Madoka Kitamura President, TOTO LTD.

Keep Gaining TOTO Fans around the World

Leveraging the Vision of Our Founder as a Touchstone

TOTO’s first president, Kazuchika Okura, wrote a letter to his successor, Saburo Momoki. The words contained in that letter have been treasured by the TOTO Group as the Words of Our Founder. Beginning with “Kindness must always come first,” the Words of Our Founder state that our goal should be to provide good products and satisfy the customer and, by accomplishing that, profit and compensation will follow. Accordingly, the Words of Our Founder represent a vision that I as president must place at the center of the Group’s management. In addition, this vision acts as a touchstone that has been passed on for over a century, making it an extremely valuable asset to the TOTO Group.
Amid the changing times, we must never lose sight of our vision to constantly pursue new technologies and even better craftsmanship and strive for levels of satisfaction that exceed the expectations of our customers. As many of our products are used by customers over long periods of time, we place importance on providing after-sales services that cater closely to their needs in the event there is an issue with our products.
The entire process from manufacturing to after-sales and follow-up services contributes to building the TOTO brand, and all Group employees understand that this process must be rigorously upheld. I believe that my mission as president is to ensure that this understanding is passed on to future generations so that we can create enriched and comfortable lifestyles centered on bathroom and kitchen plumbing products.

Drawing on the Strengths of the TOTO Group

The TOTO Group began manufacturing seated flush toilets at a time when the concept of public sewage systems was not yet widespread. Since then, the TOTO Group has opened the door to new lifestyles by creating a variety of bathroom and kitchen plumbing products such as WASHLET, which is now commonly used by numerous households across Japan.
Through the challenges and innovations it has pursued over its 100-year history, the TOTO Group has cultivated the strengths of “advanced fusion of design and functionality,”“creating new value through unique technologies,”“advanced production technology and global supply system,” and “providing high-quality products and services.”
The Group has created various unique technologies such as EWATER+, TORNADO FLUSH, and CEFIONTECT. However, a product’s value is not necessarily realized through outstanding technologies alone. Product design is another important element of product value as a good design brings joy to people and helps brighten their lives. By pursuing challenges and innovations in order to fuse design and functionality, we have improved our production technologies and realized mass production on a global scale. In this way, the important elements of product value are mutually connected to each other and have become Group strengths.
We have also benefited greatly from the fact that we ourselves are actually consumers. This allows us to consider things from the standpoint of our customers, making it easier to ascertain what they find inconvenient. This reality also underscores the importance of “Kindness must always come first.” I believe the word for kindness in
Japanese, shinsetsu (親切), explains our employees very well. The shin (親) in shinsetsu conveys a sense of familiarity, and the setsu (切) conveys a sense of closeness and empathy. I therefore believe that the word shinsetsu lays out ideas based on which we should move forward. Having the ability to relate closely to our customers and understand their feelings has allowed us to realize the strength of “providing high-quality products and services.” To that end,our pursuit of challenges and innovations for further enhancing these Group strengths is endless.

Aiming to Be a Company That Enriches People’s Lives

Society is undergoing dramatic changes, and these changes have extended into the business environment in which the Group operates. In particular, technological innovation such as AI and the Internet of Things (IoT) has been advancing rapidly, and it has now become crucial to utilize such tools in various business operations, including
product development and frontline production, in an effort to enhance efficiency. Meanwhile, we are placing importance on becoming a company that enriches people’s lives. In terms of products and services, we will naturally pursue efficiency through the use of technologies such as AI and IoT. However, we do not want to emphasize efficiency at the expense of providing products that do not have a human nature. There is a sense of awareness and certain emotions that only people have, such as the bond between parent and child and husband and wife as well as relaxation and comfort. We therefore want our toilets to provide a clean and comfortable space, our kitchens to be a space where people can enjoy cooking and communication, and our baths to be a space where people can relax and refresh. In this way, we value people’s emotions, and we therefore
wish to be a company that creates products and services that have a human nature. And, in a greater sense, we wish to be a company that enriches people’s lives.
Our desire to provide people with enriched lifestyles is the same regardless of age, gender, nationality, or region. Even with the aging population, people will continue to desire enriched lifestyles. We believe that our products can provide that sense of enrichment.

Promoting the TOTO WILL2022 Mid-Term Management Plan with a New Sense of Determination

In fiscal 2018, we commenced the TOTO WILL2022 Mid-Term Management Plan, which embodies our strong “WILL” as “We Innovate Leading Lifestyles.” Accordingly, the TOTO Group must continue to be an organization that provides customers with levels of satisfaction that go above and beyond their expectations. We will therefore strengthen our will on a Groupwide basis as we aim to become such an organization by leveraging our long-cultivated strengths and overcoming the various changes we face in the business environment.
Our performance during the first year of the mid-term management plan was sluggish, with net sales and operating profit both declining year on year, to ¥586.0 billion and ¥40.1 billion, respectively. In addition, ROA and ROE, which we have adopted as important management indicators, stood at 7.1% and 9.6%, respectively.
The main reasons for these results include our delayed response to changes and issues concerning the supply of ceramic sanitary in the Chinese market as well as the soaring prices of raw materials. These results were also due to our proactive investment toward the start of operations at new plants, the strengthening of sales, and the improvement of wages and employee treatment. While we got off to a rough start in the first year of the plan, we have been able to gain a thorough understanding of our areas of improvement. We therefore position fiscal 2019 as a year in which we will restart efforts to earnestly address the issues we face.

Gaining TOTO Fans around the World

In the Japan Housing Equipment Business, we are promoting the Anshin (peace of mind) Remodeling Strategy as the next stage of the remodeling business. Our Remodeling “Anshin” Declaration, announced in April 2018, is a declaration of intent to add Anshin to remodeling as we make Companywide efforts to revitalize the renovation market. The starting point of Anshin Remodeling is establishing an environment in which we offer peace of mind to customers by addressing their concerns over remodeling, be it due to cost or lack of knowledge regarding the construction process. Rather than chasing profit and share increases over the short term, we aim to qualitatively improve and invigorate the renovation market under the Anshin Remodeling Strategy by taking the time to build and accumulate trust with our customers. This strategy involves straightforward activities, and we believe it is the perfect strategy for the TOTO Group to execute, as it has helped drive the renovation market for over the past 30 years. I always remind the members of the Support Desk for Remodeling, a consultation desk related to remodeling, that the role they play is not on behalf of TOTO but rather on behalf of the customer. The desk has received various queries from customers, and many of these customers have stated that the desk members helped resolve their concerns and offered them peace of mind. I therefore believe that the activities of the Support Desk for Remodeling have become a true embodiment of the TOTO spirit, and we will further advance these activities in fiscal 2019.
In the overall Global Housing Equipment Business, we are stepping up our WASHLET Global Strategy. According to a global market survey conducted in March 2018, WASHLET toilet seats were the number one brand by sales volume in six countries and regions (Japan, China, South Korea, Taiwan, the U.S., and Germany), which comprised 87% of the global market for toilets with spray seats. Also, cumulative
WASHLET shipments exceeded 50 million units globally as of March 2019. By effectively promoting these strengths, we have firmly established the TOTO WASHLET brand.
For the China Housing Equipment Business, we have launched a new project that focuses on visualizing customer needs and are strengthening a purchase channel-specific strategy, which involves products, prices, logistics, and sales promotions, in order to become the brand of choice among customers. While gaining an accurate and earnest understanding of market conditions, we will strive to provide customers with value that differentiates us from the competition.
Also, in March 2019, we held an exhibition at International Sanitary and Heating 2019 (ISH 2019), held in Frankfurt, Germany. At ISH 2019, we promoted the TOTO CLEANOVATION message, which comes from the combination of the words “clean” and “innovation.” This message emphasizes the synergistic effects of the cleaning functions realized through TOTO’s toilets and WASHLET. Thanks to this message, our
exhibition garnered a high level of praise. The TOTO CLEANOVATION message also conveys our desire to enrich lives through cleanliness as well as to realize cleanliness through technologies and innovations. Going forward, we will actively communicate our stance of being a company that continues to pursue technological innovation, thereby enhancing the level of recognition of the TOTO brand.
In Japan, we are moving forward with renovating and installing toilets at hotels and public facilities in line with the government’s policy of reaching a target of 60 million overseas visitors by 2030. With the aspiration of turning Japan into a showroom for the rest of the world, we are accelerating the installation of WASHLET so that a large number of overseas visitors can gain a firsthand experience of this technology for the first time. Through this experience and enjoyment of the comfort offered by WASHLET, we will communicate Japanese toilet culture to the rest of the world.

Further Integrating CSR into Management

The expectations and demands of stakeholders around the world continue to change, and the UN Sustainable Development Goals (SDGs) are emblematic of that change. We have provided a wide array of products and services in pursuit of enriched, comfortable lifestyles. These efforts, which we have promoted earnestly on a continuous basis, relate closely with the SDGs. In light of this, we reevaluated our mission in October 2017 with the aim of highlighting the most important matters to tackle in the medium to long term in order to realize sustainable growth. Based on this mission, we have been promoting the TOTO Global Environmental Vision, which establishes “Cleanliness and
Comfort,” “the Environment,” and “Relationships” as our three material issues. We position this vision as the driving engine of the TOTO WILL2022 Mid-Term Management Plan. Going forward, we will strive to further integrate CSR into our management and contribute to the SDGs.

Moving toward a Dynamic, Vibrant, and Excellent TOTO

The majority of TOTO’s products are used by customers for 10 to 20 years. Ensuring that our products are chosen again in 10 to 20 years’ time is what will guide the next 100 and 200 years of the Company. It is for this reason that we believe our main role as a manufacturer is to cherish our customers and the excellent products that bring joy to their lives. In addition, customer satisfaction helps enhance employee motivation. To pass these ideas on to the next generation, it is important that we develop our employees. To that extent, the Group’s approach to workstyle reform is to focus on establishing an environment in which all employees can work in a lively manner. Also, our business activities are supported not only by our customers and employees but also by our various other stakeholders, including our shareholders, business partners, and local community members. We must therefore strive for collaboration and co-creation with these stakeholders. To be a dynamic and proud company, we must work to strictly
discipline ourselves, and strengthening our governance is an essential element for maintaining our soundness as a company. With the aim of enhancing both internal and
external communication, we have our outside directors and outside Audit & Supervisory Board members visit our locations in Japan and overseas, thereby making our entire business operations as open as possible. While these outside officers offer us their frank opinions at the Board of Directors’ meetings and other venues, the whole point of governance is to receive strict guidance and establish an environment where such guidance can be offered.
We would like to express our gratitude for the continued support of all of our stakeholders, and we ask that you look forward in anticipation to the future of the TOTO Group going forward.