May 14, 2019

For Immediate Release

Ryosan Company, Limited
Representative: Hiroyuki Kurihara
Representative Director, President
Listing Code No.: 8140
Listing: First Section, Tokyo Stock Exchange
Inquiries: Norihiko Takahashi
General ManagerCorporate Strategy Office
TEL: +81-3-3862-3816

Notice Concerning Suspension of the 10th Medium-Term Business Plan andImplementation of Measures to Enhance Profitability
Ryosan Company, Limited ("the Company") announces that the Board of Directors held today has resolved tosuspend the 10th Medium-Term Business Plan and to implement measures to enhance profitability as described
below in order to respond to drastic changes in the business environment.
1.

Background

The Company issued the 10th Medium-Term Business Plan with the basic aspirations of reconstructing thebusiness portfolio and improving capital efficiency of the Company. To achieve these goals, the Company
formulated the three pillars of growth strategy, financial strategy, and infrastructure strategy.
The Company’s growth strategy sought to diversify the business portfolio and enhance the businessprofitability of the Company through the introduction of high value-added solution business, the creation of coresuppliers, and the expansion of local overseas businesses. The Company’s financial strategy sought to achieve anROE target of 5% mainly by profitability enhancement, asset liquidation, and continuous capital allocation. In theinfrastructure strategy, as a basis for the measures discussed above, the Company planned to take actions
including development of new operation IT systems and revision of HR framework. The goal for Fiscal Year 2020
was net sales of 300,000 million yen and operating income of 8,500 million yen.
However, as the result of policy changes with its main suppliers to reduce the sales incentives and the grossmargins for its distributors, the Company’s business profitability deteriorated. Furthermore, there were increased
requests from customers and suppliers for inventory holdings of end-of-life (EOL) products or for business
continuity plan (BCP) purposes. As a result, there was an increase in the Company’s burden for raising funds.
Additionally, an increase in USD interest rates and a global economic slowdown in countries such as China
caused a sudden worsening of the profit environment on a Group consolidated basis.
Above all, the changes in these business margins with its main suppliers had a significant impact on
Ryosan’s existing business models which are quite different from the seasonal impacts of the market gap.
Furthermore, the Company has determined that it will be difficult to achieve the plan for enhanced profitability
and improved capital efficiency as envisioned in the original scenario. Ultimately, the Company has decided tosuspend the 10th Medium-Term Business Plan and to begin action for reforming the Company’s businessstructure in order to enhance profitability.
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2.

Purpose and Overview of Measures to Enhance Profitability

The Company will re-evaluate the business portfolio which had been structured in accordance with the 10thMedium-Term Business Plan and will implement the following measures with the aim of low-cost management
based on the Renesas business and electronic components business. By strengthening the profit structure, theCompany seeks to achieve an ROE of 5% by Fiscal Year 2020.
Overview of Measures
Business

Withdrawal from non-profitable businesses (increase efficiency ofunderperforming operations)
Optimize organizations and headcounts
Evaluate and concentrate on key projects with solution business initiatives
Expand the Renesas business
Introduce business model to change the technical support function to the profitcenterALM(Asset and LiabilityManagement)

Reduce inventory volume and minimize US$ borrowing
Streamline control function and minimize head office space usage
Disposition of non-working assets including investment securities

Through the measures listed above, the Company seeks to reduce fixed costs by 1,300 million yen from Fiscal
Year 2020. Details of measures such as headcount optimization and the financial impact of such measures will beannounced as appropriate once an outline has been finalized. Also, after the implementation of measures toenhance profitability, new medium-term business plan is scheduled to be released for Fiscal Year 2020.
3. Future Prospects
The Company expects temporary expenses for implementing measures to enhance profitability to be 900 million
yen in Fiscal Year 2019. The impact of these temporary expenses on financial results is included in theConsolidated Earnings Report for Fiscal Year 2019 released today. Furthermore, as already stated in said
Consolidated Earnings Report, annual ordinary dividends in Fiscal Year 2019 will be 100 yen in order to enhance
profitability.
4. Management Responsibility
Compensation for Directors (excluding Outside Directors) and Senior Executive Officers will be reduced by 20%
in Fiscal Year 2019.
In addition to clarifying management responsibility, the Company will make changes to members appointed
as Directors (excluding Audit and Supervisory Committee Members) in order to ensure implementation ofmeasures to enhance profitability and reform business structure.
Current Position

New Position

Representative Director,
Executive Chairman

Naoto Mimatsu

Representative Director,
President

Hiroyuki Kurihara

Representative Director,
President

Hiroyuki Kurihara

Director,
Senior Executive Officer

Iwao Sakamoto*Director,
Senior Executive Officer

Kazunori SatoDirector,
Senior Executive Officer

Masahide Nishiura

Director,
Senior Executive Officer

Masahide Nishiura

Director,
Senior Executive Officer

Kazuhiko Inaba*Scheduled to resign from his position as Director (Full-time Audit and Supervisory Committee Member) at theconclusion of the 63rd Ordinary General Shareholders’ Meeting to be held on June 25, 2019.
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