020 at the
Board of Executive Officers’ meeting
(identifying material risks every year thereafter)
Strengthened cooperation
with audit divisions
Global rollout of
short training videos
2018
2019
2020
2017
2018
2019
2020
2021
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
Initiated compliance review
Held group-wide compliance
events for the first time
Introduced “Speak Up!” in Japan
Introduced risk countermeasures
in subsidiaries in Japan
Strengthened compliance education
and implemented e-learning
Revised LIXIL Code of Conduct
Held compliance questionnaire on
globally unified platform
Held compliance review
83
GOVERNANCESECTION 4
DATA5S E C T I O N
INTERNAL CONTROL SYSTEMS
AND COMPLIANCE
Internal Audit
How LIXIL and its Group Companies See Internal Audit
Corporate Audit, a corporate function, is responsible for
managing all of the LIXIL group of companies’ internal audit
organizations in Japan and international markets, and ensures
all group companies’ audits are conducted in a unified and
comprehensive manner. (At the end of April 2021, the LIXIL
group of companies’ internal audit organizations consisted of
51 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 governance as well as internal control, and
contribute to the development of human resources.
Strengthening Internal Audit System to
Achieve Sustainable Growth
All audit organizations of the LIXIL group companies, including
our global teams, report to the leader of Corporate Audit, who,
in turn, ensures detailed information is shared in a timely
manner with each global team. Additionally, the leader of
Corporate Audit reports directly to the Director, Representative
Executive Officer, President, and CEO of LIXIL Corporation, and
as the corporate function’s representative, to the Audit
Committee of the Board of Directors.
This system unifies the internal audit chain of command
globally and strengthens information sharing.
Under this 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. Operations are carried out
thoroughly in accordance with the clearly defined roles and
responsibilities for each department and the whole group in
Japan and internationally.
Accelerating Sophistication of Internal Audit through
Digital Technologies
In order to make forecasts and provide value-added insights in
rapidly changing business environments, which now include
remote work and online showrooms, we are actively working to
integrate advanced technology into internal auditing practices –
by utilizing not only the expertise of accounting experts
traditionally used in internal auditing, but also digital
technologies and data science. To achieve this, the LIXIL group
is advancing a comprehensive IT reform project to enhance
internal audit activities with the establishment of an IT
department within Corporate Audit in April 2020. 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
Nurturing Global Internal Auditors Focused
on Diversity and Inclusion
LIXIL’s internal auditors are a diverse team in terms of
nationality, culture, gender, and experience, and are based in
eight locations across five countries. Particularly in these times
of rapid change, we will focus on nurturing employees who can
respect diverse thinking, listen to the viewpoints of others
without bias, and be global leaders.
Internal Audit Initiatives (Years ended March 31)
Inappropriate activities
by subsidiaries
in Japan
2017
2018
2019
2020
2021
Corporate
Audit
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
Strengthened
unification of
internal audit chain of
command within the
global headquarters
84
*Global Corporate Audit Staff
85
GOVERNANCESECTION 4
CONSOLIDATED 11-YEAR SUMMARY
(LIXIL Corporation and Consolidated Subsidiaries)
Years ended March 31
2011
2012
2013
2014
2015
2016
2015
2016
2017
2018
2019
2020*6
2021*6
JGAAP
IFRS
(Millions of yen)
Results of Operations
Net sales (JGAAP) / Revenue (IFRS)
Operating income (JGAAP) / Core earnings (IFRS)
Operating income margin (JGAAP) / Core earnings margin (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
Equity attributable to owners of the parent*3
Total equity
Net interest-bearing debt
Per Share Data
Earnings (loss) per share*1 (EPS) (yen)
Equity attributable to owners of the parent per share (BPS) (yen)
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*4 (%)
Number of employees*5
Stock Indicators
Stock price (closing), end of year (yen)
Market capitalization
Price earnings ratio (times)
Price book-value ratio (times)
¥1,214,939
40,409
3.3
¥1,291,396
17,915
1.4
¥1,436,395
50,485
3.5
¥1,628,658
69,080
4.2
¥1,673,406
51,674
3.1
¥1,845,117
56,259
3.0
15,780
13,688
45,779
36,289
80,106
48,680
(13,543)
(41,687)
92,329
1,166,834
526,973
536,408
175,487
1,868
15,350
52,107
39,370
59,887
33,979
(142,067)
138,348
127,351
1,481,063
528,414
538,776
266,771
21,347
14,025
73,795
44,736
100,627
28,432
(12,397)
(31,753)
114,662
20,952
17,380
64,321
49,168
124,822
83,533
(218,333)
153,144
139,039
1,465,689
561,161
566,312
307,089
1,786,294
593,487
601,795
463,479
22,013
18,199
62,622
50,724
108,887
138,931
(129,228)
10,010
160,378
(18,664)
—
76,403
60,451
128,692
137,012
16,547
(171,758)
138,801
1,875,249
602,564
613,651
418,720
2,060,873
543,750
637,517
528,386
¥1,705,427
51,722
3.0
48,041
30,864
18,211
61,454
50,404
102,126
98,563
(119,041)
46,618
147,708
1,915,427
583,747
590,855
559,971
¥1,890,450
70,069
3.7
39,011
(25,605)
25,523
72,083
62,205
132,274
121,085
19,122
(154,403)
129,646
2,130,120
524,806
537,308
697,413
¥1,633,229
89,781
5.5
69,251
42,503
26,089
68,215
60,701
146,441
132,531
(58,052)
(79,899)
121,563
2,042,165
547,244
559,431
638,345
¥1,829,344
76,046
4.2
59,107
54,581
27,875
69,953
64,661
140,707
116,362
(52,606)
(43,843)
138,751
2,107,131
616,897
649,573
549,159
¥1,692,432
54,485
3.2
49,011
(52,193)
28,188
67,639
68,502
120,053
69,351
(72,328)
1,579
141,421
2,059,544
533,656
567,167
584,537
¥1,514,449
52,290
3.5
32,010
12,518
27,508
68,635
105,557
134,832
157,701
(41,314)
(153,285)
95,862
2,091,529
502,165
535,137
736,689
¥1,378,255
57,288
4.2
35,842
33,048
23,975
68,498
84,786
137,895
151,043
(54,151)
(93,425)
111,061
1,741,814
552,271
554,767
484,444
¥ 55.50
1,850.34
40
¥ 6.49
1,817.34
40
¥ 73.42
1,930.02
40
¥ 72.06
2,041.34
55
¥ 75.46
2,104.27
60
¥ (65.11)
1,894.55
60
¥ 105.80
2,038.56
60
¥ (89.33)
1,828.84
60
¥ 148.01
1,902.18
60
¥ 189.13
2,128.77
65
¥ (179.98)
1,839.59
70
¥ 43.15
1,730.99
70
¥ 113.92
1,902.89
75
6.6
3.0
1.4
1.0
45.2
72.1
33.3
41,090
4.6
0.4
0.1
1.0
35.7
616.3
50.5
48,163
7.0
3.9
1.4
1.0
38.3
54.5
54.7
45,602
7.7
3.6
1.3
0.9
33.2
76.3
78.1
51,419
6.5
3.7
1.2
0.9
32.1
79.5
69.5
52,427
7.0
(3.3)
(0.9)
0.9
26.4
—
97.2
—
6.0
5.3
1.7
0.9
30.5
56.7
95.9
—
7.0
(4.6)
(1.3)
0.9
24.6
—
132.9
60,677
9.0
7.9
2.0
0.8
26.8
40.5
116.6
59,248
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
8.9
2.4
0.6
0.7
24.0
162.2
146.7
61,634
10.0
6.3
1.7
0.7
31.7
65.8
87.7
51,879
¥ 2,160
676,197
38.9
1.17
¥ 1,733
542,523
267.0
0.95
¥ 1,858
540,221
25.3
0.96
¥ 2,846
827,426
39.5
1.39
¥ 2,847
891,265
37.7
1.35
¥ 2,295
718,459
—
1.21
¥ 2,847
891,265
26.9
1.40
¥ 2,295
718,459
—
1.25
¥ 2,825
884,378
19.1
1.49
¥ 2,376
743,817
12.6
1.12
¥ 1,478
463,086
—
0.80
¥ 1,345
421,414
31.2
0.78
¥ 3,075
963,456
27.0
1.62
*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 Equity attributable to owners of the parent is calculated under JGAAP as total net assets - stock acquisition rights - non-controlling interests.
*4 The net debt-to-equity ratio is calculated as net interest-bearing debt / total equity based on the fiscal year-end.
*5 The number of employees from FYE2016 is on an IFRS basis, the definition of which differs from the number under JGAAP.
*6 Permasteelisa and LIXIL VIVA’s business is classified as “discontinued operations” due to the decision to divest. For comparison, FYE2020 results are also rearranged in the same way.
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)
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Sales
Acquisition cost
Equity owned
¥23.5 billion
¥17.6 billion
100%
Goodwill
Intellectual property
¥2.1 billion (net)
¥3.5 billion
Sales
¥110.0 billion
Sales
Acquisition cost
Equity owned
¥0.7 million
100%
Acquisition cost
Equity owned
¥85.0 billion
¥13.7 billion
80% *7
Goodwill
¥5.4 billion
Goodwill
¥6.1 billion (negative)
Sales
Acquisition cost
Equity owned
Goodwill
Intangible assets
¥82.0 billion
¥30.5 million
100%
¥14.7 billion
¥21.7 billion
January 2014
GROHE Group S.à r.l.*8
October 2014
GROHE DAWN WaterTech Holdings Pty Ltd
*10
Sales
¥157.5 billion
Sales
Acquisition cost
Equity owned
Goodwill
Intangible assets
¥80.1 billion
44% *9
¥157.3 billion
¥209.3 billion
Acquisition cost
Equity owned
Goodwill
Intangible assets
¥12.9 billion
¥8.6 billion
51%*11
¥1.2 billion
¥7.8 billion
86
* 7 100% in March 2013
* 8 Currently LIXIL Europe S.à r.l.
* 9 100% in September 2016
*10 Currently LIXIL AFRICA HOLDINGS (Pty) Ltd.
*11 100% in December 2017
87
DATASECTION 5 PRINCIPAL GROUP COMPANIES
(As of March 31, 2021)
48 affiliate companies of LIXIL Europe S.à r.l.
—
—
ASD Holding Corp.
New Jersey, USA
US$ thousand 412,955
10 affiliate companies of ASD Holding Corp.
—
Düsseldorf, Germany
C thousand 60,885
Consolidated Subsidiaries
Name
LIXIL Total Service Corporation
Dinaone Corporation
TM.S Corporation
LIXIL Europe S.à r.l.*1
Grohe AG
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
Paid-in capital
(¥ million)
Equity owned
by the holding
company (%)
Location
Koto-ku, Tokyo
Tokoname, Aichi
Chiyoda-ku, Tokyo
Luxembourg
Cayman Islands
Shanghai, China
Hanoi, Vietnam
Shanghai, China
100
90
60
C thousand 57,143
—
US$ thousand 24,907
US$ thousand 30,000
VND million 743,386
CNY thousand 298,975
Suzhou, Jiangsu, China
CNY thousand 356,036
Suzhou, Jiangsu, China
1,730
Taiwan Inax Corporation
Taipei, Taiwan
NT$ thousand 282,677
LIXIL India Sanitaryware Private Limited
Andhra Pradesh, India
INR thousand 69,823
LIXIL AFRICA HOLDINGS (Pty) Ltd.
Krugersdorp, South Africa
ZAR million 2,444
LIXIL Total Hanbai Corporation
G TERIOR Corporation
Koto-ku, Tokyo
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.
Koto-ku, Tokyo
Koto-ku, Tokyo
Suma-ku, Kobe, Hyogo
Oita, Oita
Saga, Saga
Koto-ku, Tokyo
Singapore
75
316
2,000
100
66
30
50
30
450
30,565
TOSTEM THAI Co., Ltd.
Pathumthani, 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
LIXIL Renewal Corporation
LIXIL Living Solution Corporation
LIXIL Housing Research Institute, Ltd.
LIXIL REALTY, Corp.
GHS Corporation
Haryana, India
Koto-ku, Tokyo
Koto-ku, Tokyo
Koto-ku, Tokyo
Taito-ku, Tokyo
Koto-ku, Tokyo
INR thousand 858,318
100
450
1,250
160
100
Business
segment
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, LWT
LHT
LHT
LBT
H&S
H&S
H&S
H&S
Name
Location
LIXIL Home Finance Corporation
Chiyoda-ku, Tokyo
LIXIL Group Finance Corporation
Koto-ku, Tokyo
Paid-in capital
(¥ million)
Equity owned
by the holding
company (%)
500
3,475
100
100
Business
segment
H&S
(Financing
services
for Group
companies)
89 other companies*2, 3, 4, 5, 6, 7, 8
Equity-Method Affiliates
Name
Sanyo Homes Corporation*9
59 other companies*11
Location
Nishi-ku, Osaka
Paid-in capital
(¥ million)
Equity owned
by the holding
company (%)
Business
segment
5,945
27
*10
—
*1 GROHE Group S.à r.l. changed its name to LIXIL Europe S.à r.l. in April 2020.
*2 Of the other companies, LIXIL AFRICA HOLDINGS (Pty) Ltd. is insolvent with excess liabilities over assets by ZAR1,407 million as of March 31, 2021.
*3 LIXIL Corporation has completed the merger between the Company (surviving company) and its 100% subsidiary LIXIL Corporation (absorbed company), effective December 1, 2020. In addition,
the Company has changed its name from LIXIL Group Corporation to LIXIL Corporation, also effective December 1, 2020. The number of other companies includes the former LIXIL Corporation.
*4 Of the other companies, Permasteelisa S.p.A. and its 33 subsidiaries are no longer subsidiaries of the Company due to the transfer of shares of Permasteelisa S.p.A.
*5 Of the other companies, LIXIL VIVA Corporation is no longer a subsidiary of the Company due to the transfer of its shares.
*6 Of the other companies, Kawashima Selkon Textiles Co., Ltd. and its three subsidiaries are no longer subsidiaries of the Company due to the transfer of shares of Kawashima Selkon Textiles
Co., Ltd.
*7 Of the other companies, JAPAN HOME SHIELD CORPORATION and its subsidiary JHS Engineering Corporation and two other companies are no longer subsidiaries of the Company due to
the transfer of shares of Japan Home Shield Co., Ltd.
*8 The number of other companies includes 47 subsidiaries of former LIXIL, Permasteelisa S.p.A., LIXIL VIVA Corporation, Kawashima Selkon Textiles Co., Ltd., JAPAN HOME SHIELD
CORPORATION, and JHS Engineering Corporation, which were excluded from the scope of consolidation in the current consolidated fiscal year due to absorption-type merger or share transfer.
*9 The company submits securities reports.
*10 “Equity owned by the holding company” shows the ratio of the number of shares owned by the Company to the total number of issued shares (excluding treasury stock) of Sanyo Homes
Corporation as of March 31, 2021.
*11 The number of other companies includes nine affiliated companies that were excluded from the scope of application of the equity method in the current consolidated fiscal year due to the
transfer of shares, etc.
GLOBAL MANUFACTURING AND SALES SITES
(As of March 31, 2021)
Number of factories
Number of showrooms
80
sites
116
sites
Japan
39
International
41
Japan
88
International
28
Japan
Americas
Europe
China/
Asia Pacific
LWT
20
LHT
19*
10
—
4
—
21
6
* Seven of the LHT factories also manufacture commodities for LBT.
Japan
88
Europe/
Middle East/Africa
China/
Asia Pacific
10
18
Domestic home reform shops and
reform network members
11,913 stores
Domestic homebuilding
franchise members (H&S)
207 stores
100
100
100
100
100
—
100
—
100
100
100
100
100
100
72
98
100
100
100
80
100
100
100
100
100
60
100
100
100
100
75
100
100
100
100
100
100
88
89
DATASECTION 5 BASIC POLICY FOR
INVESTOR RELATIONS
LIXIL 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, 2021
Communicated management message to
the market (for institutional investors and
analysts)
Earnings briefing sessions–four times
(every quarter)
Individual meetings–298 times
Briefing session regarding management
strategy and business strategy–two times
Small meeting–three times
Participated in investor conferences–
once 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
90
External Recognition (from April 1, 2020 to May 31, 2021)
Number of shares and shareholders
Major shareholders (thousand shares)
SHAREHOLDER INFORMATION
(As of March 31, 2021)
Gomez IR Site Ranking 2020
Awarded silver prize in the overall IR site
ranking and second place in the "Metal
Products" industry category from
Morningstar Japan K.K. (December 2020)
DJSI Asia Pacific Index
Selected for four consecutive years as a
component of the Dow Jones Sustainability
Indices (DJSI) Asia Pacific Index, created
by S&P Dow Jones Indices and
RobecoSAM (November 2020)
DJSI World
Selected for Dow Jones World Index (DJSI
World) for the second time, created by
S&P Dow Jones Indices and RobecoSAM
(November 2020)
S&P Japan 500 ESG
Selected as a component of the S&P
Japan 500 ESG, created by S&P Dow
Jones Indices (May 2020)
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)
Nadeshiko Brand
Selected for four 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 2021)
CDP Supplier Engagement Leaderboard
Earned a place on the 2020 Supplier
Engagement Leaderboard by CDP
(February 2021)
DISCLAIMER
The inclusion of LIXIL 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 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.
Number of shares authorized
1,300,000,000
Name of shareholder
Number of shares outstanding
(excluding treasury stock of 23,091,431 shares)
290,227,728
Number of shareholders
44,877
The Master Trust Bank of Japan, Ltd.
(Trust Account)
JP MORGAN CHASE BANK 385632
(Standing Proxy: Settlement & Clearing Services
Division, Mizuho Bank, Ltd.)
Number of
shares held
Ratio of
shareholdings
20,981*1
7.23%
18,286
6.30%
Distribution of ownership among shareholders (thousand shares)
Custody Bank of Japan, Ltd. (Trust Account)
11,026*1
3.80%
83,491
SSBTC CLIENT OMNIBUS ACCOUNT
(Standing Proxy: The Hongkong and Shanghai
Banking Corporation Limited Tokyo Branch)
9,941
3.43%
20,485
LIXIL Employee Stock Ownership
6,595
2.27%
E
A
D
TOTAL
313,319
thousand shares
B
A
B
C
D
Financial
institutions
Domestic
companies
Foreign
investors
Individuals
and others
136,125
50,124
C
E Treasury stock
23,091
Total
313,319
Monthly stock price range (Tokyo Stock Exchange)
For the years
ended March 31
2017
2018
2019
2020
2021
High*2 (¥)
2,999
3,255
2,639
2,156
3,280
Low*2 (¥)
1,593
2,285
1,270
1,065
1,147
*2 High and low share prices are from the First Section of the Tokyo Stock Exchange.
Daiichi Life Insurance Company, Limited
(Standing Proxy: Custody Bank of Japan, Ltd.)
6,561
2.26%
State Street Bank Client Omnibus OM04
(Standing Proxy: The Hongkong and Shanghai
Banking Corporation Limited Tokyo Branch)
NORTHERN TRUST CO. (AVFC) SUB A/C
AMERICAN CLIENTS (Standing Proxy: The
Hongkong and Shanghai Banking Corporation
Limited Tokyo Branch)
BNYM AS AGT/CLTS 10 PERCENT
(Standing Proxy: MUFG Bank, Ltd.)
STATE STREET BANK AND TRUST COMPANY
505001 (Standing Proxy: Settlement & Clearing
Services Division, Mizuho Bank, Ltd.)
5,781
1.99%
5,453
1.88%
5,375
1.85%
4,648
1.60%
Notes: 1. In addition to the above, LIXIL Corporation holds 23,091 thousand shares of treasury
stock. Shareholding calculations exclude treasury stock.
2. *1 indicates a trust service arrangement.
Stock price (¥)
LIXIL stock price (left)
Nikkei Average (right)
3,500
3,000
2,500
2,000
1,500
1,000
500
0
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
April
2016
April
2017
April
2018
April
2019
March
2020
March
2021
Stock trading volume (thousand shares)
60,000
50,000
40,000
30,000
20,000
10,000
0
April
2016
April
2017
April
2018
April
2019
March
2020
March
2021
91
DATASECTION 5
CORPORATE DATA
(As of March 31, 2021)
Company Name
LIXIL Corporation
Established
September 19, 1949
Registered Office
2-1-1 Ojima, Koto-ku,
Tokyo 136-8535, Japan
Paid-In Capital
¥68,418 million
Fiscal Year End
March 31
Employees
Consolidated employees: 51,879
Accounting Auditors
Deloitte Touche Tohmatsu LLC
Overview of Major Businesses
The Company manufactures and sells
building materials and housing equipment
for housing and buildings, and operates
housing-related businesses as well as
related services.
Securities Traded (Common stock)
Tokyo Stock Exchange
Nagoya Stock Exchange
Transfer Agent and Special
Management of Accounts
Mitsubishi UFJ Trust and Banking
Corporation
Annual Shareholders' Meeting
Normally held in June
LIXIL Online Information
Corporate Website
In addition to the Company profile, CR activities, and
the latest news, our corporate website also contains
sections covering recent business initiatives within the
Company 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 LIXIL’s Corporate
Responsibility Strategy and initiatives around the world
in order to contribute to SDGs with its purpose to "make
better homes a reality for everyone, everywhere.”
www.lixil.com/en/sustainability
Overview of Information Disclosure
Please see our website for more information on these subjects.
Financial Information
Non-Financial Information
Integrated Report
Corporate Responsibility Report
ESG-Related Data
Corporate Governance Information
Consolidated Financial Statements*
*Please refer to the Supplementary Data Book of the Integrated Report on our website.
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 Corporation cautions that a number of factors could cause actual results to differ materially from those discussed in
the forward-looking statements.
92
DATASECTION 5 TSE Securities Code: 5938
www.lixil.com
2021.06.29