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

In our Medium-Term Management Plan 2028, "Sustainable + Spiral (Sustainable Positive Spiral)" (FY2026 - FY2028), we have set the creation of a sustainable positive cycle (Sustainable + Spiral) as our theme. As consolidated KPIs for FY2028 (fiscal year ending March 31, 2029), we have set targets of sales of ¥110.0 billion, operating profit of ¥3.0 billion, and net profit attributable to parent company of ¥2.0 billion, as well as a target of ROE of 8% or higher as a capital profitability indicator. 
Furthermore, we have set the cost of equity and WACC (Weighted Average Cost of Capital) as capital costs to evaluate and verify our capital profitability performance. Regarding our stock price, we are striving to ensure that our growth potential is fairly and sufficiently evaluated by the market through active dialogue with shareholders and investors, the dissemination of our medium- to long-term growth strategy, and further enhancement of disclosed information.

In our Medium-Term Management Plan 2028, "Sustainable + Spiral (Sustainable Positive Spiral)," we have set capital efficiency targets for FY2028 and outlined our policies to improve investment and shareholder returns based on capital efficiency and growth, while also demonstrating a strong focus on capital cost and stock price in our management

• As a result of steadily implementing initiatives based on the basic principles of our previous medium-term management plan, Sustainability V (Value), our PBR has risen to over 1.0x.

• We recognize that there is still a gap between our current performance and market expectations, and we will continue to work on profit growth measures and capital productivity improvement measures.

• Achieve ROE target of 8.0% or more and ROIC target of 6.0% or more in the final year of the  previous medium-term management plan, Sustainability V (Value) (fiscal year ending March 31, 2026 (FY2025)).
• Steadily implement initiatives based on the basic policies of the previous medium-term management plan, Sustainable V (Value) 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.)
We will expand our investment framework (15 billion yen over five years, from FY2021 to FY2025) and implement new investments that prioritize capital efficiency and growth based on our capital allocation policy (14.7 billion yen in investments over five years).
・Restructuring of Industrial Materials Segment 
Through measures such as the acquisition of a subsidiary for our industrial materials business and the reorganization of group companies, we have improved the growth potential and capital return of our industrial materials business and reviewed our business portfolio.
・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 ).
・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%. We continued to sell off our strategically held shares until FY2025.

• In the previous medium-term management plan, Sustainability V (Value), the investment framework was expanded to 15.0 billion yen over five years. From FY2021 to FY2025, a cumulative investment of 14.7 billion yen has already been made.
• We will continue to make aggressive investments by actively utilizing external funds (such as interest-bearing debt) and cash through 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 40% and a 50% 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 80% or higher and a total return ratio of 100%, 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%
• FY2025: Sell trading partner stocks (1 stock). Cross-shareholdings to net assets ratio is 2.9%