Q: Briefly Explain the Company’s FY2023 Business Performance

Suzuki:
The company’s net sales exceeded its goal in the financial plan, helped by exchange rate movements. Nevertheless, operating profit and ordinary profit decreased.

During the FY2023, the final year of the FY2021-2023 mid-term management plan, the automotive market growth started slowing down from the second half due to the economic downturn in China and the end of EV subsidies in Europe. Besides, capital spending slowdown in the industrial market and declined demand in the consumer market continued.

In the given business environment, the decline in sales in the industrial and consumer markets was offset by growth in the automotive market, mainly in the infotainment and powertrain markets. Although net sales increased, actual sales slightly fell below the previous year's level, excluding an increase resulted from exchange rate swings. Profit created through strategies to improve profitability offset the impact of soaring raw material costs, increased labour costs and exchange rate swings, etc. However, the expected net sales target was not met because of an increase in fixed costs, such as upfront investments for the new ERP system launch and Akita plant construction, which caused a decrease in operating profit and ordinary profit.

Looking at the FY2023 consolidated results, net sales was ¥55,271 million (a 4.5% YoY increase), an operating profit decreased to ¥5,936 million, down 14.5% YoY, ordinary profit to ¥7,189 million, down 6.2% YoY whereas profit attributable to owners of parent increased to ¥5,593 million, up 0.9% YoY, supported by foreign exchange gains.

Looking at sales by market, sales in the mobility market (renamed from the automotive market) increased because recovery in global auto production drove up sales to global customers in the infotainment market, while sales of new high-speed transmission connectors also increased. Although sales in the powertrain were on a steady growth track, Chinese customers’ manufacturing slowdown started from the third quarter. Sales in the industrial market declined due to capital spending slowdown in China and continued decline in demand for 5G base stations in Japan. Likewise, sales in the consumer market slumped due to decreased demand for gaming consoles and OA equipment, which led to a decrease in revenue.

Q: Tell us about the Mid-Term Management Plan Launched from This Year

Suzuki:
While promoting a shift from “automotive” to “mobility”, we are aiming to increase our global presence in the industrial market.

To meet goals in the FY2021-2023 mid-term management plan we have already completed, we aimed to return to growth track, helped by increased global auto production and xEV acceleration, and to prepare the ground for meeting goals of “the ¥10 billion sales” and “one of the world’s top 10 connector manufactures,” which were set out as the FY2029 long-term vision. However, we were unable to overcome the impacts of the delayed recovery of the automotive market, the slowdown of the Chinese economy, etc., and fell short of the final year targets of "¥52 billion sales" and "a 20% operating profit margin," without the help of exchange rate movements. We only achieved a 10.7% operating profit margin, and profitability had yet to be further improved.

After reviewing these results and remaining issues, we launched the "FY2024-2026 Mid-Term Management Plan". We made the plan based on the world market forecasts that global auto production would grow modestly from the 90 million to 95 million units, while the xEV ratio would increase from 26% to 43% over the next three years. In this business environment, we are aiming to achieve "¥65 billion sales" and "operating profit of ¥10 billion (a 15.4% operating profit margin)" by FY2026. Besides, we have set new targets of "ROE (Return on Equity) of 10%" and "ROIC (Return on Invested Capital) of 10%" to improve profitability.

As our key strategies for goal achievement, we have primarily focused on preparing the ground for a shift from "IRISO for automotive" to "IRISO for future mobility." We are aiming to make the company grow into an industry leading company in the powertrain and automotive centralized control ECU markets and to prepare the road ahead for driving up sales in the sensor market. We are planning to expand our business portfolio into the mobility market, including the construction equipment, agricultural machinery and eVTOL markets, by suggesting our vibration resistant, heat resistant, and high-speed transmission solutions that we have developed through the automotive business.

The second key strategy is to scale up our business in the industrial market as our second pillar business. We are aiming to supply our products for control equipment worldwide and to expand our product line for the robot and AI markets, while creating a strong brand positioning in the chipmaking equipment, telecommunication and energy management markets.

At the same time, we are planning to review the system and roles of all group manufacturing sites both in Japan and other countries, to improve our productivity, investment efficiency and manufacturing capacity.

Another key strategic goal in the plan is further sustainable development in management. To ensure our sustainable growth based on the sustainable management, we have specified five materiality (key sustainability issues) goals, and set major KPIs and specific targets for FY2030.

Over the next three years under the 2024-2026 Mid-Term Management Plan, we will commit to our strategic goals for leaping to the next level of growth.

Q: Message to Our Shareholders

Suzuki:
We will ensure value-based management with a focus on the cost of capital and stock prices, and increase dividends based on our new shareholder return policy. 

When it comes to the 2023 fiscal year-end dividends, we paid out dividends of ¥90 per share (¥10 YoY increase) as planned, to ensure that our dividend payout ratio (DPR) of 30% and more is stably maintained in line with the shareholder return policy.

In the 2024-2026 mid-term management plan, we set out our strong commitment to value-based management with a focus on capital costs and stock prices. We are aiming to achieve a return on invested capital (ROIC) that exceeds the cost of capital and to improve investment efficiency through creating an optimal capital structure. As part of our new shareholder return policy, we will also ensure that the profits of a dividend payout ratio (DPR) of over 40% or a dividend on equity (DOE) of 5% are stably returned to shareholders, and also run a share buyback program for increasing shareholder returns. Thus, we are planning to pay out the 2024 fiscal year-end dividends of ¥100 and aiming to increase it to ¥150 per share in FY2026, the final year of the mid-term management plan.

Through creating values by "connecting," we will work together with our stakeholders towards sustainable development and a prosperous future for all. We would truly appreciate your continued support to our business.