Nippon Light Metal Holdings Company, Ltd.

Message from the top management

As Team NLM, we will strive
to be a groundbreaking innovator of aluminum and beyond.

Introduction

On this occasion, the NLM Group has decided to issue an "Integrated Report" in place of its previous CSR Report and Annual Report. In this report, we hope to speak in detail about the external environment that surrounds the NLM Group and the Group's internal management resources, sharing our vision in terms of how we perceive these aspects, how we will provide value as a member of society and how we wish to take part in the creation of a better future with a focus on the so-called "value creation process."
However, before getting into this main topic, I would first like to address the following matter.

The Issue of Revocation of JIS Certification and Request to Cease Using the JIS Mark

We recently became aware that some of our business sites had been shipping products bearing JIS labels even though those products did not meet the standards set forth in the Ministerial Ordinance on Certification of Conformity to Japanese Industrial Standards relating to mineral and industrial products and their processing technologies, and determined that our quality control system was lacking. Based on these revelations, we received notification of the revocation of JIS certification and a request that we cease the use of the JIS mark from the Japan Quality Assurance Organization, the body responsible for JIS certification.
We regard this improper conduct and our failure to prevent it as an organization to be truly unacceptable for a company engaged in the manufacturing business, and are treating the matter with the utmost of seriousness.
We deeply regret that the revocation of JIS certification and request for suspension of use of the JIS mark has greatly inconvenienced our customers and society, and resulted in serious damage to the credibility of the NLM Group as a whole.
At present, we are making a Group-wide effort to fully clarify the nature of the situation, and are working to sincerely explain the situation to our customers while verifying the performance of the products we have already delivered. Additionally, on June 9 we established a five-member Special Investigation Committee made up of three outside attorneys with no vested interest in the Company, one independent outside director and one independent outside auditor. The committee will use its external insight to investigate the cause of the issue from an objective standpoint, and make recommendations to prevent recurrences.
The NLM Group has pursued its business activities under its corporate philosophy to "be forever committed to the development of new applications for aluminum and aluminum-related materials and thereby contribute to the improvement of people's quality of life and environmental protection." Each officer and employee of the NLM Group recognizes this problem as their own. We understand that the starting point of everything we do is to accept the harsh criticism with sincerity and humility, and accordingly take concrete actions in order to recover and restore trust.
I would like to again express our deepest apologies for causing this situation.

As Team NLM, we will work to be a groundbreaking innovator of aluminum and beyond.

Our current mid-term management plan that was formulated in 2019 and runs from FY2019 until FY2021 embraces the slogan of "becoming a groundbreaking innovator of aluminum and beyond as Team NLM."
We have continued to emphasize the "Team NLM" and "groundbreaking innovator of aluminum and beyond" approaches both internally and in public since I took up the post of president, and as they also represent important elements of the value creation process, the central theme of this report, I would like to give you a brief overview of them.

The feature and strength deeply rooted in a history of self-improvement

The NLM Group is a complex business entity that ties together a wide range of businesses with the exceptional material of aluminum at its core, covering everything from the material itself to its processing. I believe that this point is truly our greatest feature and strength. To put it another way, instead of having a business structure that is overly reliant on a specific business or specific field, it is precisely this comprehensive capability and diversity to broadly The feature and strength deeply rooted in a history of self-improvement cover many fields which is the source of our competitiveness and differentiation.
This also describes the history of the NLM Group itself.
Nippon Light Metal Co., Ltd., one of the major companies in the NLM Group, was once a company whose main business was aluminum smelting. But since aluminum smelting consumes large amounts of electricity, the sharp rise in the cost of electricity triggered by the oil shocks of the 1970s severely compromised the international competitiveness of aluminum ingots produced domestically, and in the mid-1980s, the company was forced to effectively withdraw from this business. When facing a crisis where the very survival of the company was at stake, Nippon Light Metal Co., Ltd. made the monumental change of shift the core of its business to the field of aluminum processing.
Over the years, the NLM Group has grown into a corporate group made up of a wide range of businesses, including those that boast high competitiveness and a global reach in processing fields that make use of aluminum. Those companies include Toyo Aluminium K.K., which operates aluminum foil and paste businesses, and Nippon Fruehauf Co., Ltd., which manufactures body-related parts for trucks and other vehicles.
The feature and strength of the NLM Group is deeply rooted in this history of self-improvement, and the basis for this is in our greatest asset: people. People truly are nothing less than "human assets."

Responding to the external environment and creating social value

The concept of Team NLM also contains a sense of expectation that, if the Group companies possessing this wide range of knowledge and their constituent members (human resources) each combined organically more than ever before, even greater synergies would be created.
The NLM Group has promoted organization-spanning cross-functional collaboration that is not restricted to the frameworks of companies and divisions, and created a host of new products. Our efforts to consolidate the various Group company sites as much as possible when we moved our head office functions to Shimbashi at the end of 2019 were truly rooted in this idea. To further accelerate and strengthen these moves while continuing to produce concrete results, we will keep thoroughly promoting the Team NLM approach.
Being a "groundbreaking innovator of aluminum and beyond" is truly the ultimate form that embodies Team NLM. "Groundbreaking" is not simply a matter of expanding scale or volume; it means to address customer needs based on the Team NLM approach, to create products and services with high added value and competitiveness utilizing the strengths of the Group by integrating the knowledge of each person, to create new needs and markets, and to compete in new and unique fields. In other words, groundbreaking means being an entirely new type of company and group. This is also an idea and a goal of continually changing in pursuit of that vision.
Our slogan of "becoming a groundbreaking innovator of aluminum and beyond as Team NLM" expresses our determination to become a sustainable group for the future by responding to the rapidly changing external environment, and by continuing to change in order to help create social value.

Pursuing integrated thinking

Opportunities and risks that emerge from changes in the external environment

In conducting its business activities, the NLM Group is affected by various changes in the external environment. Examples of these changes include trends related to carbon neutrality, the shift to a recycling-oriented society, the decline in the working population, the advance of globalization, and the intensifying competition that develops as a result. The efforts made by companies to address the Sustainable Development Goals (SDGs) are also being brought into question.
To the NLM Group, these changes to the external environment are major opportunities in some ways, and serious risks in others. For instance, if reducing greenhouse gasses advances the electrification of vehicles, it would represent an opportunity due to the rising expectations placed on aluminum to reduce car weight, but the demise of the internal combustion engine also represents a risk.
That is why in conducting our business activities we aim to solve the social issues associated with these changes in the external environment, and it is why we believe that we should specifically address these challenges in our regular business activities. I think this is the starting point of integrated thinking.

Giving employees pride and happiness

A company is the amalgamation of the awareness and actions of each employee that makes it up. That is why it is important that the employees working in the Group, their families and others are able to say "I'm glad I (you) am (are) able to work at the NLM Group!" with a sense of pride. We believe that is an important element constituting the happiness of employees.
Human resources are the fundamental element of management, and we recognize it is particularly important for those human resources to possess pride and happiness.

Our future vision and priority issues (materiality)

When considering an integrated report in light of these perspectives, we started by calmly recognizing the external environment the Group faces and the management resources at its disposal. Next, we took another look at the current situation from the perspective of our Mid-to-long-term vision. Then, over the past year, the Company's Board of Directors, Group Executive Committee and meetings with the presidents of our Group companies had discussed the Group's strengths and the issues it faces. After this, we Basic Information Value Creation Foundations of Value CreationValue Creationsought feedback from seven outside experts and engaged in further considerations.
As a result, we identified five items as the priority management issues to be addressed by the Group:

  • Protecting the global environment
  • Providing sustainable value
  • Happiness of employees
  • Responsible procurement, production and supply
  • Corporate ethics and governance

We will go into further detail about these priority issues, the value we provide on that basis and the value creation story on the following pages. In finding solutions to these issues, we believe it will be important for all officers and employees to take to heart the Group's Corporate Philosophy and Principle of Conduct, to make these concrete guidelines for how they should act on a daily basis, and to tackle these key issues while striving to "become a groundbreaking innovator of aluminum and beyond as Team NLM."

Conclusion

Towards a new mid-term management plan

The current mid-term management plan that was formulated in 2019 incorporated three basic policies: (1) creating new products and new businesses, (2) investing resources in growth, and (3) strengthening management foundations. By actively investing management resources including funds and personnel in growth areas, we have strived to realize further growth. While this plan has led to some concrete actions such as the establishment of a new site in North America for automotive parts, unfortunately it has been difficult to meet our numerical targets overall, due to an economic slump due to global trade frictions and the impact associated with the COVID-19 pandemic since 2020.
We are currently considering a new mid-term management plan with FY2022 as its starting point. We will first focus on restoring the trust that was lost due to the issue of JIS certification being revoked and the request to cease use of the JIS mark. Then, with a perspective of integrated thinking and without fear of change, we will continue efforts to realize our future vision: "becoming a groundbreaking innovator of aluminum and beyond as Team NLM."