Measures to Achieve Management Conscious of Cost of Capital and Stock Price

In our medium-term management plan "Sustainability V (Value)" (FY2024 to FY2026), we have set a basic policy of achieving profit growth and improved capital productivity to improve our corporate value. In addition to the consolidated KPIs of 110 billion yen in sales, 2.6 billion yen in operating profit, and 1.9 billion yen in net profit attributable to owners of the parent for the fiscal year ending March 2026, we have set ROE of 8% or more and ROIC of 6% or more as capital return indicators.

We also set shareholder's equity cost and WACC (weighted average cost of capital) as capital costs to evaluate and verify the achievement of capital return. Regarding our stock price, we strive to ensure that our growth potential is properly and sufficiently evaluated by the market by actively engaging in dialogue with shareholders and investors, communicating our medium- to long-term growth strategy, and further enhancing disclosure information.

The Company has set a capital efficiency target for the fiscal year ending March 31, 2026 (FY2025), and has also indicated its policy to increase capital efficiency and growth-oriented investments and shareholder returns based on its capital allocation policy, and is committed to management with a strong awareness of the cost of capital and stock price.

Achieving profit growth and improving capital efficiency to increase corporate value

• As a result of steadily implementing initiatives based on the basic policy of the medium-term management plan, P/B Ratio has risen to almost 1.0x.

• We recognize that there is still a gap between our current and market expected returns, so we will work on measures to grow profits and improve capital productivity.

• Achieve ROE target of 8.0% or more and ROIC target of 6.0% or more in the final year of the medium-term management plan (fiscal year ending March 31, 2026 (FY2025))
• Steadily implement initiatives based on the basic policies of the medium-term management plan to improve P/B ratio, and strive to increase corporate value through profit growth and capital productivity improvement

・PMI execution and monitoring 
Accelerate the return on investment and raise Group profits through implementation and appropriate monitoring of PMI measures for the four main M&As implemented.

・New investment in strategic areas (M&A, new businesses, plant and equipment investment, etc.) 
Expand investment limits and make new investments emphasizing capital efficiency and growth potential based on capital allocation policy
・Restructuring of Industrial Materials Segment 
Improve the growth potential and capital profitability of the Industrial Materials business through consolidation of the Industrial Materials business as a subsidiary and reorganization of group companies.
・Achieving both growth and shareholder returns
Shareholder returns based on a consolidated dividend payout ratio of at least 80% and a policy of 100% total return ratio (including share buybacks and cancellations)
・Enhancement of various IR tools /Strengthen information disclosure to foreign investors and individual investors, and dialogue with shareholders
Expand opportunities for investor communication through participation in investor events and efforts to increase awareness through the use of mass media for investors 
・Reduction of policy shareholdings
Reduction toward a net asset ratio of less than 10.0%.

Actual results during the period of the Strategic Investment Limit (FY2021-FY2025)

Strengthening Capabilities in the Solar Power Market through M&A

Comprehensive Collaborative Agreement on Zero Carbon Island Okinoerabu Project
Kagoshima Prefecture, China Town  - Erabuyuri Electric Power Co., Ltd - Takashima Co.

• Of the investment budget expanded to 15 billion yen, a cumulative total of 13.7 billion yen has been invested between fiscal 2021 and fiscal 2024.
• Continue to invest aggressively by actively utilizing external funds (interest-bearing debt, etc.) and cash from asset allocation.

basic policy on shareholder return 

• Our basic policy on shareholder return is to increase investment in growth, aiming to become a company of sustainable growth with strategic investment, while at the same time, we will return profits to shareholders with an awareness of capital efficiency.

Medium-term Management Plan “Sustainability V(Value)

• Shareholder returns based on a consolidated dividend payout ratio of at least 80% and a 100% total return policy (including share repurchases and cancellations)

• based on the recognition that further improvement of capital efficiency is necessary to achieve ROE of 8% or higher, we have decided to change the shareholder return policy of a dividend payout ratio of 40% or higher and a total return ratio of 50%, which were previously set under Sustainability V (Value).

• Expand opportunities for investor communication by exhibiting at investor events and using mass media for investors to raise awareness

IR strategy

• FY2023: Sell all financial institution stocks (4 stocks)
• FY2024: Sell trading partner stocks (3 stocks). Cross-shareholdings to net assets ratio is 9.9%