Strategy

Message from the CEO

The Growth Strategy for the 2023 Mid-Term PlanIn FY2023, we will accelerate toward achieving
the targets of our new medium-term
management plan.
we will carry the corporate DNA instilled
by our founder into the future.

Placing first priority on recovering trust,strengthening response to severe changes tothe business environment

Net Sales

Segment Profit(¥ million)(¥ million)

50０,０００412,21440０,０００388,360

381,584

3０,０００431,205

24,713
17,5752０,０００30０,０００

13,32520０,０００

1０,０００10０,００００2018

2019

■07

KAYABA Group Report 2023

2020

2021

2022０(FY)
■2018

2019

2020

2021

2022

Pursue creativity, contribute to society
on a permanent basis
Companies are being required to make stronger efforts
than ever before to meet their social responsibilities forenvironmental measures, such as developing environmentally friendly products and responding to carbon

2020 mid-term plan: Three years management plan from FY2020 to FY2022
2023 mid-term plan: Three years management plan from FY2023 to FY2025

Corporate Spirit
By providing technologies and products that make people’s lives safe and comfortable,
the KAYABA Group contributes to society
1. We shall follow all rules and face all issues with honesty.
2. We shall build a corporate culture full of vitality, and hold high goals.
3. We shall value kindness and sincerity, cherish nature and care for the environment.
4. We shall constantly pursue creativity to contribute to the prosperity of customers, shareholders, suppliers and society.

Management Vision

25,50022,010

328,037KAYABA’s Mission

In order to be a company that is indispensable to oursociety, quality and trust are essential. This goes beyond
simply the quality of products. It is important to sustain
quality in all aspects, such as by dealing with customers
and inquiries sincerely, making proposals based ontrustworthy technology, and providing reliable monozukuri. We aim to be company that our workers and theirfamilies can be truly proud of, that will make our customers and business partners glad to be part of ourmonozukuri journey, and that is loved by regional communities.
FY2023 is a year in which we will accelerate into thenew medium term. Grounded in our origin of providing
monozukuri that brings happiness, we are determined
to incessantly push our evolution forward, coming
together as a group to deliver monozukuri that satisfies
all our stakeholders.
We humbly ask for your continued support as wemove ahead with our endeavors.

Data

The three years since 2020 saw the spread of COVID-19
infections, a global semiconductor shortage, steep
increases in the prices of energy and materials, andsudden fluctuations to the exchange rate. The future
prospects for the manufacturing industry remain difficult to predict.
In the 2020 medium-term management plan (the2020 mid-term plan), we placed first priority on ourefforts aimed at recovering trust, under the slogan of“Regain Trust, Restore Pride.” As a result, the orders wereceived from customers returned to the level of before
the nonconforming acts, serving as proof of the trust
we have won back. We built new relationships of trustwith all of our stakeholders, and our hardworking employees have taken back the pride they feel in theircompany. I’d like to use this opportunity to once again
thank everyone involved in these efforts.
FY2022 was the final year of the 2020 mid-term plan,so we all worked together to make our very best efforts. We focused our energy on issues such as shiftingfrom emphasizing sales to emphasizing profits, revolutionary monozukuri that will support the future, plantand office reorganizations, and the reduction as well as
discontinuation of unprofitable business and products.
As a result, net sales and segment profits both exceeded our targets, achieving record highs.
The fact that we were able to increase profits amidst
a harsh management environment is proof that we haveeffectively strengthened KAYABA’s ability to respond toexternal changes.

Monozukuri that brings happinessBusiness Strategy

A Look Back on the 2020 Mid-Term Plan

Our Promise to Stakeholders

Value Creation

Representative Director,Chief Executive Officer (CEO)Strategy

Firmly rooted in our origin,

KAYABA’s founder, Shiro Kayaba, set forth the spirit of“creativity, love and vitality” as our basic principle. Thishas been passed down into our current Corporate Spiritof “offering products make people’s lives safe andcomfortable, and contributing to society.” I believe themission we have been entrusted with is to carry thecorporate DNA instilled by our founder into the future.
Under the new medium-term management plan, wewill once again return to our origin point, take measures
to put our Corporate Spirit into practice, and take on thechallenge of creating new value.
In the 2023 medium-term management plan (the2023 mid-term plan), under the slogan of “Take quality
management to new heights,” we will build a strong
foundation aimed at reform as we improve the qualityof human resources, information, products and services, and our work. Human resources are thefoundation of monozukuri. In the 2020 medium term,
while reinforcing the trust that we have built with all ourstakeholders so that it is unshakeable, we will encourage the energy and spirit of challenge in our employeesthat drives them to contribute to the development ofsociety and respond to new social issues, thereby
feeling satisfaction and joy in their work. I believe thatwill lead to further building the KAYABA brand, and tobringing our Corporate Spirit to life.

neutrality. KAYABA is working toward the target of“Reducing CO2 emissions volume by 50% compared tothe 2018 level,” showing our love of nature and constantawareness of contributing to the achievement of asustainable future. Also, major environmental changes
continue to occur, including the emergence of new EV
manufacturers, the acceleration of CASE, the withdrawal of companies from the Russian market.
I believe that the mission of the KAYABA Group is toquickly notice the signs and predict changes in thetimes, put our creative technical ability to good use byresolving issues faced by our customers and by society,and to continue contributing to the development of society on a permanent basis..

OverviewPutting our Corporate Spirit into practiceunder the slogan of “Mastering qualitymanagement,” building a base for reform(FY)

Note: Segment profit is calculated by deducting cost of sales and selling, general andadministrative expenses from net sales.

1.	Human Resource Development:	To develop human resources who have a thorough understanding of our policies and strategies and can accomplish our goals
with passion.
2. Technology and Product Development:	To offer products that gain the admiration, provide comfort and satisfy all of our customers throughout the world.
3. Monozukuri (Japanese Manufacturing Expertise): 	To operate plants filled with the creative inspiration of committed monozukuri, and joy of creating products that satisfy ourcustomers.
4. Management: To be always self-aware of our corporate social responsibilities and to pursue efficient management.

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08

Strategy2023 Medium-Term Management Plan

Mastering Quality Management

2020 mid-term plan: Three years management plan from FY2020 to FY2022
2023 mid-term plan: Three years management plan from FY2023 to FY2025

KAYABA will maintain the identity
it has had since its establishmenteven as we seek out new technologies.
We are aiming to be a company
that can provide a great dealof specialized proposals.

The Five Basic Policies▶Growth strategy

Development and launch of electrification
products
New customers / new market entry, create newbusiness▶Innovative
monozukuri

Innovative manufacturing initiative (Ship’30* p. 21 ):Automated production, transfer, and inspection
Visualization of production site information
through the utilization of AI/IoT▶Constant cost
reduction

Determining the optimal global production areas
in response to changes▶Environmental
Initiatives

Activities related to SDGs and sustainability▶CImproving
capital efficiency, Initiatives for improving PBR (ROE improvement)
and strengthening shareholder returns
strengthening
financial structure

Strategy

by remaining rooted in hydraulics,

Next, let’s turn to innovative monozukuri. Robot
manufacturing and the use of AI have been making
progress, and now we will look to drastically reduce
lead times and raise productivity through the installationof fully automated production lines. Also, we plan toincrease the quality of workplace information throughrendering information visible, and improve quality in themonozukuri process.
With manufacturers in China focusing on cost competitiveness, we will need to make greater efforts thanever before on cost reduction activities.
In our efforts for the environment, we are conducting
joint development with Toyota on the possible practicalapplication of an environmentally friendly hydraulic fluid.
Regarding our other products and production technology, we are engaged in product planning and thedevelopment of monozukuri aimed at the achievementof carbon neutrality, and will contribute to the creationof a sustainable society.

Overview

In the 2023 medium-term management plan (2023 mid-term plan), we will take quality management to newheights while raising quality throughout the entire Group by carrying out the five basic policies, thereby increasing corporate value.
We will strive to win the trust and satisfaction of all our stakeholders.

Note: S hip’30=Self handling innovation plant 2030
Creating an innovative self-handled plant by 2030

Value Creation

Growth Strategy by Area

Member of the Board of Directors, Senior Managing

Representative Director,and President Chief Operating Officer (COO)

Executive Officer, and Chief Financial Officer (CFO)

Our targets for 2025, the final year of the 2023 midterm plan, are as follows.
We did not establish a numerical target for ROE in theprevious mid-term plan. However, we have set one forthe 2023 mid-term plan for the purpose of improving
capital efficiency. Also, we will aim for a dividend payout
ratio of 30%.
FY2025 target

Net sales¥431.2 billion¥470.0 billion

Segment profit¥25 5 billion¥38.0 billion

Segment profit ratio

5.9%

8.1%

Equity ratio

40.9%

45.0%

Payout ratio

19.4%30.0%

ROE

16.2%

12.0%

Net sales and segment profit ratio(%)(¥ million)
8,000

7.2

8.1

5.9

6.2

4,312

4,500

4,600

4,7002022

2023

20242025

6,000

10.0
8 .0
6 .0
4.0

4,000

2,000０■ AC Operations ■ HC Operations ■ Other(FY)Segment Profit Margin

Basic Policies
First, let’s look at our growth strategy. Keeping with theglobal trend toward electric drive force and electric
controls already becoming mainstream, we are moving
forward with a system that can propose hydraulicproducts that incorporate electronic control technology.
We will continue to grow by developing the09

KAYABA Group Report 2023

electrification compatible products and systems forwhich we have been conducting R&D for many years, inparticular by expanding to reach international customers
and markets. We plan to become a company which
provides a great deal of proposals on which manufacturers will come to rely.

*DataFY2022

In the 2023 mid-term plan, we will aim to achievesales of ¥470 billion and a segment profit ratio of 8.1%
by observing the following basic policies and attaining
steady growth while thoroughly conducting qualitymanagement.

Business Strategy

Financial Targets

Our global growth strategy first involves entering theof local suppliers—an issue that all businesses face.
shock absorber market in India. Currently, we are proRegarding other regions in Asia, we plan to develop
ducing products by contracting with our partner
India and Vietnam into motorcycle manufacturing bases,
manufacturers in the country, but we are now planningwhich will secure cost competitiveness. And facing anto enter the market directly. Also, there is high demandissue that is common among businesses in the ASEANin India for products for agricultural machinery, so weregion, we absolutely must insource products andwill begin to conduct sales promotions to uncoverachieve local procurement.
business opportunities for HC Operations.
In the United States, AC Operations is launching
In Europe, the manufacture of our electronically coninitiatives to build KAYABA as a premium brand. HC
trolled suspension IDC* is concentrated in Spain, and weOperations will move forward with responding to
are responding to the forecast increase in demand. Also,increasing demand for construction machinery.
we are developing innovative manufacturing lines for saleon the market, and preparing to construct rationalized
IDC：Intelligent damping control
production systems.
In China, we will solidify ourAC Expansion of production
business foundation by introducing
AC Premium aftermarket
capacity for IDC SAEuropeAmericas
AC Operations to rapidly emerging
HC Local response to demand
Innovative
monozukuri
ACfor construction equipment
Chinese auto manufacturers. Also,
the joint venture electronic power
steering company we founded inAC Entry into Chinese manufacturers
FY2017 had been operating at a loss
China
HC/HC
Cost structure that can compete with local suppliers
due to quality issues, but it is now
achieving profitability. While actively
attracting inquiries for IDC, we willbuild a system that has the capacity
AC New Markeat Entry
AC Main motorcycle production baseto manufacture 2.5 million units byIndia
ASEAN
HC Expand sales of agricultural
HC/HC In-house production,
the end of 2025. Also, we will mainmachinery products
local procurement
tain our competitiveness by setting
AC: Automotive Components   HC: Hydraulic Components
prices that can compete with those
Global Governance SystemWe will work to strengthen our governance system
together with plant and office general managers in theUnited States, Europe, and China, as well as regional
headquarter executives at head offices. Recognizingthat it serves as the foundation from which we willproceed with our growth strategy, we will place more
focus on the essential task of strengthening governancethan ever before.

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Strategy

KAYABA’s Significance for the Future

Continuing to Contribute to Society
through Vibration Control and Power Control

2050

Overview

Amidst the major tides of the times, KAYABA will base its corporate activities on ESG management and create new value that contributes to society through vibration control andpower control. And we will continue to be a company that contributes to a sustainable
Decarbonized societysociety through activities that embody our Corporate Spirit and management vision.
• Net zero CO2 emissions
This fiscal year, we plan to construct a value creation process in addition to establishing our materiality.

• Achieving carbon neutrality

KAYABA’s Initiatives for the Future
Strategy• Contribute to a sustainable society• Complete Ship’30

p. 11• Apply cutting-edge technology such as AI/IoT• Construction and agricultural machinery:full electrification• Prohibition of sales of new gasoline-poweredvehicles• DX through collaborative innovation with existing technology
and new technology p. 22• Reduce GHG emissions volume by 50% (compared to 2018)p. 36~40

2030

Value Creation

EV shift• Switch to autonomous driving, electrification,energy conservation
p. 49, 53, 54• Creation of new markets / new products p. 50, 54• SDG target year• The 2030 problem (human resource shortage
from decreasing birthrate and aging population)*GHG (Greenhouse Gas)

• Circular economy (recycling economy)

Business Strategy• Construction and agriculturalmachinery: electric hydraulic use

Accelerating electrification• Decline of gasoline-powered vehicles• GX League Phase 2(introduction of emissions transactions)• Construction and agricultural machinery:remote control, automation, unmanned
operation

2025

2023 Medium-Term Management Plan

Mastering Quality Management
The Five Basic Policies▶Growth strategy▶Constant cost reduction▶Environmental Initiatives▶CImproving capital efficiency,
strengthening financial structure• A once-in-a-century revolution• Construction and agricultural
machinery: low fuel consumption,
low noise, improved operability• Climate change• Diversity, Equity, and Inclusion(DE&I)• Diverse human resources

p. 14• Conduct initiatives aimed at a manufacturing revolution• Overview of KAYABA’s Environmental initiatives• Responding to environmental regulations• Focus on core business

p. 21

p. 35

Data

▶Innovative monozukuri

CASE, MaaS

p. 9

p. 39

p. 45

• Establish materiality• Rebuild value creation story2023• ESG、SDGsAnticipated changes
in society

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