2024 New Year’s Message from President & CEO

Jan 4 2024

Happy New Year to all of you at NAGASE Group.

Firstly, I would like to express my deepest sympathy to the people who have been affected by the earthquake which hit the Noto Peninsula on January 1, 2024, and my sincere wishes for the earliest possible recovery of the afflicted areas. This disaster reminded me how powerless we really are against nature. With all the environmental problems happening on a global scale, we really need to work hard on sustainability activities. Otherwise, the Earth will truly turn against human beings. I feel that both individually and as a company, we must do what we can to implement the sustainability activities that NAGASE is currently pursuing, such as carbon neutrality. On January 2, a tragic accident occurred at Tokyo’s Haneda Airport when a plane collided with a Japan Coast Guard plane, causing the loss of precious lives. It was hard to believe it was happening, but anyone can be involved in an accident or disaster.

It is a true blessing that none of the members of our group have been reported injured, and there have been no reports of anyone losing their loved ones. I feel incredibly fortunate that each and every one of us can welcome today together, in good health, without anyone having suffered such a loss. Being able to do the ordinary things in life is genuinely a blessing, something to feel happy about. I sincerely hope that the year 2024 will be a safe and rewarding year for all NAGASE Group employees.

2023 was a year full of new things for me. I truly feel that everyone is a teacher, and I've been learning from them. As CEO, I've approached every task with the determination to see it through, striving to experience, learn, and absorb new things as much as possible. We also reexamined norms as much as possible and challenged ourselves with the belief that "we should do it now, so we can promote well-being" for society, for our employees, and for the company. These past nine months have been a period of constant challenge.

I really want to thank you all for following along with me last year. I also want to thank you all for your hard work. Starting with the overall transformation, we have been working on QUICK WIN, reviewing our growth strategy and portfolio; reorganizing from 11 business units to 7; launching the CEO Office; reviewing our conference structures; launching CVC; streamlining unprofitable businesses; implementing proactive public relations, N-Meet up and other communication initiatives; designing HRBP and CXO systems; planning the integration of NBIC (NAGASE Bio Innovation Center) and HB Research Center, the moving project for the Nagoya Branch and the renovation project for the Osaka Head Office; and providing open learning opportunities such as coaching and executive training sessions.

I believe that the groundwork for the coming years is progressing largely as I anticipated. On the other hand, on the financial front, at the time of last year's second quarter earnings report, we revised the estimated operating profit for fiscal year 2023 downward from 34.5 billion yen to 30 billion yen. We have already taken steps to address the underlying causes and have initiated actions. Although the current fiscal year will be challenging, I am confident that by the final year of ACE 2.0 in fiscal year 2025, we'll be able to correct back to our original trajectory.

Looking at last year's external environment, various geopolitical risks unfolded worldwide, such as the Russian invasion of Ukraine, the Israel-Hamas conflict, tensions between the U.S. and China, and the depreciation of the yen due to interest rate hikes by various countries in response to high inflation. Looking at the natural environment, there were severe heatwaves, intense rainfall, and abnormal weather patterns around the world. Meanwhile, in the realm of technology, while AI generation, as represented by ChatGPT, recently captured headlines, it swiftly became a familiar presence. It is a good sounding board for me.

I had a conversation about AI with my 85-year-old mother during the New Year, and she said, “In the past, many things were inconvenient, but each change happened slowly, allowing everyone to share joy and gratitude. It was an era where people were more humane, helping each other with what they lacked.” There's a paper suggesting that over 40% of jobs may be replaced by AI and robots in the near future. I personally have serious doubts as to whether convenience is really the same thing as well-being for people. However, it seems inevitable to resist this trend. I believe we’re heading toward a world that resembles something out of a movie. At NAGASE, we see this as a business opportunity and are actively considering the use of AI and robots. Yet, we also value NAGASE's strength—the connection between people—and intend to continue cherishing that.

2024 will be an election year worldwide. There will be elections to determine the leaders of numerous countries and regions, including the United States, Russia, Taiwan, Indonesia, and Mexico. There are also general elections in South Korea and India. It is going to be a year of changes in administrations, changes in policies, changes in relations between nations, and major geopolitical consequences.

In that respect, I am prepared for even greater changes this year than last year. The new normal is certainly taking shape regarding the way we work, the way we interact with others, and international relations, but while there are areas where we can follow existing precedents, we are accelerating into an era in which we cannot survive if we continue in this fashion. This change cares nothing for our convenience. Neither will it wait for us. I believe that it is important to question and reexamine conventional wisdom and norms.

NAGASE is going to transform itself without fear of change or failure. We at NAGASE will protect what is important to us, such as our corporate philosophy, culture, and customer network, and if you are up to the challenge, please be bold and speedy in making changes and come up with your own answers, one at a time.

There are three things for which I would like to ask for your understanding and support this year.

First, please fully understand and implement NAGASE's growth strategy. We will continue to follow the basic policy of ACE 2.0, "Pursuit of Quality." QUICK WIN, which we launched last June, includes a growth strategy and portfolio review, but since the growth strategy and portfolio review were not completed until November, the concept has not yet been fully adopted by all employees. I will try to visit you and explain those strategies, so I would like to ask you all to continue to implement the growth strategy. Specifically, we have categorized our portfolio by function rather than by businesses, and we are accelerating the implementation of strategies and the selection and concentration of resources in the areas of develop, focus, improve, and base. It will take some time, but our goal is to build a strong portfolio that will not be affected by market conditions or the external environment.

Second, I would like you all to have a “treasure hunt.” Find NAGASE's uniqueness and polish it up together. We live in an era of rapid change. It is not something that can be found by top management acting alone, and I hope that everyone will find a new diamond in the rough. At every turning point, there are always opportunities for new businesses and business models. Businesses, ideas, and products that can be grown, in other words, the raw diamonds of NAGASE's uniqueness, can be found everywhere. I hope that you will think outside the box and find a product, idea, or business that you believe is right for the world, without making preconceived judgments. And I hope everyone will polish them carefully. Please look for NAGASE's uniqueness, preferably an overwhelming uniqueness that competes with no one else, and join us all this year.

My third request is to promote compliance, sustainability, and diversity. As for compliance, as I explained, NAGASE is a company that everyone is watching. Even if something is legal, I would like you to determine whether it is appropriate or not as the NAGASE Group. In sustainability, we are committed to carbon neutrality and improving employee engagement. In addition, we will be raising a new materiality this year. In terms of diversity, we have already been working to create an environment in which women can play an active role, and we will further promote the education of global, fair, and selfless people and leaders.

These are my requests for 2024.

Lastly, for this year's slogan, we will continue with "Delivering next.” which we've been using since last April as our global group slogan. But please think carefully about what “next” means to you. Is it delivering the next solution, the next future, the next idea, the next dream? I would like to ask each of you to find your own "next" and use it to solve your customers' manufacturing issues.

To conclude my message, I would like to extend my best wishes for a healthy year to everyone in the NAGASE Group and their family members, and I sincerely hope that wars and conflicts will end as soon as possible, and peace and tranquility will be restored to the world.

January 4, 2024
Hiroyuki Ueshima

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