February 14, 2024
Name of Company: ISEKI & CO., LTD.
Company Representative: President, Shiro Tomiyasu
Code number: 6310
Stock exchange listing: Tokyo Stock Exchange Prime Market
Enquiries: Investor Relations Section
General Manager, Fumitoshi Suzuki(Telephone: +81 3 5604 7709)

Action to Implement Management that is Conscious of Cost of Capital and Stock Price

We hereby announce our action to implement management that is conscious of the cost of capital and stock priceas described below.
1. Current State Analysis
ISEKI’s price book-value ratio (PBR) has continuously remained below 1, standing at 0.34 as of December 31,
2023. We have broken down PBR into its components return on equity (ROE) and price earnings ratio (PER),
and arranged factors contributing to each of these through analyses using “comparisons over time with othercompanies in the same industry,” “opinions gathered from investors the Company is engaged with,” and othermethods.
(1) ROE
Changes in ROE over time show it has not reached the Mid-term Management Plan target of 8%. Factors
contributing to this underperformance have been identified as the low net profit margin and total asset turnover.
We believe that product-specific profit margins and SG&A ratio are among factors affecting the net profit
margin, and inventories, capacity utilization rates, and other metrics are among factors affecting total asset
turnover. Additionally, we have found that institutional investors, with whom we are in regular contact,
perceive our cost of equity to be approximately 8%.
(2) PERPER has not risen above a multiple of 10 since 2020. We attribute this to insufficient disclosure about our
growth prospects, strengths, profitability, and other information as well as discrepancies between projections
and actual performance.
(Change in ISEKI metrics)
PBR (multiple)
ROE (%)PER (multiple)
Net profit margin (%)
Total asset turnover (times)

2017/122018/122019/122020/122021/122022/122023/12

0.93
4.2
22.9
1.8
0.8

0.53
1.6
32.6
0.7
0.8

0.56
1.1
52.2
0.5
0.8

0.52
(8.8)
(5.5)
(3.8)
0.8

0.48
5.1
9.8
2.0
0.8

0.39
6.2
6.4
2.5
0.8

0.34
0.0
841.5
0.0
0.8

- 1 -

2. Striving to Improve PBRGiven the challenges identified in the current state analysis, we will steadily proceed to advance measures set
forth in Project Z, which is also under way, in our aim to achieve a PBR of 1 or higher by 2027.
Our vision (2027)

Consolidated operating margin
ROE
DOE

5% or higher
8% or higher
2% or higher

PBR of 1 or higher

Direction for improvement(1) Improve profitability(2) Enhance asset efficiency(3) Allocate cash for growth(4) Enhance IR activities & ESG initiatives
Measures for improvement▸ Project Z measures
Core themes■ Fundamental structural reform: Optimization of production and development, and intensification ofdomestic sales■ Growth strategy▸ IR activities and ESG initiatives■ Expand and advance dialogue and information disclosure■ Strengthen governance structure
3. Dialogue with Shareholders and Investors
To achieve sustainable growth and enhance corporate value over the medium- and long-term, we believe thatthe understanding of our shareholders and investors is essential. We will thoroughly explain our management
policies, engage in a constructive dialogue, and strive to build trusting relationships that endure over the longterm.
Officers in charge of business administration departments (Investor Relations Section, Corporate Planning
Department, Financial Department, and General Affairs Department) oversee these dialogues and strive toactively engage with shareholders, investors, and other stakeholders during financial results briefing sessions
and other opportunities.
For further details, please refer to the attached documents.

- 2 -Action to Implement Management that is Conscious of Cost of Capital and Stock Price

ISEKI & CO., LTD.
(Tokyo Stock Exchange Prime Market:6310 )February 14, 2024

1

Index１．Current State Analysis
２．Striving to Improve PBR
３．Dialogue with Shareholders & Investors2

Current State Analysis

Improving PBR

Dialogue

１．Current State Analysis

3Current State Analysis

Improving PBR

Dialogue

Current State Analysis: Change in PBR, ROE & PER Over Time◼ PBR has continued to remain significantly below 1, standing low at 0.34 as of December 31, 2023.
◼ The following trends have been identified based on changes in PBR components ROE and PER over time.
‒ ROE has trended below 8%, the Mid-term Management Plan target.
Based on interviews conducted for the current state analysis and evaluation, it was found institutional investors, with whom we are in regularcontact, perceive our cost of equity to be approximately 8%.

‒ PER has not reached a multiple of 10 since 2020.

PBR = ROE x PER

PBR (Multiple)

ROE (%)

In-depth analysis on next slide

10% 2025 (Final year of Mid-term Management Plan) ROE target: 8%

5.1%
1.0

6.2%

5%
0%

0.0%

4.2%
1.6%

1.1%

(5)%

(8.8)%(10)%

2017/122018/122020/122021/122022/122023/12PER (Multiple)

0.5

0.34 *10.0

2017/1

2019/122018/1
2017/12*1: As of December 31, 2023

2019/1
2018/122020/1
2019/122021/1
2020/122022/12021/122023/12022/122023/12

120.0
100.0
80.0
60.0
40.0
20.0
0.0
(20.0)

841.5

52.2
22.9

32.6

9.8

6.4

2021/122022/12(5.5)
2017/122018/122019/122020/122023/124

Current State Analysis

Improving PBR

Dialogue

Current State Analysis: ROE Analysis

ROE (%)
10%

ProfitNet sales

8%

6.2%

Manufacturing industry average: 5.5~9.1%

0.0%

0%

Net sales
Total assets

Substantial changes in the businessenvironment, including surging raw material
and energy prices
Profitability decreased significantly despite
diverse measures(4)%

We have strived to improve profitability under thecurrent Mid-term Management Plan launched in
FY2021 with a 5% operating margin target.

Total assets
Equity(8.8)%(10)%

2017/122018/122019/122020/122021/12(5.0)%
2018/122019/122020/122021/122022/122023/122022/122023/12

0.8

1.0
0.8

Manufacturing industry average: 0.8~0.9

0.6
0.4
0.2
0.0

×

(6)%

(8)%

0.0%
0.0%

2017/12Financial leverage(multiple)

1.1%

Total asset turnover(times)

1.6%

(2)%

Manufacturing industry average: 4.5~6.9%

×

4.2%
4%

2%

5.0%

2017/12

5.1%

6%Net profit margin (%)◼ Factors identified as holding ROE down are the low net profit margin and total asset turnover.
－Product-specific profit margins and SG&A ratio are factors affecting the net profit margin.
－Inventories, capacity utilization rates, and other factors are affecting total asset turnover.

2018/122019/122020/122021/122022/122023/12

3.1

4.0
3.0
2.0

Manufacturing industry average: 1.4~2.1

1.0
0.0
2017/122018/122019/122020/122021/122022/122023/12(Note) Manufacturing industry average represents a range of values from FY2017 to FY2022.

5

Current State Analysis

Improving PBR

Dialogue

Current State Analysis: Summary◼ PBR components were broken down, and factors contributing to the low level were arranged through analysis using“comparisons over time with other companies in same industry,” “opinions gathered from investors the company isengaged with,” and other methods for each of the components.
Current state analysis perspective
Profitability

Key analysis results✓ The profit margin/operating margin is lower than other companies and the level has not lived
up to investors’ expectations.
✓ Capital profitability has not risen to exceed investors’ expected cost of equity.

ROE

Asset
efficiency
Capitalstrategy✓ Limited progress has been made on sales and profits despite the higher allocation ofoperating cash flow to investments compared to other companies, so the fixed asset turnoverhas been low.
✓ The turnover period for inventories has been longer than other companies.

Direction forimprovement

Improve
profitability

Enhance asset
efficiency(incl. financial leverage)

PBR✓ Along with both sales and profits, the growth rate has trended lower than other companies.
Growthexpectations

PER

Information
disclosure/
dialogue✓ The proportion of overseas sales lags behind other companies.

✓ The payout ratio and other shareholder returns trend lower than other companies.
✓ The debt repayment periods are long, necessitating attention to financial soundness.
✓ Insufficient disclosure of profitability differences and strengths between domestic and overseas.
✓ Insufficient disclosure of action targets for achieving management goals.

Cost of capital

Allocate cash
for growth✓ The disparity between projections and actual performance is considerable, reducing the credibility of
projections.
✓ Governance needs to be strengthened.

Reinforce IR
activities &ESG
initiatives
6

Current State Analysis

Improving PBR

Dialogue

２．Striving to Improve PBR

7

Current State Analysis

Improving PBR

Dialogue

Striving to Improve PBR : Summary
Consolidated operating margin: 5% or higher
ROE:
8% or higher
DOE:
2% or higher

2027

Measures set forthin Project Z

Fundamental structuralreforms<Core Themes><Direction for improvement>

Optimization of
production

・Optimal allocation of manufacturing sites andmodels produced
・Forward-looking capital investment
・Responding to environment and enhancing
efficiency

Optimization ofdevelopment

・Concentration of development resources
・Common designs to enhance efficiency

Intensification ofdomestic sales

・Consolidation to drive integration ofmanagement resources
・Redistribution of resources to growth markets
・Logistics improvements and inventory reduction

Sweeping
comprehensive
business structuralreforms

Growth strategy

IR activities and
ESG initiatives

Expand and advance dialogue and information disclosure
Strengthen governance structure・Overseas
・Domestic

Note: See “Project Z Measures” (announced on February 14) for more information about Project Z.

PBR of 1 or higher

Deployment of strategy specific to eachregionLarge, cutting-edge, environment, dry
fields

Improve profitability

Enhance asset efficiency

Allocate cash for growth

Enhance IR activities& ESG initiatives
8

Current State Analysis

Improving PBR

Dialogue

Growth Story
PBR
1 or higher

Project Z

2025

Vision2027[Short-term focused measures][Fundamental structural reform][Growth strategy]

Smart & Sharp

Address demand and build up capabilities.
(1) Improve profitability(2) Enhance asset efficiency(3) Allocate cash for growth

Operating margin
5% or higher
ROE
8% or higher
DOE
2% or higher

To be aSolution
Provider for
Agriculture&
LandscapeGrowthLeverage ISEKI technology to realize on a global scale(1) Automation & labor savings(2) Reduced impact on the environment for agriculture and landscaping.
9Current State Analysis

Improving PBR

Dialogue

Profitability Improvement◼ We will accelerate advances in revenue management, implement short-term focused measures,and pursue a growth strategy to enhance profitability.

Sweeping
comprehensive
business structuralreforms[Our vision (2027)]✓ Operating margin: 5% or higher✓ ROE:
8% or higher✓ DOE:
2% or higher＜Core Themes＞
Fundamental
structural reform・Optimize production✓ Implement shortterm focusedmeasures

Integrate manufacturing company management(July 2024)

Improve product-specific profit margins
Integrate management of wide-area sales companies(January 2025)

・Optimize development
・Intensify domestic sales

Growth strategy

Overseas: Deploy strategy specific to each region✓ Pursue a growthstrategy

Concentrate
management
resources

Domestic: Large, cutting-edge, environment, dry fields

Business portfolio✓ Upgrade revenue
management to narrow down focus areas
10Current State Analysis

Improving PBR

Dialogue

Asset Efficiency Enhancement◼ We will enhance asset efficiency through inventory reduction and investment decisions based on
hurdle rates.
✓ Improve fixed asset turnover

Fixed asset turnover (times)

4.0

3.0

➢

Make investment decisions based on hurdle rates

・Hurdle rate = Cost of capital + margin・Asset management to be revised annually➢

Reorganize business units and reassess production

2.0

1.4

1.4

1.4

2018/122019/12

1.5

1.6

1.7

1.7

2020/122021/122022/122023/12

1.0

lines
0.0

Sweeping comprehensive
business structuralreforms[Our vision (2027)]✓ Operating margin: 5% or higher✓ ROE:
8% or higher✓ DOE:
2% or higher

2017/12* Estimated to remain flat in 2027 due to growth investment✓ Improve inventory turnover

2027/12Inventory turnover (times)

7.0
6.0
5.0

➢

Reassess distribution and procurement strategies

4.0➢

Reorganize business units, consolidate models, and3.0

reassess production lines to reduce inventories

2.1

2.0

1.9

2.0

2017/122018/122019/122020/12

2.2

2.0

1.8

1.6

2022/122023/12

2.4
●

1.0

* Improve to 2.4 ASAP (two-month reduction)

0.0
2021/122027/1211

Current State Analysis

Growth Strategy

Improving PBR

Dialogue

Cash Allocation for Growth◼ Generate operating cash flow through improved profitability and enhanced asset efficiency and allocate that cash flow to structural reform,
growth investment, and shareholder returns. Although interest-bearing liabilities will increase through 2027, the level will decrease moving
forward to 2030.

Improve
profitability

Generate
operatingcash flow

Sweeping comprehensive
business structuralreforms[Our vision (2027)]✓ Operating margin: 5% or higher✓ ROE:
8% or higher✓ DOE:
2% or higher

Enhanced asset
efficiency✓ Structural reform &growth investment➢

Strategic priority growth areas
Large-scale, dry fields, environment,
cutting-edge, overseas➢

Human capital➢

System investment➢

Structural reform<Cash Allocation>■2024 ~ 2027 (4-year cumulative total)■2028 ~ 2030 (3-year cumulative total)✓ Shareholder returns

Loans payable

OCF

Structuralreform,growthinvestment, etc.

Reduction inloans payable

OCF
Shareholder
returns

Structuralreform, growthinvestment,
etc.

Shareholder
returns✓ Reduction in interestbearing liabilities
12Current State Analysis

Improving PBR

Dialogue

Enhancement of IR Activities & ESG Initiatives◼ We will enhance and strengthen activities to promote better understanding of our growth strategy
and reduce the cost of capital.

IR
Activities✓Expand and advance dialogue and information
disclosure➢ Enhance disclosure of qualitative & quantitative information andenable progress to be visualized➢ Proactively initiate dialogue (individual meetings, facility tours, etc.)✓Strengthen governance structure

ESG
Initiatives➢ Revise directors’ compensation system (FY2022~)➢ Strengthen oversight functions (diversify the Board of Directors)

13Current State Analysis

Improving PBR

Dialogue

３．Dialogue with Shareholders & Investors

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Current State Analysis

Improving PBR

Dialogue

Dialogue with Shareholders & Investors (FY2023 Results)◼ Attributes of Dialogue Partners
Overseas
11.1%

ESG
8.3%

Selling side
47.2%

Domestic／
Overseas

Domestic 88.9%

Fund manager
27.8%
Area ofresponsibility

Selling side／
Buying side

Buying side 52.8%

Analyst 63.9%◼ Principal Topics & Concerns

・ISEKI Group’s strengths
Performance
Management
strategy

・Business demand trends

・Status of climate change response

ESG

・Composition of directors

・Medium-term measures and progress・Management conscious of cost and efficiency of capital・Business portfolio-related management systems

・Status of human capital-related initiatives

Share price &shareholder
return・Stock price & PBR challenges and responses

・Direction of shareholder returns
15

Current State Analysis

Improving PBR

Dialogue

Dialogue with Shareholders & Investors (FY2023 Results)◼ Dialogue Opportunities & ISEKI participants
Description

ISEKI participants

Ordinary General Meetings ofShareholders

All directors and corporate auditors

2023 Results

Method, etc.

1 meeting

Held in-person

Financial results briefing sessions

All executive directors

4 sessions

・Held online or hybrid・Briefing materials and Q&A summary madeavailable on website

Individual meetings

Director in charge of investor relations,
Director in charge of finance, General
Manager of Public & Investor Relations
Section, General Manager of Financial Dept.

21 meetings

Online or in-person dialogue

Business briefings

President and Representative Director,
Director in charge of investor relations, etc.

(Held in 2022)

Held online

Facility tours & new product launches

President and Representative Director,
Director in charge of investor relations, etc.

2 events

Held in-person

Facility tours for individual shareholders

President and Representative Director,
Director in charge of general affairs, etc.

1 tourHeld in-person

Inquiry responses

IR Section, General Affairs Dept.

As needed

Dialogue through website, telephone, email, etc.

(Reference information) Interviews withinstitutional investors and securities
analysts

Handled by outside contractor

5 sessions

Online dialogue
16

Current State Analysis

Improving PBR

Dialogue

Dialogue with Shareholders & Investors (FY2023 Results)◼ Feedback Provided to Management✓ Public & Investor Relations Section provides reports and feedback
・Opinions, interests, concerns, and other comments provided by shareholders and investors during dialogues are reported to management in a timely manneraccording to the context.
・Feedback about our businesses is provided to the relevant business units as appropriate, which is then reflected in business activities to make improvements.
Description

Individual meetings with investors and analysts
Opinions, requests, etc. from shareholders andinvestors
Share performance metrics & stock price information
IR activity reports

Other reports (related to shareholders and investors)

Reporting method

Frequency

TargetWritten reports detailing meeting summaries

Each occasion

All directors

Reports detailing meeting summaries, stock performance, etc.
discussed at public relations liaison meetings

Monthly

Members of Directors’ Operation
Committee

Reports detailing meeting summaries, stock performance, etc.
discussed at Board of Directors meetings

Quarterly

Members of Board of Directors

Reports detailing topics of high concern to shareholders andinvestors as well as opinions voiced at high-level meetings

Monthly

President and Representative Director,
Director in charge of investor relations

As necessary, reports detailing shareholder structure,stockholdings and other trends pertaining to institutional investors
and others

Each occasion

Members of Directors’ Operation
Committee and others◼ Example of Comments Incorporated from Dialogue
Opinions, request, etc.
Reassess and improve items relating to human rights andconflict minerals in CSR Procurement Guidelines

Our response
CSR Procurement Guidelines revised in November 2021 to specify responsible mineral procurement be conducted as well
as forced and child labor eliminated. (Reference) Iseki Group CSR Procurement Guidelines

17

Notes on the Future Forecast• The objective of this presentation document is to provide information and never intends to induce any action.
• The document was created by ISEKI with currently available information and it involves potential risks anduncertainties. The forecast may not be consistent with actual results depending on fluctuation of the economic
situation and market trends.
• In using this information, investors are expected to depend on their own judgment. ISEKI is not liable for any
losses incurred by investment decision made utilizing the business forecast or targets given in this document.

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