President and Representative Director, Group CEO

Goro Kamino

The SALA Group began with the establishment of Toyohashi Gas and Hamamatsu Gas in 1909 and 1910, respectively. I have heard that the gas lamps which lit up the streets were seen as a symbol of enriched lifestyles at the time. Later, in our efforts alongside local communities to recover in the post-war era and achieve rapid growth, we branched out beyond simply contributing to social infrastructure through the supply of gas, and went on to engage in all areas of energy, as well as in engineering, housing, sales of imported vehicles, finance, and real estate. In this way, we sought to take on any activity related to people’s lives as we gradually expanded our business from supplying gas to the overall lifestyle industry.

 

After graduating from university, I gained experience through a position overseas at a financial institution, among other roles. In 1990, I returned to my hometown of Toyohashi and joined Chubu Gas (currently SALA ENERGY), where I worked on-site. In 2000, I became the president of GASTEC SERVICE (currently SALA ENERGY), a company dealing in LP gas and petroleum, where I strove to reorganize the group and rebuild the old business structure. At this company, I thought about how to create a process for realizing the enrichened society mentioned in our Fundamental Principles, with a view toward the 21st century. In light of this, I avoided expanding the business recklessly, and instead focused on growing step by step by refining existing businesses and steadily incorporating new initiatives through a process of trial and error.

 

In 2002, soon after the prohibition on holding companies was lifted in Japan, I established SALA Corporation as a pure holding company. With the aim of boosting the quality of Group management, I established the Brand Message “Fine Quality for Your Life. SALA,” as well as six Group Values: “SALA Quality Management,” “Group Value Management,” “Human Resource Management,” “Co-creation Management,” “Area Contribution Management,” and “Shareholder Value Management.” In 2016, I transitioned CHUBU GAS and SALA HOUSE from listed affiliate companies to wholly-owned subsidiaries, and created the current SALA Group structure whereby each company can provide a wide range of services in the most optimal format.

 

At the heart of all these changes was a sense of crisis: I felt that it would not be sufficient for a regional gas company to focus solely on providing energy, and that we would only have a future if we continually thought about development within the local community and society in general. This topic has been on my mind ever since the year 2000, when concerns began to emerge over the potential decline in Japan’s population, though I think about it more intensely than ever as this decline is becoming a reality. What kind of business should be established to realize enriched lifestyles and development in society? The answer to this can be found through insight—by carefully looking at society. As long as we work to attain our raison d’être as a company amid changing times, we will naturally come to understand the actions that we should take.

Our core area spans eastern Aichi Prefecture and western Shizuoka Prefecture. This is “Japan’s navel,” right in between Tokyo and Osaka. The region is extremely prosperous in both primary industries, including agriculture, and secondary industries, including manufacturing. The value of our products shipped to this core area exceeds 11 trillion yen, and so I felt we needed a platform to utilize this potential.

 

However, a large retail center in front of Toyohashi Station withdrew from business in 2003, resulting in a loss of vitality in the community. I sometimes felt that the region was missing the strength that it needed. As such, I sought the assistance and encouragement of local governments and local financial organizations to redevelop the area in front of Toyohashi Station. In 2008, COCOLA FRONT started business as a commercial complex that includes Hotel Arc Riche Toyohashi. The Higashi Mikawa area, with its rich atmosphere, was the focal point of this idea. Higashi Mikawa is home to lush mountains, the sea, and urban areas. As a transportation hub, it attracts many visitors from the surrounding regions, as well as from Tokyo, Nagoya, and even from various countries around the world. We used the name “Higashi Mikawa Energization Project” for the redevelopment work in front of Toyohashi Station. We defined the concepts for development as “it all starts here” and “bringing true enjoyment,” as this location would serve as the entranceway to Higashi Mikawa.

 

Regional revitalization cannot be achieved with local resources and insights alone. Some say that “young people, fools, and outsiders are the ones who can truly change society.” With this in mind, we utilized the local area’s history and culture, as well as its plentiful nature and cuisine, while collaborating with external creators and designers boasting global success to launch a project for creating the “living room of Higashi Mikawa”—a place where everyone can get together and enjoy their lives.

 

We went on to finish several other new commercial complexes, including COCOLA AVENUE in 2009, emCAMPUS EAST in 2021, and emCAMPUS WEST this past April.
However, it is difficult to achieve success in urban development simply by creating new physical things and managing tenants with commercial goals. It is crucial to incorporate the strengths of external parties and reevaluate the community’s history and culture alongside its plentiful nature and cuisine to create value with a vibrant future. I feel that this is the best approach for sustainable regional revitalization.

 

These efforts have recently helped to launch the Higashi Mikawa Food Valley concept, whereby local producers, chefs, and many other talented individuals with connections to cuisine and agriculture enrich their interactions with one another. Locations such as emCAMPUS and Hotel Arc Riche Toyohashi are key areas in this concept. An organic farm was built on the rooftop of emCAMPUS, with activities to grow select produce. These initiatives are not yet at the scale of a business, but I am extremely excited to see how they will develop going forward.

 

The essence of these initiatives is an approach to urban development that creates value unique to the local area and encourages people to live and work there. This fundamental concept is present in all the areas in which we carry out business; not just the Higashi Mikawa region. It is no exaggeration to say that regional revitalization and our company’s business are two sides of the same coin.

In the modern day, it is essential to consider climate change issues and biodiversity in any business. At present, it is already a global standard for companies to actively work to create a carbon-neutral society. The SALA Group is no exception, and has continually carried out advanced initiatives in the local region with consideration for the environment.

 

For example, we started running a biomass power plant in 2019 after we joined the electric power retail business in 2016. At the time, we thought that we would not be able to procure timber from forest thinning in large quantities as fuel, so we decided to procure palm kernel shells (PKS) as our main raw material. However, we were able to secure some 12,000 tons of thinned wood—about 10 times our initial estimates—letting us gradually get on track with our efforts to realize local production for local consumption in the field of energy.

 

One significant challenge in solar power generation and other forms of renewable energy is that the amount of generated electricity varies with the weather and other conditions, and so we often encounter curtailment when this electric power is not fully used. To overcome this challenge, we will invest in grid-scale batteries and use large storage facilities to achieve a level supply, thereby helping to maximize the use of renewable energy.

 

Additionally, in our initiatives outside of the electric power business, we are focusing our efforts on realizing carbon-neutral car dealer stores with effectively zero CO2 emissions (the first initiative of its kind among car dealers in Japan), developing and selling detached houses with net negative CO2 emissions from construction to demolition, and converting buildings into ZEBs. In this way, we seek to contribute to carbon neutrality with an approach rooted in the local community.

Looking back at FY2023, COVID-19 was downgraded to a Class 5 disease under Japan’s Infectious Diseases Control Act, and economic activity made progress toward recovery. However, ongoing turbulence persisted in an unpredictable landscape due to various factors, including numerous natural disasters, the instability in Ukraine, and the weak yen. Despite these circumstances, the SALA Group achieved record-high net sales in FY2023 by passing on rising costs in raw material prices for energy. On the other hand, in terms of profit, a fall in the volume of gas sales and struggles in selling houses unfortunately resulted in a decrease in operating profit.

 

However, we can see this period as a year of progress in reforms for sustainable growth going forward, despite the uncertain landscape. We built grid-scale batteries in the first initiative of its kind in Shizuoka Prefecture, developed a new offering for custom-built detached houses in anticipation of the Japanese government’s environmental standards, and achieved decarbonization at all Audi and Volkswagen locations in Hamamatsu City. In this way, we made progress in carbon neutral projects, and we will continue to drive each business in new initiatives for sustainable growth going forward.

We are currently approaching the second year of our Fifth Medium-Term Management Plan as we seek to realize our 2030 Vision. A major theme for us at this point is to actively carry out growth investing and attain sustainable growth. Apart from investments in grid-scale batteries and other areas of the electric power business, as I mentioned earlier, we will also focus on investing in DX to integrate customer IDs across the SALA Group, streamline business processes, and boost the level of service for customers. Previously, each Group company had stored customer information in its own database and had provided services accordingly. By linking and integrating data for each customer, we will create a platform that helps connect SALA with customers in the local area. We plan to start running this new system in 2025, providing more enriched lifestyles by adding a variety of services to the platform through co-creation with external companies, universities, and administrative institutions. In addition, we will proactively invest in the human resources that support fields for daily living and housing, as well as the growth of the entire Group. Ever since SALA’s establishment as a holding company in 2002, we have steadily expanded net sales and operating profit through capital restructuring in the Group and synergy in unified Group management. Going forward, we aim to achieve 280 billion yen in net sales and 12 billion yen in operating profit by 2030. However, looking at capital efficiency, our return on equity (ROE) is at around 8% and is growing only slowly, owing to an increase of equity from our accumulating profits. In light of this, we have held multiple rounds of discussions at the Management Conference, comprised of the Board of Directors and full-time officers, regarding capital allocation—namely, how to allocate our cash flows from 2024 to 2030—with a view toward realizing our 2030 Vision. I believe that the most vital step toward this end is to accelerate investment for further growth. We will allocate 50% of our cash flows into growth investing, including expanding the electric power business, M&A for augmenting the lifestyle field, and alliances with ventures. In addition to growth investing, we seek to boost capital efficiency by strengthening investments for maintenance and renewal and bolstering shareholder returns, with a goal of realizing at least 10% in ROE by 2030. Furthermore, we will control our equity-to-asset ratio to remain at approximately 40% to 50%.

 

We have defined five aspects of our approach toward the 2030 Vision: “establish the SALA brand,” “boost quality,” “achieve dramatic growth in the housing field,” “nurture people who think and act on their own initiative,” and “enhance social value.” We will build a system and environment where each and every employee can fully demonstrate his or her own abilities, and we will continually tackle the challenges faced by society and our customers. In addition, we will enhance both the quality and productivity of our systems and business processes, and focus efforts to expand fields for daily living and housing outside of the energy business. Through these efforts, we aim to become a company that enriches lifestyles and society with deep roots in the local community, in line with our motto “SALA in my town, SALA with people’s lives.”

Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail.