Management Focusing on Capital Cost & ROIC
Utilization and Our Definition of ROIC

Global Investment Executive Meeting Committee. We haveestablished a system to evaluate the certainty of returns

Alongside ROE as the traditional management metric,

based on ROIC by setting hurdle rates that take into account

Bridgestone set ROIC that evaluates return on investment

country and business risk, and discussing them with theand capital efficiency as the most important management

global management team.

KPI in the 21MBP, and thus we are promoting management

Results and Remaining Issues in
ROIC Improvement Activities

focusing on capital cost. ROIC is a financial metric thatmeasures how much profit a company generates in relation
to invested capital in its business activities. The basic
formula used by Bridgestone to calculate ROIC is as follows.

As part of the 21MBP, we maintained our ROIC improvement
activities using the ROIC tree, however failed to reach ourROIC =Adj. operating profit (after tax)

global ROIC target of 10%. In the 24MBP, we will further

Working capital + Non-current assets(Invested capital)

reinforce the ROIC improvement activities as well as drive
reinforcement of earning power across the entire value
chain. By evaluating performance based on ROIC for each

Adjusted operating proﬁt (after tax): Fixed tax rate of 30%

business and region and implementing the PDCA cycle, weWorking capital: Notes and accounts receivable and other assets + Inventories‒ Notes and accounts payable and other liabilities (FY-end balance)

aim to achieve the level of 10% of our ROIC target, which

Noncurrent assets: Non-current assets excluding deferred tax assets(FY-end balance)

remains an issue from the 21MBP.
To achieve our goals, we are aiming for improvements in

ROIC Improvement Activities

each management item of the ROIC tree. Regarding grossprofit margin in the adjusted operating profit ratio, we areTo promote the adoption of this ROIC concept at on-site level

introducing Dan-Totsu products, expanding sales of premiumand facilitate the implementation of improvement activities,

tires, creating value by fusing “new premium” ENLITEN and

the Financial Strategy Division at the global headquarters

BCMA, and further reduce deficit and unprofitable areas. Inoversees global activities as the secretariat. In line with this,terms of operating expense ratio, we are continuing to reduce

we are initiating its implementation that values Bridgestone-business costs through global SCM logistics transformation

like Genbutsu-Genba (respect for being on-site) approach,and steady on-site productivity improvement, in addition tothrough sharing improvement case studies with ROIC

thorough cost management. On the other hand, regarding

ambassadors at TQM Conferences. In daily activities, wethe cash conversion cycle, which is a component of investedpromote autonomous improvement activities at each site bycapital turnover ratio, we are enhancing inventory

focusing on both the numerator (profit) and denominator

management to rapidly adapt to demand and sales(asset) and setting management items based on the ROIC

fluctuations. For fixed asset turnover, we are executing thetree. In addition, with a view to establishing a structure for2nd stage of rebuilding and further improving the efficiency

investment and resource allocation that focuses on capitalof existing assets through periodic reviews of land,cost, we have established Global M&A Executive Meeting andbuildings, and strategic shareholdings.

● 24MBP Targets Leveraging the ROIC Tree

ROIC (>capital cost)
2023

8.7%

2026

10% level

Gross profit margin

Adj. operating profit(after tax)*1

2023

7.8%

2026

9% level

Improvement

2026

2023

40% level

38.4%

Operating expense ratio
2023

2026

27.2%

Same as 2023

Deterioration

Cash conversion cycle*2

Invested capital turnover

2026

2023
2023

1.12times

2026

1.15 times

161 dayslevel

150 days level

Fixed asset turnover2023

1.63 times*1 Fix tax rate of 30%*2 Cash Conversion Cycle (CCC) = Days of inventory outstanding + Days of sales outstanding – Days of payables outstanding

2026

1.65 times levelBridgestone 3.0 Journey 2024 Integrated Report87