Introduction

Strategy

Top Message

VisionStrategy

Materiality

Close-up

Governance

Data

Financial Strategy
Medium-Term ’21 Plan: Financial policies and targets
In the medium-term business plan, the Medium-Term ’21 Plan,announced in 2021, Toyo Tire Corporation set out its future vision
for three management platforms (digital and IT infrastructure,sustainability management, and organizational and humanresource infrastructure) designed to create value through thesolution of social issues and ultimately generate sustainablecorporate growth. Right now, we are steadily progressing eachmanagement platform and earnestly working to strengthen thefinancial base that underpins these platforms.
We intend to pursue stable management, even when facedwith an uncertain and rapidly changing economic environment bypromoting measures designed to: improve capital efficiency by
scrutinizing our business assets; achieve cash flow-focusedmanagement by strengthening our power to create cash andaccelerating cash cycles; and ensure financial soundness, andbuild a robust financial base that will contribute to improving ourcorporate value through KPI management.
In terms of concrete targets, we have set targets in theMedium-Term ’21 Plan for a consolidated operating income
margin of 14% or more and consolidated operating income of 60
billion yen in fiscal 2025. We have also set a minimum 55% sales

Financial situation

composition ratio for priority products, which is vital for achieving
the aforementioned targets. We are promoting initiatives tomaximize our strengths in order to increase profitability. In fiscal
2023, we achieved consolidated operating income of 76.9 billion
yen, ahead of the target of the Medium-Term ’21 Plan, and ourconsolidated operating income margin was 13.9%.
As a manufacturing company that utilizes machinery,equipment, and other assets to increase earnings, we arefocused on improving our return on assets (ROA). Furthermore,
we set a minimum target for return on equity (ROE) of 12% during
the medium-term plan because we are moving into a newcorporate stage, and clarified our policy for improving capitalefficiency as well as profitability. Each month we review our ROE,
together with our consolidated operating income andconsolidated operating income margin, and hold internal
discussions on ways to achieve our targets. The ROE for fiscal
2023 was 20.2%.
We are determined to improve our own unique corporate
value, which focuses on enhancing quality, by continuously
pursuing these financial policies and targets.

(Millions of yen)

FY2021

FY2022

FY2023

Total assets

531,229598,889

645,480

Equity capital

279,954

320,683

395,199

Cash and cash equivalents at end of the year

53,592

41,60052,798Interest-bearing debt at end of the year

128,784

135,436

102,714

Capital ratio (%)

52.7

53.5

61.2

Payout ratio (%)

28.3

25.7

21.3

Return on equity (ROE) (%)

16.5

16.0

20.2

Total assets / Return on assets (ROA)
Total assets

Earnings per share / Return on equity (ROE)

800
600
400

531.2
11.4

598.9

Stock price

Equity capital
Total assets

ROE
Earnings per share (EPS)= Net profit/total number ofissued shares＝

Net profit margin
Net profit＝

Net sales

Operatingincome margin

Depreciation andamortization ratio

Profitcoverage

Profitability index

Selling, generaland administrative
expense ratio

Total asset (total capital) turnover ratio
Net sales
Total asset (total capital)

Current assets
turnover ratio

Inventory
turnover ratio

Trade
receivables
turnover ratio
Productivity Indicators

Practice of KPI management implemented in each region and location

25

TOYO TIRE Integrated Report 2024

600

15

13.8
9.0

2022

20

10

2023

(FY)

Return on equity (ROE) (right scale)
(%)

40

469.4

450
300

5

150

0

0

268.6

311.5

16.5

16.0

2021

2022

30

20.2

20
10

2023

(FY)

0

Investment and financial strategies

Fixed assets
turnover ratio

CCC/SCCC

Cost of sales
margin

2021

(yen)

ROA

BPS

Price to earnings ratio (PER)= Stock price/EPS= Market capitalization/net profit

0

(%)

645.5

200

Building a strictly-disciplined, robust financial base for enhanced corporate value

Earnings per share

Return on assets (ROA) (right scale)(Billions of yen)

Current
liabilities
turnover ratio

We have established a policy regarding the allocation of capitalwith due consideration of shareholder returns, and formulated thecapital investment plans based on the tandem pursuit ofprofitability and potential growth. When considering capital
investments, we calculate the internal rate of return (IRR) basedon future cash flows and compare it to the most recent weighted
average cost of capital (WACC). As a general rule, management
decisions to invest are made only for projects for which the IRR
exceeds the WACC.
We plan to make capital investments of 194.0 billion yen overthe five years of the Medium-Term ’21 Plan. We intend to use
operating cash flow generated during the period, along withadditional procured funds if necessary, to cover the total amountof capital investment and shareholder returns.
Operating cash flow for fiscal 2023 increased by 86.5 billion
yen due to the accumulation of profit and improvements inworking capital while capital investments amounted to 34.1 billion
yen, including growth investments such as digital-related
investment and investment in a new plant in Serbia. Dividend
payments during the fiscal year amounted to 10.8 billion yen,which were covered within the operating cash flow. In fiscal 2024,

we expect to invest a total of 45.3 billion yen, which includes, inaddition to digital-related investments, new capital investments at
our U.S. plant and in R&D at our Serbia Factory. We will continue
to invest within the scope of our operating cash flow, and remain
disciplined to ensure that our free cash flow is stable and in asurplus.
In addition to the capital ratio and financial leverage, we will
make quarterly fixed-point observations on the turnover ratio oftrade receivables, inventory, trade payables, and others, toproperly manage the balance sheet and cash flow. Whilemaintaining strict financial discipline in that manner, we willconsider investing in strengthening our supply framework forlarge-diameter light truck tires as they harbor strong growthpotential given that light trucks and SUVs, areas in which we
excel, form the bulk of sales in the U.S. market, as well as indeveloping highly unique products that leverage our strengths.
Through these strategies, we will maintain and improve ourcurrent profitability, promote capital optimization, and return
profits to shareholders by increasing dividends in an effort to meetcapital market expectations.

TOYO TIRE Integrated Report 2024

26

Introduction

Strategy

Top Message

VisionStrategy

Materiality

Close-up

Governance

Data

Medium-Term ’21 Plan Progress
Growth investment
Regarding growth investment, we will promote investment that isessential for ensuring future growth in the medium- to long-term,
namely digital-related investment, market investment andinvestment in new R&D fields.
First, on digital-related investment, we aim to improve
profitability by reorganizing our enterprise resource planning (ERP)system, and seeking to strengthen global data governance by, forinstance, visualizing management resources and risks,
accelerating business processes and improving the quality of ourdecision-making.

Second, in terms of market investment, we will invest
management resources in building user-centric sales andmarketing, including digital marketing, engagement activities
designed to enhance our brand power and promotional activities
to expand sales.
Third, in terms of investment in new R&D fields, we will strive
to establish and commercialize technologies for next-generation
vehicles in order to create forms of sustainable mobility that areworthy of a carbon-neutral society.

Basic policy
The new Toyo Tire Group: Use our new global strategy to maximize corporate value

R&D

Environment and social (ES) investment
We expect to make further sustainability-related investments
going forward in order to promote a shift toward sustainability
management. Regarding decarbonization-related investments inparticular, it can be difficult to incorporate any CO2 reduction
impact into the profit simulation used for verifying profitability anddetermining whether or not to promote regular investment
projects. As a result, those investments may be consideredunsuitable in terms of sustainability management.
With that issue in mind, we introduced internal carbon pricing(ICP) on a trial basis in fiscal 2023. ICP is a good way to visualize

This section explains the progress made on our five-year medium-term business plan that we call Medium-Term’21 Plan. To help address the dramatic changes in our external environment, we are pursuing the plan’s goals by
coordinating R&D, production, sales and other functions on a global scale and demonstrating an ability to adapt
swiftly and ﬂexibly to change.

the impact of reducing CO2 emissions by translating that impact
into a quantifiable monetary value and incorporating that impact
into a quantitative model. We reviewed the performance of our
ICP-based decarbonization investments, and then decided to
introduce ICP as an official evaluation standard from fiscal 2024
based on external ICP price-setting trends. By considering theCO2 reduction impact as a monetary value in investment decisionmaking, we will strive to promote decarbonization-related
investment.

Build a foundation for advancing our global technologicalcompetitivenessProduction

Create a globally balanced supply framework with the launch of
our Serbia Factory

Sales

Expand contact with potential customers, enhance our uniquepresence in the market

New
corporate
stage[Corporate]
Realize effective coordination among R&D, production andsales functions
Establish a management platform to drive our growth strategies andenhance human resources<Corporate>
Strengthen business administration
foundation and support
Transform corporate governanceand compliance structures

Previous
corporatestage(past initiatives)<R&D, Production, Sales>
Strengthen areas of expertise
Demonstrate uniqueness
Shift to a function-based organization

Shareholder returns
In our new corporate stage, we will set policies for capital
investment and shareholder returns in addition to ROE indicators,
and we will pursue both profitability and efficiency in a wellbalanced manner.
As part of this policy, we aim to return at least 30% of profit,
excluding extraordinary profit and loss to reflect the actual
performance of the business, to shareholders as dividends. We
strive to provide long-term, stable returns to shareholders, taking
into overall consideration factors such as the ratio of dividends toshareholders’ equity and the actual amount of dividends.

Regarding specific dividends, we paid an annual dividend of
100 yen per share in fiscal 2023, an increase of 20 yen from theprevious year, and in fiscal 2024, we expect to pay 105 yen per
share. This will be done by adjusting for non-recurring special
gains and losses included in profit attributable to owners of theparent and linking returns to real profit that more closely reflects
actual profit values. We will work to realize a long-term stable
return in a payout ratio of 30% or more, calculated by excluding
special factors, in a way that both provides stability and reflects
business performance.

Progress on R&D, production and sales strategies

R&D
Strengthen our proprietary technology by joining up
the R&D of Japan, the U.S. and Europe to develop
highly preferable and differentiated products that meetenvironmental and other next-generation mobility needs

Production
Build a stable supply base for the North
American market and make the Serbia Factory
highly cost competitive

Sales
Enhancing our approach to strategic models by launchingoriginal products inspired by tailored strategies in North
America, Europe, Japan, and other Asia, and encouraging close
cooperation between our tire and automotive parts businesses

27

TOYO TIRE Integrated Report 2024

• Launched the industry’s first light truck tire for EV

Looking to reduce rolling resistance and improve cruising distances by conducting ourown unique aerodynamic simulations while maintaining the wear resistance anddurability required to support the high torque and increased vehicle weight of EVs• Developed a concept tire made from 90% sustainable materials• Started joint research on sustainable materials with the University of Novi Sad in Serbia• Installed final equipment in the Serbia Factory in December 2023

Actively developing the systems and training to support full production• At our U.S. plant, we are gradually shifting production of low-inch tires to other bases

and upgrading facilities so we can increase production capacity of large-diameter lighttruck tires• As part of our effort to streamline production of automotive parts, we stopped
production at our auto parts plant in the U.S. and transferred production primarily toJapan• Working to consistently strengthen our relationships with local dealers in the North

American market to gather more data on user needs, and leverage our dealer network
to promote sales of high value-added products• Continue to introduce sophisticated products primarily in the light truck tire segment• Focusing on direct digital marketing through social media, while also improving ourpresence and building a quality brand image by participating in motorsports activities
and signing sponsorship agreements with professional sports teams

TOYO TIRE Integrated Report 2024

28

Introduction

Strategy

Progress on key performance indicators

Capital Investment

2023 Results

Our targets

Operating Income 60.0 billion yen

76.9B yen

Operating Margin 14% or over

13.9%

ROE 12% or over

20.2%

Dividend payout ratio* of 30% or over27%

• Create differentiated products by further evolving our proprietary technologies• Effectively utilize the extremely cost-competitive Serbia Factory• Build a future-oriented supply platform through the global development of highly• Consistently develop high value-added products tailored to specific needs• Solidify and extend a dominant position in the large-diameter light truck tire segment

74.8B yen

80

Target income
60.0B yen

40

9.0
6.0

20

3.0

0

0

FY2022

FY20233-year avg.
30%

35%

17%

60

FY2021

Changes in ROE, Dividend payout ratio*

Target income
12.0
margin14% or over27%

76 yenFY2021

20%

16%

Dividend per share

80 yenFY2022

Data

100 yen

34.1B yen
FY202247.3B yen

4,558

5,000
4,000
3,000

3,066

5,054

5,170

2023

2024 (E)

3,546

2,000
1,000
0

2020

2021

2022

We worked hard to expand sales of priority products such as large-diameter light truck tires in the North American market, resulting in
year-on-year increases in unit sales and revenue in fiscal 2023.

FY2021

North America proportion of
total sales (FY2023)

Changes in Percentage of sales frompriority products

Target ROE
12% or over

40

60

Ratio of priority products to total sales
in North America (FY2023)

FY202367%

FY202342%62%

Target41%

Target53%

51%

FY2021

FY202258%

63%% of sales frompriority products
55% or over20
0

Ratio of units sold toNorth America (FY2023)

FY2023(%)
100
80

FY20236,000

FY2023

Dividend Payout
Ratio Policy
30% or over

* Calculated based on actual net income excluding

Net sales (billions of yen)

FY2023 review

37.8B yen

30%

Governance194.0B yen

63%

(%)
15.0

Close-up

Basic strategy

5-year total CAPEX(3-year avg. 30%)

% of sales from priority products 55% or over(Billions of Yen)
100

Materiality

in North America

FY2024-2025

Operating Margin

Strategy

efficient production systems modeled on the Serbia Factory

Achievement and progress of targets (FY2023)

Operating Income

VisionProgress of Tire BusinessWe are accelerating some measures set forth in the Medium-Term ’21 Plan such as the promotion of sales of priority products that offer highadded value and the streamlining of business structures in the automotive parts business. Furthermore, we achieved most of the plan’stargets ahead of schedule in fiscal 2023 thanks in part to a boost from external factors such as foreign exchange rates. Going forward, we
will continue to promote various measures to reach the remaining targets that have not been met, and to further progress the targets thathave already been achieved.

Changes in Operating Income, Margin

Top Message

FY2023

Priority products: Tire product categories that
epitomize Toyo Tire’s strengths and that are vital forachieving our targets for operating income andoperating income margin, such as new products,
core products, and differentiated products

Target58%

In the European market, unit sales declined year on year partly due to the impact of the Russia-Ukraine situation, tighter monetary policies,
and the continued economic slowdown caused by higher prices. In the Japanese market, new vehicle production recovered, but sales of
winter tires were stifled by warm winter weather. As a result, unit sales were flat year on year in fiscal 2023. However, revenue increased
thanks to more prevalent price increases and a higher ratio of priority product sales.

The external environment and future outlook

extraordinary gains/losses

Progress on Digital transformation
We position digital transformation (DX) as a set of initiatives
designed to back up efforts to improve our corporate structure
and to steadily realize the growth strategy laid out in MediumTerm ’21 Plan. Our Digital Transformation Headquarters, which
was established in 2021, promotes digital innovation thatenhances company-wide cross-departmental cooperation. And,the headquarters is made up of designated DX personnel fromeach function who serve as intermediaries for promoting DX. We
are also establishing a framework for DX education together with
the Human Resources Department to increase the number ofpeople with the right mindset and skills to fully comprehend andeffectively utilize precious data.
Regarding the DX initiatives which are divided into threestages and promoted: (1) Strengthening management platforms,(2) Improving profitability and (3) Enhancing value, we are steadily
advancing initiatives in the first stage of strengthening
management platforms, and are now starting to implement the29

TOYO TIRE Integrated Report 2024

second and third phases that will lead to improved profitability
and enhanced value. We are in the process of establishing an
integrated digital strategy that leads to both customer-oriented
manufacturing and highly profitable operational management inorder to support our overall growth strategy.

Regions

Production/Supply

Restructuring systems,
building digital platforms

2023 Light trucks:

76%

15
10

DX
(1) Strengthening
management platforms

Breakdown of new vehicle sales in the U.S. market(million 2012 Light trucks:
units)
49%
20

Growth strategy
R&D

The United States is a major sales region for Toyo Tire Corporationin which the ratio of small trucks to total new vehicle sales remains
comparatively high at roughly 75% of total sales in fiscal 2023. Our
company has a strong presence in the light truck replacement tire
market, where demand is expected to increase in future.

(2) Improving profitability(3) Enhancing value

Data-driven management,
increasing operational
efficiency

Innovating products andservices, enhancing value
we provide

We also expect to see stable tire replacement demand inJapan and Europe, which both boast a high level of automobile
ownership. Regarding new vehicle sales, we are seeing an
increase in SUVs and a tendency toward installing larger diameter
tires in new vehicles. We consider these trends as a great
opportunity for expanding sales in areas in which we excel.
Requirements for tire performance will likely change and growmore sophisticated as the source of powering vehicles diversifies.
Furthermore, the creation of new forms of mobility, such as green
slow mobility, may require unprecedented new tire performance.
Green slow mobility is a small mobility service that uses electricvehicles permitted on public roads that are capable of speeds up
to 20 km/h to help alleviate social issues such as last-milelogistics and an aging population.

502012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Light trucks

Passenger cars

Medium-sized trucks, etc.

TOYO TIRE Integrated Report 2024

30

Introduction

Strategy

Individual measures

R&D• Develop tires with high environmental performance to help
improve the fuel efficiency of automobiles• Develop products that set us apart from other companies by fully

VisionStrategy

Materiality

Close-up

Governance

Data

Production
Blending eco-friendly technologies andsophisticated features
Our goals for EV
Gas-powered cars

• Operate our Serbia Factory at full capacity to ensure timely supply to the European market and stable supply to the North American
market• Increase production at our U.S. plant of large-diameter light truck tires that are expected to witness even higher demand in the North

Environmental
impactAmerican market• Realize optimal global supply systems centered around efforts to establish production systems at the Serbia Factory and expand• Develop technologies and products to handle the low tire noise,

instant torque, and heavier body mass, due to the use of motors
with the spread of EVs

Top Message

production capacity at our U.S. plant

Lower Treadwear

Quiet Ride
Capturing robust
demanddemonstrating our unique commitment to the joy of driving andoffering of design features

Supplying to the U.S.

Joy of driving

DesignLocal production
for local consumption

Local production
for local consumption

Supplying to Europe

Supplying to the U.S.

Sales

Serbian Plant
U.S. Plant• Promote sales activities with a focus on large-diameter tires for

New plant starts production
Supply of low-cost, high-quality tires

Further bolstering supply
capacity

light trucks, in which we have a strong presence, bystrengthening cooperation with national dealers with nationwide
dealership networks

Wide light truck tires• Expand brand recognition and fan bases through direct

marketing that maximizes social media and other digital tools,
and participation in motorsports

Production bases shift
Passenger vehicles tires• Increase our focus on product categories in which we excel inJapan, Asia, and Europe and concentrate on developing
differentiated products

Our Brand

A brand that pursues a degree of excitement and surprise thattranscends expectations and satisfaction with its unique
imaginative sense and technological prowess, and makes
driving ideals a reality. Toyo Tires offers a full product range
from passenger car tires, light truck tires, and truck and bus
tires.

31

TOYO TIRE Integrated Report 2024

A brand that heeds the opinions of car enthusiasts, remains
true to its motto of creating what customers really want, andoffers an exquisite mix of freedom, innovation, and creativity.
Nitto always strives to set trends by anticipating market needs
through in-depth analysis of customer feedback, which leads
to an overwhelming reputation in its own niche market.

Expand capacity at our U.S. plant

Full production at Serbia Factory

We intend to satisfy replacement tire demand for pickup trucks
and SUVs, which is expected to continue to grow going forward,
by increasing production ratios of large-diameter light truck tires
at our U.S. plant.

We will establish a stable production system and promote various
measures to ensure production is kept within the estimated costs.
We will seek to increase market credibility by providing a stablesupply of products to the North American market, shortening leadtimes to swiftly meet European demand and supplying highperformance tires.

TOYO TIRE Integrated Report 2024

32

Introduction

Strategy

Top Message

VisionStrategy

Materiality

Close-up

Governance

Data

Financial Highlights
Progress of Automotive Parts BusinessNet sales

Operating income / Operating income margin
Operating income

Basic strategy• Establish a superior position as a system supplier by organically linking
tires and automotive
parts

50

• Encourage product30

use in next-generation
mobility vehicles andother strategic models(Billions of yen)600

Net sales (billions of yen)
40

37.1

39.0

41.3

47.4

450

10

Engine Mount

Motor Mount

Bush

377.5

343.8

(Billions of yen)
80

552.8

2020

2021

2022

2023

30

53.1

40

150

(%)
40

76.9

60

393.6

300

20

0

497.2

43.0

Operating income margin (right scale)

38.4

36.3

10.2

10.6

44.0
20

13.9

13.5
8.9

20

10

2024 (E)

0

0
2019

2020

2021

2022

2023

0
2019

(FY)

2020

2021

2022

2023

(FY)

FY2023 review
We moved into the black in fiscal 2023, two years ahead of the
fiscal 2025 timeline, by terminating production of auto parts at our
U.S. plant and generally streamlining our business structure,continuing our cost-cutting activities, and passing on fluctuations

in raw materials prices. Going forward, we will be looking to
generate consistent profits and improve profitability by further
rationalizing production systems, reducing costs, and developing
and selling high value-added products.

Profit attributable to owners of parent /Profit attributable to owners of parent margin

Total assets / Return on assets (ROA)

Profit attributable to owners of parent
Profit attributable to owners of parent margin (right scale)(Billions of yen)80

The external environment and future outlook
Automobile production is recovering now that the disruptions in
supply chains and shortages of semiconductors caused by the
COVID-19 pandemic have dissipated. From a medium- to longterm perspective, requirements for automotive parts’ performance
will likely change and grow increasingly sophisticated as vehicle
power sources and mobility modes diversify. The proportion ofbattery electric vehicles (BEVs) is expected to rise in the future,
but demand for hybrid electric vehicles (HEVs) is also proving
strong. While demand for EV motor mounts and other EV-specificparts is increasing, we expect demand for our engine mounts andother main products to remain solid.

Achieve a stable profit in the automotive parts business
Having turned a profit in the automotive parts business earlier
than planned in fiscal 2023, we will strive to ensure stable profits
and generate greater profitability by consistently implementing
improvements under a new streamlined framework anddeveloping high value-added products.

Collaboration with tire businessToyo Tire Corporation is engaged in two businesses that are vital to the mobility sphere,
namely tires and automotive parts. Future performance requirements for tires andautomotive parts will undoubtedly grow more diverse. We will strive to enhance ourtechnological prowess and to develop and propose high value-added products byacquiring additional expertise and information through joint development projects andtechnical exchanges with automakers.
In addition, we will gather timely auto-related information to help anticipate andspeedily develop the advanced technologies that future generations demand. Any
information that we collect will also be shared with the tire business to help develop tires
that satisfy the latest needs and trends.
We remain committed to pioneering the development of a mobility society through ourown unique approach that features close collaboration between our tire and automotive
parts businesses.

33

TOYO TIRE Integrated Report 2024

41.4

40
24.5
20

(%)
40

72.3

60

6.5

11.7

2019

2020

30

48.0

10.5

9.6

2021

2022

13.1

3.4

0

2023

Link between tires and automotive
components[Making an impact on the mobility industry]

10

200

0

0

(FY)

224.5

222.7

47.5

49.5

200

Establishing a competitive
advantage as supplier

52.7

(%)
20

468.7
7.8

320.9

395.2

(%)
80

(yen)

61.2

65

450

50

2019

11.4

645.5
13.8

9.0

15
10

2020

2021

2022

2023

(FY)

0

Return on equity (ROE) (right scale)

(%)
40

600

469.4

300

268.6
13.0

150
161.4

0

20
2021

6.8

53.5

35

2020

445.6

598.9

5

Earnings per share

100

2019

531.2

Earnings per share / Return on equity (ROE)(Billions of yen)
400
280.2

600
400

Capital ratio (right scale)

300(Billions of yen)800

20

Net assets / Capital ratio
Net assets

Return on assets (ROA) (right scale)

Total assets

2022

2023

(FY)

0

2019

311.5

16.5

16.0

2021

2022

30

20.2

20
10

5.3
75.9
2020

0
2023

(FY)

TOYO TIRE Integrated Report 202434