Medium-Term Business Plan, DKK-Plan2025:
Rolling Plan

March 22, 2024

Table of Contents
1

Overview of the Rolling Plan

2

Business Structure Reforms

3

Financial Strategy

4Medium- to Long-Term Policy
11. OVERVIEW OF THE
ROLLING PLAN

2

Summary◼ Due to the controlled capital spending by customers, spikes in energy prices, materials prices, andpersonnel expenses, the net sales forecast for FY3/24, the second year of the Medium-Term Business
Plan, was sluggish at 30.5 billion yen◼ We will implement the business structure reforms based on the fundamental reforms to improve businessperformance explained in the “First Half Results for the Fiscal Year Ending March 31, 2024,” establish a
structure that enables performance recovery and profit creation, and implement various initiatives◼ We will delay the target year for achieving 5.0% ROE under the Medium-Term Business Plan, DKKPlan2025 by two years, and aim to achieve it in FY3/27◼ Similarly, we will aim to achieve the cumulative 3-year shareholder returns of 10.0 billion yen in FY3/27;
however, we will strive for early achievement considering the situation such as the status of the operating
cash flow

Rolling Plan
From FY3/25•

Business Structure Reforms

Business portfolio optimization, R&D selection and consolidation, human resources
Establish a
strategy, organizational structure reform, improved work process efficiency
structure for profit• Financial Strategy
creation
Capital allocation, continued shareholder returns

DKK-Plan2028
FY3/26 – FY3/28

Realize and accelerate growth3

DKK-Plan2025 Initiatives Status•••“1. Strengthen business foundation” is making progress mainly in corporate governance. We will continue the efforts.
“2. Optimize business portfolio” related initiatives are making slow progress, and the impact is visible in the businessperformance.
“3. Realize new business creation early” is in the stage of accumulating steady initiatives and results. Acceleration is required
to quickly grow into a business that makes significant contribution to the business performance.
Key Actions

DKK-Plan2025
Priority Measures

FY3/23

1. Strengthen business foundation•◼ Enhance corporate governance; promotecompliance management◼ Improve employee engagement◼ Promote environmental management

•
•
•
•

Change of Directors’ term from 2 years to 1
year
Revision in Directors’ compensation system
Conduct employee engagement survey
Promote diversity and inclusion (DE&I)
Information disclosure compliant with TCFD
recommendations

FY3/24••••••

2. Optimize business portfolio•◼ Ensure visibility of business profitability of
new segments/ROIC◼ Promote structural reforms, including theGroup◼ Strengthen business foundation for profit
creation••

Establish segments corresponding toconsolidated results
Enhance initiatives for social infrastructuredevelopment
Reform affiliate companies for operational
efficiency by exiting unprofitable businesses
and consolidating offices

•

•

•

3. Realize new business creation early◼ Capital tie-ups and active investment in M&A◼ Launch solution business toward resolvingsocial issues◼ Aggressive investment in human resources
development••

Established “Solutions” and “New Radio
Frequency Areas” segments to create new
businesses
Set as a material issue, search forcollaborating/partner business•••

Reduce cross-held shares (continue)
Complete acquisition of ISO 27001 certification(non-consolidated)
Establish human rights policy and conduct
human rights training
Initiatives for personnel system reform(implementation postponed from April to
October 2024)
Establish measures to reduce greenhouse gas
emissions
Submit a commitment letter for Science Based
Targets (SBT) certification
Enhancing existing business profitability has
been sluggish partially due to the impact ofcontrolled capital spending in thetelecommunications area
Won an order for the basic design of “Ebino
Transmitting Station (submarine broadcasting
system transmission facilities)” from the
Ministry of Defense
Expanding application of high-frequency
induction heating equipment including for EVs
M&A of Cybercore to expand Solutions
business
Received an order for superheated steam
equipment
Contribution to business performance by new
businesses were limited

Progress/Issues〇
Continue
initiatives

×Review some
initiatives△

Accelerate

4Background of the Review••

Sufficient structure and foundation was not built to enable response to changes in the external
environment such as the spike in material prices and controlled capital spending by customers
With the extremely challenging management environment continuing, our business performance for
FY3/24, the second year of the Medium-Term Business Plan, is expected to significantly underperform
initial expectations

Consolidated Net Sales and Operating Income••

Net sales decreased by about 15.0 billion yen from FY3/20
Due to intensified price competition including for bidding and spike inmaterials prices, operating margin decreased and could not cover
fixed costs. Expecting to report operating loss for two consecutive
years
売上高
Net
sales

45,016

営業利益 income (million yen)
Operating

41,47833,96831,817External Factors••••

30,500Internal Factors

2,601
1,583

•
•

53

2020/3期
FY3/20Controlled capital spending byexisting customers
Spike in materials prices
Spike in personnel expenses
Higher energy cost

2021/3期
FY3/212022/3期
FY3/22-1,510-1,5002023/3期
FY3/232024/3期
FY3/24•

Delay in product price review
Slow shift to organizational structure
suited to the market environment
Slow monetization of new business(Outlook)5

Status by Segment
Business Performance and Environment by Segment(100 million yen)

The market for Telecommunications Business, the driver of ourbusiness thus far, had significant impact on deteriorating
business performance

500

430
15
20

400

300

305

Solutions
New Radio
Frequency

73

Induction Heating

28

Heat Treatment

78

200

28

100

Controlled capital spending by existing customers
significantly exceeding expectations

Fixed WirelessHigh in demand and social needs, but competition andpricing pressure is intensifying

Broadcasting

Equipment updating demand can be expected, but the
future of broadcasting business itself is uncertain
Increased market demand and growth can be expectedwith the practical application of AI and advances in wirelesscommunication technologies

Solutions
140

61

47

MobileCommunications

70

MobileCommunications
Fixed Wireless

Other Businesses

Steady performance, but demand for products in thesegment is limited

Broadcasting

Induction heating/Heat Treatment

Auto industry including the overseas market is recovering,and the performance is mostly in line with the plan

New radiofrequency areas

Contribution to business performance is not visible, but
growth is expected considering the market growth potential
and customer sensitivity

Other Businesses

33
54

40
43

0
FY3/24 (Forecast) FY3/25 (Initial Plan)

Deteriorating business performance against theinitial plan for FY3/25 became clear in FY3/24

Select the focus segment based on factors
including the medium to long term vision andmarket environment and concentrate resources6

Positioning of the Rolling Plan••

Review of numerical targets and timeframe for the Medium-Term Business Plan, DKK-Plan2025 wasdecided
Execute drastic business structure reforms and financial strategy during the current Medium-TermBusiness Plan to promote business reform and improve performance, which will lead to the achievement/
acceleration of growth during the next Medium-Term Business Plan, DKK-Plan2028

Lay a solid businessfoundation

Realize andaccelerate growth

Toward solving social issues
and sustainable growth

DKK-Plan2025

DKK-Plan2028

DKK-Plan2031

FY3/26 - FY3/28

FY3/23 - FY3/25

FY3/29 - FY3/31

Establish a structure
for profit creation

Rolling Plan
From FY3/25

FY3/23

FY3/24

FY3/25

FY3/26••

FY3/27

Business structure reforms to improve
profitability
Realize capital structure that pays attention tocost of capital
FY3/28

FY3/29FY3/30FY3/31

7

Review of Numerical Targets•••

Delay the target year for achieving 5.0% ROE under the Medium-Term Business Plan, DKK-Plan2025 by
two years, and aim to achieve it in FY3/27
Set operating income as a new quantitative target to prioritize profit and ROIC
Quickly respond to changes in the external environment, thoroughly enforce selection and consolidationof businesses, and review cost structure to improve business performance and achieve numerical targets
early
FY3/25Initial Plan

FY3/24
Estimate

FY3/25
Forecast

FY3/27
Goal

43.0

30.5

33.0

40.0

billion yen

billion yen

billion yen

billion yen

―

-1.5

0.5

1.8

billion yen

billion yen

billion yen

2.0

-1.1

0.4

1.8

billion yen

billion yen

billion yen

billion yen

D/E ratio

0.2-0.3

0.15

0.16

0.2-0.3

ROE

5.0%

-％

1.1%

Net sales
OperatingincomeNet income+2 years
5.0%

8

Direction of the Rolling Plan
Opportunities• Wider social awareness of sustainability• Increased expectation for ICT• Increased defense and national resilience
related demand• Social contribution on disaster prevention andmitigation• Auto industry reform and growth

Risks• Decrease in demand from decreasing population• Increased procurement cost due to change in external
environment• Decline in competitiveness due to lack of human resources
matching core technologies and necessary skills• Decline in competitiveness due to slow technologicalinnovation

Strength of DKK Co., Ltd.
Technology(Core technology: Radio
wave control, heat
treatment)

Experience
Knowledge

Domestic andinternational
networks

Rolling Plan Policy: Build a profitable structure through business structure reforms
Structural reform to
improve profitability

Medium to long term
growth strategy• Select and enhance focus segments
corresponding to the market
environment• Streamlining the organization andconcentrating resources• Operational efficiency and work
style reform• Intensive development of coretechnology and selection andconsolidation of R&D with amedium to long term perspective• Implement human resources
strategy with a view toimplementation of businessstrategy

Optimal capital structure• Promote asset light management• Incorporation of awareness of
cost of capital in management
and business activities• Creation of a platform to realize
stable shareholder returns

92. BUSINESS STRUCTURE
REFORMS

1010

Optimize Business Portfolio: Select Focus Segments• Select the priority segment based on factors including the medium to longterm vision and market environment, and intensely channel resources
Solutions

Aim at increasing demandassociated with practicalapplication of AI and advancement
in wireless communication
technology for early achievementof expansion and profitability for
Solutions business.

Defense(Fixed Wireless)

In anticipation of a substantial
increase in the defense budget,maximize opportunities to capture
future demand, including for
maintenance and development
work.

Radio Frequency

Expand our share and businessareas in auto-related industries byusing induction heating
technology. Enter industries otherthan auto.
Aim at profitability improvement by
early establishment of newenvironmental business using
superheated steam.

11

Business Portfolio and Medium to Long Term Policy• Aim at early business performance recovery by channeling resources intensively infocus segment growth
Medium to long term policy by segment(Fixed Wireless)Profitability
SolutionsRadio frequency (Induction
heating, heat treating service)

Defense(Fixed wireless)New radio frequency areas

Current situation(As of FY3/24)

Medium to long term
targets*Size of the circle indicates net sales

Radio
Frequency

Induction
heatingHeat treating
service

Defense• Stable supply of defense equipment and active proposal
on maintenance and inspection of existing facilities• Capture orders leveraging unique knowledge and trackrecord of our company with expertise in defense
communication equipment• Expand new products with core technology developmentaligned with the R&D vision of the Acquisition, Technology& Logistics Agency

Radio Frequency
New Areas

Market size

Solutions• Enhance proposal-based sales capabilities and technology
development leveraging the compatibility of “wirelesscommunication x sensing x AI”• Secure stable revenue source by achieving licensemonetization• Aim to commercialize “information services” by utilizing
big data obtained through collaboration with a dataprocessing company• Capture customer demand with development oftechnologies for EVs and power-saving features• Rebuild overseas manufacturing and maintenancestructures based on the manufacturing bases ofautomobile manufacturers• Expand business areas by launching recycling
service• Contribute to extension of expiry date andreduction of food loss
• Expand business to overseas markets facing
multiple issues regarding industrial waste
processing

12Growth Strategy: Solutions
VisionShort term
Medium tolong term

Solve social issues through AI-based Solutions Business
Aim to solve social issues through video-based AI solutions, strengthen proposal and development
capabilities, and increase orders in collaboration with Cybercore••

Achieve license monetization leveraging the compatibility of “communication x sensing x AI” tosecure stable revenue source
Commercialize “information services” by utilizing the obtained big data

Market environment

Image AI solution

AI image recognition area
Market size: 68.0 billion yen (FY3/28)<Other markets>
Local 5G

Wi-Fi

CCTV

79.1
billion yen

310.0
billion yen

127.8
billion yen(FY3/28)(FY3/27)(FY3/27)

Wireless
communicationSensingAI
technology• Top level technology in image AI area
• Wireless communication technology andsensing technology centered on camera

Strength/Technology

Short term
(FY3/27)◼ Increase product line up, expand target markets◼ Cultivate business partners and agents<Expertise and track record>
Human flow
analysis

Development
Expansionof image
analysis

Advancement ofsensing technology

Realize real time
data processing

Manufacturing industry
behavior analysis

Net sales

2.0
billion yen

Medium tolong term(FY3/31)

Social issue solving
data business◼ Obtain data, analyze with AI◼ Provide analysis and consulting business using
analysis results

Net sales

5.0
billion yen

13Growth Strategy: Defense
Achieve stable earnings by taking advantage of wireless communication technology we developed over many years

VisionShort term

Win orders through a stable supply of equipment against the backdrop of increased defense budget and through proactive
proposals targeting maintenance, inspection, and development projects for existing facilities

Medium tolong term• Win orders by building the structure of the sales and technology division in anticipation of major equipment renewal(Ebino Transmitting Station)• Expand new products through core technology development targeting fields of our focus*The Ebino Transmitting Station is a submarine broadcasting facility operated by the Maritime Self-Defense Force

Market environment

Defense budget
Five years from FY3/24

43 trillion yen

Provide defense products
Maintenance and updating ofexisting facilities
◼
◼

Short
term
(FY3/27)

Capture demand for maintenance and updating of existing
facilities based on delivery track record
Win orders using our unique frequency technologies andknowledge<Expertise and track record>

Frequency Construction
technology knowledge

Increase orders based on track record
and trust in wireless communications
and defense equipment

Strength/Technology

Development of
new defense
equipment

billion yen

Application ofprivate sector
technology

Design and construction of various
defense related facilities

Medium tolong term

Focus on EMS domain(Satellite communication,
electronic warfare functions)◼

7.0

Delivery of various defense equipment

Development

DeliveryrecordNet sales

Strengthen initiatives aligned with the Technical Guidelines of
the Acquisition, Technology & Logistics Agency(FY3/31)

Net sales

9.0
billion yen

14Growth Strategy: Radio Frequency (Induction Heating/Heat Treating Service)
VisionWork on technological development for carbon neutrality to maintain top global market share

Short term
Medium tolong term•••

Upgrade equipment to downsize staff for improved productivity
Use prototyping facilities to win orders associated with expansion of EVs
Identify demand for maintenance work on existing equipment to stabilize revenue stream••

Capture demand through technological development for power-saving
Rebuild overseas manufacturing and maintenance structures based on the manufacturing bases ofautomobile manufacturers

Market environment

Heat treating service
Global market: about 100.0 billion yen(By FY3/30)

Review the hardening method to achievecarbon neutrality

FurnaceHeat
treatment
technology

Induction heating
equipment

Overseas
network

Establish new
prototypingbase

New customer cultivation basedon abundant track record
Strength/Technology

Short
term
Increase orders by leveraging prototyping/research base,cultivate new customers for EV-related parts
Boost productivity with robots and automation equipment

EV/Carbon neutrality measures◼
◼

<EV-related track record>

Development
EV
equipment

Joint research onheat treatment◼
◼

Energy andlabor-saving
facility(FY3/27)

Net sales

12.0
billion yen

Motor shaft

Hub unit

Constant velocity
joint (CVJ)

Rack shaft

Medium tolong term

Increase net sales and market
share in overseas markets

Improve cost competitiveness for overseas strategy, enhancemaintenance structure
Contribute to the environment with power-saving and othermeasures(FY3/31)

Net sales

15.0
billion yen

15

Growth Strategy: Radio Frequency (New Areas)
VisionContribute to society by entering environmental business

Short term

• Continue resolving customer issues and expand lineup, focusing on disposal of food and otherwaste• Speed up development and achieve early commercialization

Medium tolong term

Expand business areas by commercializing recycling service through collaboration

Market environment

Waste processing-related
market size: 2.1 trillion yen

Create new market
Establish foundation for domestic
market◼

Showcase processing capabilities through trials and build trackrecordSpeed up development and expand lineup<Expertise and track record>◼

Contribute to achievement of SDGs in Japanand overseas

Development

Rapid
heatingtechnology

Design anddevelopment
according touse• Drying• Sterilization• Antioxidativ
e treatment• Incineration

Short
term

Accumulate
peripheraltechnology

Maximize the possibilities for superheatedsteam equipment and create a new market◼

Strength/Technology◼

Review tocreate newservices

Industrial waste
processing industry(FY3/27)

Net sales

1.5
billion yen

Food industry

Medium tolong term

Overseas deployment andcreation of a recycling
business

Expand business to overseas markets facing multiple issues
regarding waste processing
Aim to convert to services area such as recycling business(FY3/31)

Net sales

5.0
billion yen

16Selection and Consolidation of R&D
Selection and consolidation of R&D• Accelerate commercialization through aggressive investment in focus segments• Control total R&D investment amount by strictly screening for investment efficiency• Take medium- to long-term strategies and investment impact into account in selecting R&D targets
Focus
segments
29%

FY3/24(F)Total R&D
investment

Other
Businesses
33%

Make development
investment in focus
segments aggressively

1.4 billion
yen

Acceleratemonetization

FY3/27(F)Total R&D
investment

1.1 billion
yen
Focus
segments
67%

Other
Businesses
71%
Existing
Communications(Mobile communications + Disasterprevention + Broadcasting + Other)

DefenseSolutionsRadio Frequency(Induction heating +Heat treatment)

New radiofrequency areas

Other
Businesses

Focus
segments

17

Selection and Consolidation of R&D
Medium to long term strategy• Clarify the direction of R&D toward the 10-year target to achieve short term R&D results andmaintenance/expansion of core competency for the medium to long term growth
Active involvement in social contribution
Realize corporate value improvement andgrowthNext generation
communication
Realize Beyond
5G/6G/wireless powertransmission system
Enter ITS market

Solutions
Evolve to social
issues solution
business by using
AI

Maintain and expand
core competency
DefenseApply technology
to develop use in
EMS domain

Radio wave
control
technology

Induction heating
equipment
For EVs and othernew parts

Heat treatment
Realize energy
and labor saving

Superheatedsteam
Expand lineups
Measures to create arecycling business

Core
Technology
18

Human Resource Strategy
Overview of the Human Resource Strategy•••

Review human resource strategy along with business structure reforms
Focus on personnel allocation and career development optimal for the business portfolio
Performance evaluation system to be revised to link individual initiatives to company growth (start
operation from October 1, 2024)
Maximize personal
Human resource/organizational structureManagement Strategy
and organizational◼ Personnel that can sense the issues of society
growthStrengthen
Creation ofnewbusinesses

Further
expansion ofexisting
businesses

businessfoundation◼
◼

Establish a structure for profit creation
Clarify focus segments
Organizational structure in line with the businessportfolio◼

and customers and the needs of related parties,
and take voluntary action (think and act on theirown)
Personnel that can make proposals
unconstrained by conventional thinking andactively promote business reform
Personnel that can think and act based on“overall optimization” such as for the related
departments and groups, and execute theirdutiesOrganizational structure that can capture thechange in business environment and respondquickly◼ Main initiatives
Job visualization◼ Allocate people to jobs, clarify individual
scope of duty
◼ Introduce job description and appropriate
performance evaluation◼ Resolve mismatching of job description andlevels, etc.

Profitability improvement◼ Improve expertise and skills according tobusiness strategy◼ Framework that promotes re-skilling◼ Introduce career plan sheet◼ Systematic development of DX personnel

Employee growth

Improve corporate
value

Improve employee engagement
Promote DE&I
◼ Promote diverse work style◼ Conduct survey and implement improvement
measures on employee engagement◼ Strengthen initiatives for respecting humanrights◼ Introduce fair performance evaluation system

19Organizational Structure Reforms••

Channel resources intensively in focus segments
Consolidate construction related technology divisions to strengthen profitability by enforcing profitability
management

Concentrate resources

Streamline the organization

Early conversion to profit contributing
business by channeling resources intensively

Consolidate construction related technology
divisions Reduce fixed costs•••

Enhance sales, manufacturing, and development
structure for focus segments
Strategic skills education for active demand
creation and establishment of issues-solving
business model
Launch a new company-wide project team tocapture maximum demand in Defense segment

About
10%
increase(vs Sep 2023)•••

Reduce fixed costs (indirect expenses, SG&A) byconsolidating construction related technology
divisions into two offices
Revitalize succession of technologies such as
experience and know-how
Reduce long working hours for employees bystandardizing operations and diversifying projects

About 8%decrease(vs Sep 2023)

20

Promote Asset-Light Management•••

Aim at improving asset efficiency along with organizational structure reforms
Basic policy to sell/reduce assets with low contribution to business performance or no
impact on improving corporate value
Sale to be executed based on determination of an investment opportunity that willcontribute to business growth
Specific measures
Reduce non-businessassets/ low-efficiency
assetsReduce cross-heldshares•Promote review on sale andreduction of assets that do notdirectly affect business andbusiness assets with low ROIC•

Plan for reducing cross-heldshares is to significantly exceed
the initially planned amount
Promote reduction and promote
investment for growth

Reduce cross-held listed
shares to zero by FY3/28

Continue to consolidate/split
subsidiaries based on thebusiness field, function, and area
Consider new establishment/
expansion in areas with growthprospectSufficiently review
appropriateness andrestructuring effect andimplement gradually••Group company
reorganization

Timing/Goal•

Improve business asset
ratio by 10% by FY3/27(vs FY3/24）

21

Operational Efficiency
Operational efficiency••

Promote operational efficiency by delegating authority and actively implementing DX andoutsourcing of operations
Prioritize allocation of necessary resources to core operations to maximize business results<Current>

Company<Ideal Business Style>Company••••

Use of DX and RPA*, outsourcing
Promote delegation of authority
Review various meeting bodies andcommittees
Shift toward core operationsCore
operationsCore
operations

Non-core
operations

Non-core
operations

Performance evaluation system withemphasis on the weighting of creative
operations

Outsource

Outsourcing mainly administrative
divisions

Allocate time tocreation/improvement ofoperations*RPA: Business process automation technology

22

Business Performance Outlook from Business Structure Reforms••

Increased profit margin from increase in the composition of focus segments
Optimal level of fixed cost through organizational structure reforms and strict screening of R&D⇒ Establish a profit creation structure to achieve and increase operating profit

Existing Communications(Mobile communications + Disasterprevention + Broadcasting + Other)
DefenseNet sales

30.5 billion yen

Net sales

40.0 billion yen

SolutionsRadio Frequency(Induction heating + Heat treatment)
New radio frequency areas
Other Businesses

Focus
segments

Focus segments

Net sales
13.0 billion yen

Focus
segments

Net sales
22.5 billion yen
FY3/24(F)FY3/27(F)30.5 billion yen

Net sales

40.0 billion yen-1.5 billion yen

Operating income

1.8 billion yen

233. FINANCIAL STRATEGY24
24

Review of Shareholder Returns and Financial Strategy••

Among the DKK-Plan2025 investment strategies, delay the target year for achieving
shareholder returns and M&A investments by two years, and aim to achieve it in FY3/27
For growth investment, strictly screen R&D while executing capital investment for growth
Initial Plan
(FY3/25)

Shareholder returns(Dividends, share buybacks)

M&A investment
Growth investment

10.0

billion yen
or moreUp to 4.0
billion yen

6.0

Progress (to FY3/24)

6.3

billion yen

1.5

billion yen

2.8

billion yen

billion yen

Growth investment

4.0

1.5

Other investments
Update investment
DX investment
ESG-related investment

billion yen

billion yen

4.0

0.9

billion yen<Dividend (interim/year-end)>

FY3/23: 30 yen/30 yen Total amount: 0.65 billion yen
FY3/24: 30 yen/30 yen Total amount: 0.6 billion yen (planned)(R&D)(Capital expenditures)<Share buybacks>
February-March 2022: 2.5 billion yen
February 2023-January 2024: 2.5 billion yen

billion yen

Acquired Cybercore on September 29, 2023
(turned into subsidiary)<Main results>• Development of 5G-related equipment and newtechnologies• Development of defense-related antenna system• Development of systems solutions<Main results>• Capital investment to expand overseas contract
heat treatment business<Main results>• Introduction of production control system and asset
management system to improve work efficiency• Updating of aging facilities

Revised Plan
(To FY3/27)

10.0 billion yen
or more<Share buybacks>
FY3/25: Over 1.0 billion yen<Dividend>
FY3/25: Over 0.6 billion yen

4.0 billion yen
or more6.0 billion yen
or more4.5 billion yen
or more3.0 billion yen
or more25

Capital Allocation•••

Due to the change in business environment, capital allocation under DKK-Plan2025 will
also be revised, and a new financial strategy will be establishedImproving business performance with business structure reforms will be the priority issue
Promote asset light management and aim to improve return on investment and ROE(FY3/25 - FY3/27)

Operating CF

7.0 billion yen

Review of asset holdings

Use of leverage(Non-business assets, cross-held shares)

6.0 billion yen

Minimum 2.0 billion yen

Total: Minimum 15.0 billion yen

Growth investment
Development investment:
Minimum 3.2 billion yen
Capital investment:
Minimum 3.0 billion yen• R&D investment and capital
investment to expand focus
segments

Other investments

M&A investment

Shareholder returns

Minimum 2.0 billion yen

Minimum 2.5 billion yen

Minimum 4.0 billion yen• Investment for productivity
improvement including in DX• Investment for maintenanceand updating of facilities• Expand business area by
realizing recycling businessmainly with superheatedsteam equipment• Continue flexible sharebuybacks and stable dividend
payout taking into
consideration the consolidated
business performance and thestatus of sale of asset holdings

26

M&A Strategy
Purpose of M&A under DKK-Plan2025• Established “Solutions” and “New Radio Frequency Areas” as new segments ingrowth area business• Execute capital tie-ups and M&A aimed at realizing new business creation early
Results
September 29, 2023

Acquired shares in Cybercore Co., Ltd.

✓ Create synergies by combining our wireless communication technology and sensing technology
centered on camera with Cybercore’s image AI technology and sensing AI technology✓ Aim to expand Solutions business by developing/providing optimal solutions for customers

M&A Strategy under the Rolling Plan
• Aim at full entry into environmental business and approach wide range
of industries with attention to environmental measures and SDGs
around the new radio frequency areas• Expand business area by realizing recycling business mainly withsuperheated steam equipment
27

M&A Strategy
Medium term business strategy and M&A targets in the new radio frequency areas
Ultra high temperature
superheated steam equipment

D-Rapid

Purpose of M&A

Realizing industrial waste recycling business
Extremely efficientdrying capabilities

Superheated steam
generator equipment

Dry various
industrial waste

Superheated steam
processing furnace

Reduce the volume ofindustrial waste
Reduce industrial
waste costs

Target customers
Food and beverage
manufacturers
Other various
industrial waste
emitting
corporations*Above is a continuous processing
conveyor machine

1. Bioplastics strategy

Dried industrial
waste

Plastics such as PE
and PP

Reducefossil fuelusage
volumeBioplastics

M&A target

Bioplastic molded product2. Bioenergy strategy
CO2
reduction
Utilizationof industrial
wastevPressure

Heat

Process dried industrial wastewith heat and pressure

Biofuel development

Select partners
corresponding toeach strategy

Replace fossil fuel with biofuel28

4. MEDIUM- TO LONG-TERM
POLICY29
29

Initiatives toward PBR over 1X
Items forimplementation

Specific initiatives

Business
structurereforms• Optimize business portfolio:
Channel resources intensively infocus segments• Organizational structure reforms• Enhance strategic sales skills• Selection and consolidation of R&D• Promote operational efficiency

Profitability
improvement

Capitalallocation• Execute investment for growth withuse of cash and review of asset
holdings• Build optimal asset structure using
leverage• Continue to enhance shareholder
returns with attention to capital
structure

Reduceshareholder
equity• Create profit through businessstructure reforms• Reduce volatility of businessperformance• Reduce beta by formulating optimal
share price• Strategic PR activity• Accurate information disclosure andcreation of growth expectations byenhancing IR activities• Eliminate risk factors with nonfinancial strategy

Improvemarketvaluation

Reduce cost ofcapital・
Improve
expected growth
rate

Goal and indicators

ROE
improvement
FY3/27
Over 5.0%

PBR
over 1X

PER
improve
ment
From
FY3/27
Over 20X*Refer to “Measures for realizing management with attention to cost of capital and share price” established on March 22, 2024 for details of the initiatives(https://denkikogyo.co.jp/ir/library/other/, Japanese only)30

Our Company Group’s Ideal for FY3/31••

Improve business performance by enhancing profitability and return on investment with theimplementation of the Rolling Plan
Maintain the performance targets for FY3/31 stated in the Medium- and Long-termManagement Strategy and aim for achievement by promoting the reform
Establish a structure
for profit creation

DKK-Plan2031
FY3/29 - FY3/31

Toward solving social issues
and sustainable growth

Rolling Plan
From FY3/25• Business structure reforms• Continue with the Financial
Strategy• Strengthen PR/IR• Revise performance evaluation

DKK-Plan2025
FY3/23 - FY3/25

Lay a solid business foundation• Establish new segments and actively approach
new customers• Execute M&As, turn Cybercore into a
subsidiary• Enhance governance• Group company reorganization and integration• Wider internal awareness of sustainability

FY3/23

FY3/24

FY3/25

DKK-Plan2028
FY3/26 - FY3/28

Realize and accelerate growth• Achieve over 5.0% ROE during theperiod• Achieve PBR over 1X• Improve profitability and recoverbusiness performance by expanding
focus segments• Expand high added value products andservices• Improve return on investment• Improve employee engagement• Continue to work on sustainability issues

FY3/26

FY3/27

FY3/28• Achieve over 8.0% ROE by convertingto high profit structure• Convert to positive equity spread andexpand• Further expand focus segments andbuild optimal business portfolio alignedwith the business environment• Turn businesses into services, expand
overseas businesses• Become a company of choice forstakeholders• Solve sustainability issues

FY3/29FY3/30FY3/3131

Cautionary Note about Earnings Forecasts
Figures included in this document that are related to descriptions,
including plans and policies and not past facts, are forecasts
regarding future earnings. They are all calculated based on
management assumptions and views based on information obtainedby the company at the time of writing. Therefore, these forecasts
include risks and uncertain factors, and actual results may differ
from them due to a variety of factors. Such potential risks anduncertain factors include changes in economic situations andproduct demand levels in major markets, fluctuations in the foreignexchange market, changes in regulations in Japan and overseas,
and accounting standards and practices. This document has beentranslated 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.

32