Message from the Director in charge of financial affairs

12
Unifying thinking

3

Developing strengths(invisible assets)

4

5

Picturing the desired future

Developing strategies, acting andrepeatedly evaluating and improving

Evaluation analysis for achieving the vision

Message from the Director in charge of financial affairs

Improving capital efficiency toenhance our corporate value

We would like to improve total asset
turnover by increasing the efficiency
of investments, including capital andR&D investments, and at the same time,
controlling inventories and other current
assets to keep them at appropriate levels.
The Tokyo Stock Exchange hasrequested the “action to implement
management that is conscious of cost ofcapital and stock price.” While our costof capital is approx. 8% at present, ROE
is currently a low 6.1%. We are promoting
initiatives to achieve an ROE that exceeds
the cost of capital. The first step will be
increasing ROA based on operating profit
to 8% in the operational departments
within three years, and we will strive tocontinue to improve profitability, withthe goal of increasing it to 10%. For thispurpose, we will work to fully understandthe current situation to see if our existing
activities are sufficient, and we willpromptly take measures for the points
that need to be changed.
It must also be noted that sustainability
management is an essential constituentof corporate value. We will give our full
attention to the environmental sector
and make the necessary investments. At
the same time, investment in intangible
assets such as human capital andintellectual capital is also an essential
factor for sustainable growth.
We will appropriate retained earnings
from profit-oriented initiatives in operating
activities to invest for future growth(capital and human resource investments)
in a well-planned manner, and at thesame time, we will continue to deliver
returns to shareholders in a wellbalanced manner.
We have a basic policy of continuing
to pay dividends stably with a target
dividend payout ratio of around 30%

Ratio of operating profit to net sales
Net sales (Left axis)

Total asset turnover

Masaki Fujiwara

30,000(Times)

Operating profit/net sales (Right axis)(in million yen)

Director and Executive Vice Presidentin charge of financial affairs(%)

24,36928,088

7.5
21,875

19,436of consolidated net profit. The forecast
annual dividend for FY2023 (fiscalyear ending March 31, 2024) is 40 yen
including 5 yen as a commemorative
dividend for the 90th anniversary. We
intend to use the rest as a strategic fundfor capital investment to accomplish theCG23 medium-term management plan,
the research and development of nextgeneration products and other purposes.

1.00

1.0

8

0.87

0.86

22,6755.8

5.8

15,000

0.83

0.75
40.79

1.2
2.102018We celebrated the 90th anniversary of
our founding in April 2023. However,
we must improve our growth potential
and profitability by more efficiently using
the invested capital as we look toward
our 100th anniversary. Further, we must
be a company which fulfills its socialresponsibilities. While it is necessary
for the Sansha Electric Manufacturing
Group to expand its business with thegoal of contributing in growth areas suchas the new energy sector to continue its
growth, we need to improve profitability
at the same time. Unfortunately, ouroperating profit ratio has been sluggish,

29

having remained below 10% for eight
consecutive years. To improve this, wemust take company-wide measures.
Against this background, we use returnon assets (ROA) based on consolidated
operating profit as a management
indicator and we are working to improve
the ratio of operating profit to net sales
and total asset turnover.
The improvement of the ratio ofoperating profit to net sales is dependent
on our ability as a manufacturer topropose solutions that enable customers
to achieve value. While we havebeen operating business leveraging

our readiness to fulfill the needs ofcustomers, which is a strength of ours,
we will build relationships which enable
us to appropriately profit by exploring thetrue needs of customers to offer benefits,
and at the same time, standardizing andproviding products. These activities need
to be carried out by not just the sales,
product planning, and development
departments but by the entire company,
including the manufacturing andsupporting departments. We will
enhance our initiatives focused on theimprovement of added value.

20192020

02021

202202018(FY)

Return on assets (ROA)
(%)

2019

2020

2021

8

Dividend payout ratio (Right axis)

(yen)

5.1

30

5.8(%)

30

28

42.3
30.0

41315

1.0

1550

25
30.0

31.5
25

1.700

2018

2019

(FY)

Annual dividends and dividend payout ratio
Annual dividends (Left axis)* Based on consolidated operating profit

6.52022

2020

2021

2022

(FY)

0

2018

2019

2020

2021

2022

(FY)

SanRex REPORT 2023

30