Medium- to Long-Term Vision, Value Creation Activities - Creating Value

Taiheiyo Cement's DNA

Taiheiyo Cement is continuing to support economic development
and social infrastructure while being environmentally conscious.
1960

1970

Social Conditions

Rapid economic growth

Soaring oil prices

Rapid increase inconstruction investment
and the bubble economy

Bursting of the bubble
economyRapid economic recession

EventsSurge in demand

Oil crisis

Increase in demand

Peak demand

Taiheiyo Cement's Major
Initiatives

Increased production
through development of andconversion to SP and NSP kilns

Energy source converted tocoal

Responding to further increases
in production and strengthening
energy conservation

The 2008 global financial
crisis

Improved earnings throughwaste processing

Overseas expansion of
cement businessIn addition to further adopting theuse of NSP kilns to meet rapidly
increasing public and private sector
demand, we progressed our energy
conservation by introducing waste
heat recovery power generation.

We began full-scale waste
processing using cement kilns asa measure to improve profitability.
In 1998, the industry went throughreorganization and Taiheiyo Cement
Corporation was established.

In addition to existing sites in the
U.S. and China, we accelerated
investment in Southeast Asia tobuild our cement business in the
Pacific Rim.

Conventional wet long kilns wereconverted to dry SP and NSP kilns
with high thermal efficiency andmass production efficiency.

1980

The oil crisis of 1973 was aturning point in our efforts to
reduce energy costs by convertingfrom heavy oil to coal for cement
calcination.

1990

2000

2010

2020

Increased frequency ofnatural disasters

National CO2 emission
reduction targets
established

We conducted businessrestructuring and improved
profitability.
We received disaster waste andassisted in the early recovery ofareas affected by disaster.

We have formulated the "Carbon
Neutral Strategy 2050" and areworking on the developmentof innovative technologies thatare positioned as a new growthstrategy.

Frequent torrential rains
United Nations Climate
and the Great East Japan
ChangeConferences (CoP)
Earthquake
Improve earnings throughStrengthening initiatives tostructural reforms andcooperation in disaster recovery achieve carbon neutrality

Trends in demand, exports, amount of waste, etc. utilized,
and consolidated net sales(million t)

100

80

−Domestic cement demand (1961-)−Cement exports (1961-)−Amount of waste, etc. utilized (1991-)

Consolidated net sales
Domestic cement
Overseas cement
Other

Data provided by: The Japan Cement Association(billion yen)

1,200

1,000

800
60
600
40
400
20

0

200

1961

1971

1981

1991

2001

2011

2021 2023(FY)

0* The figures for the volume of waste, etc. used are from when the Japan Cement Association started collecting statistics, and consolidated net sales are from when the disclosure of
information on overseas business was started.
* Changes to segments, etc. were made in FY2005.
* The "Accounting Standard for Revenue Recognition" (ASBJ Standard No. 29), etc. was applied from FY2022.

16

17

Medium- to Long-Term Vision, Value Creation Activities - Creating Value

Five Cultivated Strengths
The Taiheiyo Cement Group will fulfill its mission to build safe and secure social infrastructure and living environment
through the effective utilization of waste and by-products, with cement production and supply as the cornerstone.

A leading supplier of cement that supports the living
environment and infrastructure
The Taiheiyo Cement Group has a total of 16 cement plants inJapan and overseas, with an annual clinker production capacityof approximately 30 million tonnes. In Japan, we are investing
100 billion yen by 2030 to strengthen our production system
by upgrading our main facilities and building a solid supply
system. Meanwhile, a new production line at Taiheiyo Cement
Philippines, Inc. will start operation in May 2024.

Business portfolio that incorporates the Pacific Rim’s
growth markets
We continue to support infrastructure and the living
environment by supplying high quality cement and construction
materials, and applying advanced technologies at our nine
cement plants in Japan and seven in the United States and AsiaPacific region. Going forward, we aim to enhance our networks
by building a new business portfolio that incorporates growthmarkets and expanding our trading business.

Cement Consumption(million t)

Cement production process that boasts world-leadinguse of alternative raw materials and fuels
In addition to waste and by-products, municipal waste andincineration residues, in recent years we have been contributing
to the formation of a circular economy by also using waste anddebris from natural disasters as raw materials and fuels for
cement. Furthermore, based on the recognition that carbon
neutrality is the most important issue for the cement industry,
we have published our “Carbon Neutral Strategy 2050” and areaccelerating our efforts towards achieving carbon neutrality.

Japan

140
120

AmericaIndonesia

VietnamPhilippines

126.9

113.5

100
80
60
40
20
0

59.0

70.0
66.6

31.4
30.0

39.7
35.2

11.6
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Estimate Forecast Forecast(FY)

Data source: The Global Cement Report 2020, 14th Edition

Highly diverse human capital
Based on the idea that people are a company's greatest asset,
we are creating a workplace that gives highest priority to thesafety and health of our employees. In addition, we consider
diversity and inclusion to be initiatives that integrate our humanresources and are linked to the creation of new value, and arepromoting human resource development that enables each
employee to play an active role through various measures,
including the promotion of the active participation of women.

18

Stable financial footing that enables continued growthinvestments
Although the group had a weak financial structure at the timeof the merger in 1998, we have improved our profitability to theextent of recording operating income of 60 billion yen or morefor eight consecutive years from FY2014 to FY2021. In addition,
we have maintained a net debt/equity ratio (DER) of 0.7 times orlower and the issuer credit rating of A that we acquired in 2018.

19

Medium- to Long-Term Vision, Value Creation Activities - Creating Value

Materiality
The Taiheiyo Cement Group has worked to solve social issues through cement production for more than 140 years.
We recognize that these initiatives themselves are both our social mission and material to our business.

Identifying Risks and Opportunities

Materiality

Summary of the Collection, Evaluation and Identification of Company-wide Risks

The Taiheiyo Cement Group conducts “collection, evaluation and identification of company-wide risks” every three years. This time
(FY2023) the initiative was conducted with the purpose of identifying company-wide risks that could have a significant impact on
uncertainty of Group management in light of the significantly changed business environment and risks.

For more than 140 years the Taiheiyo Cement Group has supported the development of infrastructure and living environments bysupplying society with high quality cement and construction materials, while conducting our business in consideration of the global
environment. Based on these experiences, we have identified the materiality of sustainability issues in order to organize the form anddirection we should aim for when addressing the various environmental and social challenges we face, beginning with climate change.

Process of Collection, Evaluation and Identification of Company-wide Risks

Materiality Identification Process

Step 1

Conduct a comprehensive inventory of risks at our 38 business sites and identify risks that could hinder the achievement of
the goals of the 23 Medium-Term Management Plan and key sustainability issues that were reviewed in FY2023.

Step 2Gather and analyze information related to the situation of and concerns about the identified risks, and identify companywide risks that could have a significant impact on uncertainty of Group management

Step 3

Review company-wide risks (Risk Management & Compliance Committee)

Step 4

Determine company-wide risks (Sustainability Management Committee)

Identified "company-wide risks," business opportunities and business strategies
Company-wide risks

Business opportunities

Business Strategies

Risk of increase in thenumber and severity ofnatural disasters and aging
facilities and equipment• Increasing demand for environmentally sound products(with low CO2 emissions)• Measures to strengthen urban areas and prevent andmitigate natural disasters

Risk of business fluctuationsin the supply chain• Transition to a circular economy• Reorganization of supply chain, succession of businesses
from other companies• Steady transition to carbon
neutrality• Supply critical materials for national
resilience• Key player in the formation of acircular economy

Human resource-relatedrisks• Acceleration of DX and digitalization• Acquisition of human resources as a leading
sustainability company

The process was conducted in three steps, from identification of issues to validation. As a result, a total of 12 materialities wereidentified from financial aspects, environmental aspects and social aspects.
Step 3

Identification of issues andcategorization into themes

Prioritization and organization of themes

Verification• Candidate themes were mapped with the importance tostakeholders and the importance to our Group on separate
axes.
• Regarding importance to stakeholders, issues that are ofinterest or importance were evaluated, with reference toopinions and information obtained from ESG interviews
with investors and other stakeholders.
• Regarding importance to our Group, issues were
evaluated in accordance with the principle of double
materiality, taking into account the medium- to long-term
impact of the Company on the environment and society.

The identified
materialities were finallydiscussed and verified
by the Sustainability
Management Committee
and the Executive
Committee.

* SDGs, ISO 26000, GRI Standards, ESG assessment agency evaluation items, GCCA Sustainability Framework, etc.

Identified materialities

Twelve themes of "higher" and "extremely high" importance were designated as material.

P opularization ofenvironmentally soundproducts

Biodiversity
Conservation of water resourcesSustainable supply chain

 elivering of carbon neutrality
DContributing to the realizationof a circular economy

HigherR educing environmental
impactDiversity and inclusion
Respect for human rights
Stakeholder engagement
Corporate ethics and complianceC reating a safe and healthy
workplaceContributing to national
resilience
Group governanceHighDX promotionR isk management (crisis
management)

Human resource development

Extremely highImportance to stakeholders

Toshio Arima

Chairman of the Board
Global Compact Network Japan

Step 2

Issues specific to our businesses
were identified and categorized into
themes, using various disclosure
guidelines and evaluation tools fromESG evaluation organizations as
references*, as well as the opinions
and information received fromstakeholders through ESG interviews,
opinions from third parties, ourcompany's history and strengths,
and exchanges of opinions with eachrelevant department.

Third-party opinion
Your materiality selection process is orthodox and the KPIs and timeline, as well as
the associated guidelines, are sensible. “Carbon neutrality" and "circular economy" areyour two most important themes, and a "circular economy" will lead to CO2 emission
reductions while bringing growth and profitability at the same time. This is truly abusiness that has proven its strategic characteristics in the era of SX (Sustainability
Transformation). On the other hand, the new business model of expanding CO2 capture
and utilization under the CO2 recovery kiln commercialization concept with mechanicalplant companies and gas companies is a step up to a European-style circular economy. I
am confident that your company's historic corporate mission to "build the nation using
cement" will continue with its unifying force and brilliance in the future.

Step 1High

HigherImportance to the Taiheiyo Cement Group20

Extremely highFinancial aspects
Environmental and social aspects

21

Medium- to Long-Term Vision, Value Creation Activities - Creating Value

Materiality

List of Materialities and main KPIs

AspectMateriality

Themes to be addressed

Targets, KPIs, etc.

Relevant standards, targets,
guidelines, etc.

Relevant SDGs

• Delivering of carbon neutrality (by 2050)

Delivering of carbon
neutrality

Financial
Aspects• Reduce domestic CO2 emissions by at least 40% (by 2030,
compared with 2000)

Carbon Neutral Strategy
2050

Promote the use of alternative raw materials and fuels• Maintain waste usage intensity of 400kg/tonne-cement or more

Sustainable supply chain

Sustainability assessment• Assessment rate of major suppliers: 75% (2030)

Contributing to national
resilience

Maintaining a stable product supply system

Biodiversity

Develop quarry rehabilitation plans• Quarries with rehabilitation plans: 90% or more

GCCA guidelines on
biodiversity

Conservation of water
resources

Management of water resources• Promote management of fresh water usage intensity

GCCA Sustainability
Framework Guidelines

Accident prevention• Zero fatalities

CSR Objectives for 2025

Waste emissions reduction

Promotion of Health and Productivity Management (H&PM)

Diversity and inclusion

Promotion of the active participation of women

Respect for human rights• Maintain volume of waste to landfill at or below 40 tonnes• Upgrade of plant facilities to maintain stable supply• Serious quality complaints: 0• R atio of employees receiving periodic health examinations: 100%
• Ratio of female recruits: At least 30%

GCCA guidelines onalternative raw materials
and fuels
GCCA guidelines on supply
chainsISO 9001

Internal environment
improvement policy• Ratio of female employees: At least 10%

CSR Objectives for 2025

Promotion of human rights due diligence• Conduct steady human rights due diligence and take corrective
actionUnited Nations andgovernment, etc. standards

Engagement with shareholders, investors• Engagement with shareholders, investors: 150/year or more

GCCA Sustainability
Framework Guidelines

Group governance

Globalization of Whistleblower Program• Coverage of the Whistleblower Program: 90% or more (byFY2031)* Coverage = numberof companies who haveintroduced program andsubsidiaries that are covered

Corporate ethics andcompliance

Compliance education• Standards of Conduct training (e-learning) participation rate:
maintain at 90% or more

GCCA Sustainability
Framework Guidelines

Stakeholder engagement22• Reduce specific CO2 emissions by at least 20% (by 2030,
compared with 2000)

Contributing to therealization of a circular
economyCreating a safe and healthy
workplace

Environmental
andSocial Aspects

CO2 emissions reduction

Communication with local communities• Ratio of newly appointed female managers: At least 10%• Engagement with local communities: 1,500/year or more

23

Medium- to Long-Term Vision, Value Creation Activities - Creating Value

Value Creation Process[Management Capital]
A
A–

Manufacturing Capital

Domestic clinker production capacity(FY2023)

17,642thousand tonnes

Overseas clinker production capacity(FY2023)

12,240thousand tonnes
Intellectual Capital

Cementproduction processthat boasts
world-leading use ofalternative raw
materials
and fuels

A leading
supplier of
cement that
supports the living
environment andinfrastructure

Human Capital
Number of employees(as of the end of FY2023)

12,720Business
portfolio thatincorporates the
Paciﬁc Rim’s
growthmarkets

Stableﬁnancial footingthat enables
continued growthinvestments

2,538

IR Activities (FY2023)

164

Limestone quarries of the group(as of the end of FY2023)

19

Construction Materials
Business

Research and Development

Utilization of waste and by-products(FY2023)409.6 kg/t-cement24• Stabilizers:• Ready-mixed concrete:

8.16 million m³

Logistics
andsupply[Mineral Resources Business]• Limestone for cement raw material
million tonnes• Limestone for concrete aggregatesmillion tonnes• Limestone for industrial use(steelmaking, etc.)
million tonnes

20.20• Amount of waste and by-products processed
million tonnes• Limestone for industrial use (power plants)
million tonnes

7.27
0.72

[Construction Materials Business]• Construction-related materials:
million tonnes• Concrete products:
million tonnes• Ground Improvement,
repair and renovation projects(Cement and stabilizers)
million tonnes

0.21
0.31

Fundamental Policies ofthe 23 Medium-Term Management Plan
Aiming to become an Outstanding Leading Company
Financial Aspects

Delivering of carbon neutrality
Contributing to the realizationof a circular economy
Sustainable supply chain
Contributing to national resilience

Group Governance /0.27

Environmental and Social Aspects
Biodiversity
Conservation of water resources
Creating a safe andhealthy workplace
Diversity and inclusion

Compliance

Outcome
Supply critical materials
for national resilience
Key player in the formationof a circular economy
Steady transition to carbon neutrality[Economic Value (FY2023)]

809.5 billion yen(up YoY)
4.4 billion yen• Operating income:• Net sales:(down YoY)

• Total amount of dividends:[Environmental Business]

Use

Materiality

30.93 million tonnes
2.22 million tonnes

8.20

Environmental Business

Natural Resources Capital• Cement:

9.80

Mineral Resources
Business

Social and Relationship Capital
Engagement with communities(FY2023)

Production

Cement BusinessCollection/
Reuse

Taiheiyo Cement Group's
Main Products[Cement Business]

Highly diverse
human capitalRaw material
procurement

Patents held
(as of the end of FY2023)

1,439 in Japan
287 overseas

OutputTaiheiyo Cement's Strengths

Credit rating (as of August 2023)

R&I

To become an enterprise groupthat provides a sense ofsafety and security to societies
in the Paciﬁc Rim by demonstrating
the group’s overall capabilities.

Business model

Financial Capital
JCR[Our future vision and direction]

Respect for human rights
Stakeholder engagement
Group governanceCorporate ethics
and compliance

8.2
75.9
5.9

billion yen(shareholder returns, steady dividends)
billion yen• Capital expenditure:(maintenance and growth areas)billion yen• R&D expenses:(research and intellectual property areas)[Social Value (FY2023)]• Supply critical materials for national resilience
Cement, aggregates, etc.:

43.74 million tonnes
Ready-mixed concrete: 8.16 million m³• Key player in the formation of a circular
economy(resolving social issues)
Waste and by-products processed:

7.27 million tonnes

External economic beneﬁt (EEB)(non-consolidated):

87.2 billion yen• Steady transition to carbon neutrality(reduction of environmental impact)
CO² speciﬁc emissions:

10.2% reduction(compared with 2000)
Alternative energy usage rate:

19.9%(Contribute to reduction of fossil energy use)

• Highly diverse human capital(permanent employees, non-consolidated)
Overall employee engagement score:

66%
Ratio of newly appointed female managers:

13.6%

25

Medium- to Long-Term Vision, Value Creation Activities - Creating Value

Carbon Neutral Strategy 2050
Overview of Innovative
Technology Initiatives

Taking on the challenge to develop
innovative technologies and aiming
to become a leader in CO2 capture andutilization.

Chemicalabsorption method

Cementproduction
facilities

CO2 recovery

Carbonation

CO₂

CO2
utilization

CO2-recoveringcement production
facilities

Yuuichi Kitabayashi

CO2 storage

Towarddelivering
carbonneutrality

CO2 refining andshipment

Methanation

Stable supply of green hydrogen and energy

Vice President and Representative Director

Toward delivering carbon neutrality

Carbon neutrality is our significant growth strategy

Post-2030 transition plan

Challenges in the delivery of carbon neutrality

The Taiheiyo Cement Corporation has established the"Carbon Neutral Strategy 2050" to achieve carbon neutrality
throughout our supply chain by 2050, and have released
a transition plan to reduce CO2 specific emissions by 20%
or more and to complete the development of innovativetechnologies for CO2 capture and utilization by 2030. In
December this year, we started demonstration testing of the"Carbon Capture Suspension Preheater Kiln" (C2SP Kiln), aCO2-recovering cement production process, and also started astudy of a "carbon neutral model plant" at the Kawasaki Plant
of our Group company DC Co., Ltd., which will demonstrate CO2
capture, utilization and storage at the actual plant level.

We are aiming for our world-first, independently developed
C2SP Kiln, which can efficiently capture CO2 in a compact
facility, to become the global standard. There are currently
about 4,000 cement kilns worldwide, and we expect that there
will be a great need for C2SP Kiln as the achievement of carbon
neutrality is aimed for around the world. Further, regarding
methanation, which is the use of separated and recovered CO2
as energy, we are working with mechanical plant companies
and gas companies with the aim of not only reusing it incement production, but also using it widely in society.

From 2030 onwards we will sequentially deploy CO2
utilization technologies such as CO2 separation and capturein C2SP Kiln, CO2 mineralization by carbonation and CO2
utilization through methanation throughout the Group. We
estimate that the cost of implementing C2SP Kiln and CO2
utilization facilities will exceed 100 billion yen per kiln basedon the current technology, or 2 trillion yen for the entire
domestic Group. Although the cost of equipment will decline
as the technology evolves, there is a limit to how much capital
expenditure can be borne by a single private company. It istherefore necessary for the government and industry as a whole
to consider a mechanism for shifting the transition costs ofcarbon neutrality to cement prices and introducing appropriate
carbon pricing to ensure the burden is shared fairly.

We believe that our "Carbon Neutral Strategy 2050" isconsistent with the Paris Agreement. This is evident fromthe fact that in March 2023 the Development Bank of Japan
extended a transition-linked loan to the Company, based on
the Technology Roadmap for Transition Finance in the Cement
Sector published by the Ministry of Economy, Trade andIndustry as part of its efforts to align with the Paris Agreement.
On the other hand, immediately effective measures such as theuse of blended cement are necessary to achieve recognition
as a Science Based Target, but rapid deployment is not easy
due to market and product standard constraints in Japan. In
addition to the development and commercialization of various
innovative technologies, we will also accelerate our efforts
regarding establishing standards.

Raw material-derived
Innovativetechnology• Energy saving• Expansion of alternative energy

Use of renewable energy,hydrogen, synthetic methane, etc.

• Expanded use of cement admixtures• Development of low-CO² cement

Popularization of blended cement andlow-CO² cement• Establishment of CO² separation and recovery technology

Deployment of CO² separation and recovery technology
Popularization and use of CO² storage technology• Optimization of the transportation by using EVs and quarry greening• Standardization of accounting for CO² uptake by concrete carbonation (recarbonation)

Deployment throughout the supply chain

Reduction of emissions intensity
2030
by 20% or more throughout the supply chain
Interim Target

Carbon Neutrality
Transition Plancompared to 2000

2000

2020

2030

Energy-derived
Raw material-derived
CO² emissions reduction
2040

Gas flow of a C2SP Kiln
Raw material-derived+ energy-derived CO²

Carbon neutrality

Cement production
process

Energy-derived

Other than cement
production process

26

Stable supply of waste concrete and sludge

Innovative technology
Other than cement
production process

Gas ﬂow
Raw material ﬂow

Cementraw material

Raw material-derived CO²(captured as concentrated CO²)

Effective use of CO²

Preheater
Energy-derived
CO²
CO²-capture
calciner

EnergyMethanation
Reuse of CH4

Combustion gas(O² + CO²)

EnergyRotary Kiln

2050

By concentrating the calcination reaction of raw limestone in an oxygen-fired
calciner, highly concentrated CO2 can be recovered directly from the cement
process.

27

Medium- to Long-Term Vision, Value Creation Activities - Creating Value

Strengthening Production Systems
We will strengthen our production
system with "safety, maintaining
quality and environmental
preservation" as our top priorities.
Koshiro Hidaka

Fujiwara Plant No. 5 Kiln (installation of high-efficiency clinker coolers)

Inspection of kiln tires using a drone

Managing Executive Officer

Our production system: Strengthening
facilities, systems and engineers

Initiatives to reduce CO2 emissions

Realization of smart factories

Safety − aiming for zero fatalities

The Taiheiyo Cement Group's domestic plants have beenin operation for more than 60 years and their deteriorationis advancing. We have determined that drastic measures arenecessary to ensure stable production for the decades to come, andwe are proceeding with the upgrade of major facilities with a plan
to invest approximately 100 billion yen over the next 10 years,
including the period of the 23 Medium-Term Management Plan.
By introducing the latest facilities and digitalizing production andfacility management, we are aiming to reduce our CO2 emissions
and environmental impact, as well as progressing energy saving
and manpower conservation. We are also aiming to ensure thatthe core technologies required for cement production and facility
management are passed on to the next generation and that humanresources are developed through education and practical training.

The most significant feature of our cement production is theefficient use of various waste and by-products as alternative
raw materials and fuels on a scale of approximately six
million tonnes per year, while at the same time possessing
quality control and facility operation technologies to maintainconsistent quality. Recently, we have been working to expand
the use of alternative fuels in response to soaring coal prices.
With the installation of a waste heat recovery power generation
system at the Saitama Plant, the installation of such equipment
at all domestic plants has been completed. At the same time,
we will continue to upgrade aging power generation facilities
with gas turbines, with a view to using methanation, which isplanned as a carbon neutrality initiative. We will continue ourefforts to further reduce our CO2 emissions.

In view of the labor shortages that are foreseeable dueto the declining birthrate, we are working to realize smart
factories that utilize digital technology. Equipment inspections
can detect signs of breakdown and end of service life by using
AI to analyze data collected by sensors and cameras installed
throughout the plant. In addition, the development of a fully
automated system for operation management via AI is expected
to be completed by the end of FY2024. Furthermore, in the near
future, we aim to establish a support system for the operationand management of all plants through remote operation fromthe headquarters, which is to eventually include overseas plants
too.

We are committed to promoting safety, security and healthactivities as a Group, keeping in mind that "safety is the highest
priority." However, it is very regrettable that fatalities haveoccurred since FY2022 and the number of accidents is also on
the rise, and we recognize that we are in a critical situation.
We believe that to eliminate occupational accidents the mostimportant thing is for everyone from top management to theworkers on site to share a high awareness of safety and toalways follow the basic rules that have been communicatedat all times. We will strengthen our initiatives to achieve zero
fatalities through more thorough activities.

Main facility upgrade work performed from FY2023 to FY2024
Environmental
measures• Switching from electrostatic precipitators to bag filters(Of all 12 of our kilns, 11 are scheduled to be completed by FY2025)

Switching to a dust collection system that uses filters will improve the rate of dust
collection from exhaust gas generated in the cement production process

Energy-saving
measures• Introduction of high-efficiency clinker coolers (to be introduced sequentially)

Coal replacement
ratio improvement
measures• Installation of storage facilities to increase receipt of waste plastic (Kamiiso Plant, Saitama Plant),
installation of new burners (Kamiiso Plant)• Recycled oil processing capacity expansion work (Kumagaya Plant)

CO2 reduction andenergy cost reduction
measures• Waste heat recovery power generation systems at the Saitama Plant (Operation started in October
2022, completing the introduction of waste heat recovery power generation systems at all domestic
plants)• Gas turbine power generation facility at Saitama Plant (in operation from September 2023)

Will improve the recovery efficiency of the heat used for calcination in the clinker (anintermediate product of cement) production process and realize energy saving

Will reduce coal use by using waste as an energy substituteWill realize the reduction of CO2 emissions and energy costs

28

Promotion of engineer development
We are progressing the development of engineers based on the belief that "people are at the foundation of production."
In order to pass on the core technologies related to cement manufacturing that we have inherited from our predecessors, wehave established "Techno Schools" for mid-career engineers at each plant to intensively learn specialized knowledge, and“Maintenance Dojo” where facility maintenance skills are learnt, with eligibility expanded to include engineers from contractors.
In addition to improving cement-related skills, we haveestablished an "Overseas Trainee Program" in which young
permanent employees are sent to an overseas Group company
for about one month to hone their language skills and gain
experience living overseas. On the other hand, the renovationof the production line at Taiheiyo Cement Philippines, Inc., inwhich a state-of-the-art production line is being built, startingfrom the preparation of the land and foundation work, is aunique and valuable training opportunity and we are actively
sending young permanent employees to this project.
Maintenance Dojo Program (surface finishing of bearing metal)

29Medium- to Long-Term Vision, Value Creation Activities - Creating Value

Medium-Term Management Plan

Step 1

Step 217 Medium-Term Management Plan

20 Medium-Term Management Plan

(FY2016 to FY2018)

The 17 Medium-Term Management Plancovered the three years from FY2016
to FY2018 and is regarded as the firststep towards realizing our future visionand direction. It aimed to maximize ourcorporate value.

Fundamental Policies
1 To become a corporate group that

preempts future changes in theenvironment and seeks innovations in all
fronts, thereby progressing on a growthpath
2 To contribute to the establishment of asense of safety and security in society
through the provision of materials andtechnological development, furthering
national resilience as a member of thesocial infrastructure industry.
3 To vigorously push ahead with further
strengthening our earnings base andfinancial structure aiming at sustainable
development by strengthening
businesses through exhaustive costcutting

Performance
Profitability

Operating income on net sales: 7.5%
Return on assets (ROA): 6.3%
Growth investments: 100 billion yen• Acquisition of the Oro Grande plant(U.S.A.) and construction of its new mill
• Establishment of Ofunato Power Inc.
(biomass power plant)• DC Co., Ltd. made a wholly owned
subsidiary

Financial Structure

Net debt/equity ratio (DER): 0.6 times• Net interest-bearing debt of 234.8 billion
yen (end of FY2018)

Shareholder ReturnsI ncreased dividends and purchased
treasury shares.
• Payout ratio: 18% (3-year average)• Total return ratio: 26% (3-year average)• Treasury shares purchased: 10 billion yen

30(FY2019 to FY2021)

We built on the results of the businessand financial strategies implemented in thefirst step, the 17 Medium-Term Management
Plan, and continued addressing theremaining issues to open up a path onwhich we could move on to the next stepby ensuring the implementation of new
initiatives and establishing a solid businessfoundation for future sustainable growth.

Fundamental Policies
1 To become a corporate group that

anticipates future changes in thebusiness environment and seeksinnovation on all fronts, thereby
advancing along a pathway of growth.
2 To contribute to the establishment of asense of safety and security in society
through the stable provision of highquality products, solutions and advanced
technology development, in order tobuild national resilience as a member ofthe social infrastructure industry.
3 To push ahead with the strengthening of
our earnings foundation for businesses
and further improve our financial
structure through cost reductions as well
as by actively executing investments inpromising fields that will contribute to
the group’s sustainable growth.

Summary up to Step 2
Achievements

Although domestic
demand for cement isdecreasing, operating
income stayed in the 60
billion of yen range.
Maintained shareholder
returns (total return ratio)of 30%.
Achieved our target of a
net DER of 0.4 times orless ahead of schedule.
Growth investments
proceeding according toplan.

Step 323 Medium-Term Management Plan (FY2022 to FY2024)

Aiming to become an outstanding leading
company

We aim to construct a business model unique to us, where allbusinesses in our group function together comprehensively and integrally.
In other words, to become an outstanding leading company.

Fundamental Policies
1 Strive for sustainable growth.
2 As part of the social infrastructure industry, contribute to theestablishment of a safe and stable society.
3 Strengthen our earnings base for businesses and steadily
carry out growth investments.

Challenges

S ustained growthinvestment
Initiatives to deliver
Carbon Neutrality
Strengthening of plantfacilities and quarry
development
Restructuring ourbusinesses in Japan

Investment Strategy and Shareholder Returns
Cash flow from operating activities
and assignment of assets etc.
(3-year cumulative total): 

330 billion yen• New investment aimed at sustainable growth: Capital expenditure,and investment and financing: 280 billion yen (including growthinvestment: 120 billion yen)
• Shareholder returns: Total return ratio around 33% (one third of the
net profit for the year attributable to parent company shareholders)• Maintain and improve financial soundness: Maintain a net DER ofaround 0.4

Profitability
Operating income on net sales: Return on equity (ROE): 

11% or more
10% or more

Targets for FY2024

750 billion yen or more
Operating income: 85 billion yen or more
EBITDA*2: 
145 billion yen or more
Net debt/equity ratio (DER): 
Around 0.4
Net interest-bearing debt/EBITDA:  1.5 or less
Net sales*1: *1 Since we have adopted the Accounting Standard for Revenue Recognition(ASBJ Standard No. 29) etc. from FY2022, the net sales in the FY2024 planshow the amount after adoption of the new standard. (The adoption of the
new standard has a negative impact of -210 billion yen.)*2 EBITDA = Operating income + depreciation (including goodwill amortization)

Performance
Profitability

Operating income on net sales: 7.4%
Return on assets (ROA): 6.3%
Growth investments: 100 billion yen• I nvestment in the Semen Indonesia Group• Renovation of Taiheiyo Cement
Philippines, Inc.’s production line
• C onstruction of new waste heat recovery
power generation system (Saitama Plant)

Financial Structure

Net debt/equity ratio (DER): 0.4 times• Net interest-bearing debt: 175 billion
yen (end of FY2021)

Shareholder Returns

Steady dividend payments andpurchase of treasury shares• Payout ratio: 19% (3-year average)• Total return ratio: 30% (3-year average)• T reasury shares purchased: 15 billion yen

Key Strategies

1

Initiatives to deliver carbon neutrality

2

Sustained growth investment

3

Strengthening plant facilities

4

Quarry Development

Growthinvestments
Carbon neutrality
100 billion yen

20 billion yen
10 billion yen
35 billion yen

23 Medium-Term
Management Plan

Strengthening
plant facilities
100 billion yen
Quarrydevelopment
100 billion yen
FY2022 ~ FY2031

31

Medium- to Long-Term Vision, Value Creation Activities - Creating Value

Progress Summaryof the 23 Medium-Term Management Plan
Indicators

1
2
3
4
32

Initiatives todeliver carbon
neutrality

2050
Delivering carbon
neutrality

Sustained
growthinvestment
Reconstructing
the overseas
business
portfolio

Capturing growthmarkets

Strengthening
plant facilities

In order to establish a
production and supply
system with longterm stability, we will
renew key machinery,
upgrade production andequipment management,
and deploy AI

QuarryDevelopment

We will establish asystem aimed at thelong-term stable supplyof limestone resources

Targets2030 Interim Target
Reduce CO2 emissions
intensity by 20% or morethroughout the supply chain(compared with 2000)
Reduce domestic CO2
emissions by 40% or more(compared with 2000)

E xpand our business areain the U.S. and Asia-Pacificwhere demand for cement
is strong, and proceed withbusiness development that isrooted in the region

Initiatives

This year’s evaluation and challenges

Introduction of high-efficiency coolers andoperation of waste heat power generation aimed
at energy saving and improved efficiency

C ommencement of a study of the carbon neutralmodel plant concept

In addition to waste heat power generation at the
Saitama Plant and the introduction of high-efficiency
coolers at two plants in Japan, the use of alternative
fuels has expanded and CO2 emissions have been
reduced. In addition to starting construction of the
C2SP Kiln test facility as an innovative technology
for carbon neutrality and developing CO2 utilization
technologies, we participated in JOGMEC's CCS
research project. Furthermore, we have commenced
studying the concept of a carbon-neutral model
plant at DC Co., Ltd.'s Kawasaki Plant.

C ompletion of the acquisition by CalPortland
Company of a portion of the west coast cement
and ready-mixed concrete business assets ofMartin Marietta Materials, Inc.
The renovation of the production line at Taiheiyo
Cement Philippines, Inc.
Withdrawal from the cement business in China

CalPortland Company now has four plants and has
expanded its market share in California to 40%.
The renovation of the production line at Taiheiyo
Cement Philippines, Inc. is progressing well and isscheduled to begin commercial operation in May
2024. The company's annual production capacity
will be 3 million tonnes.

 evelopment of the C2SP Kiln, an innovative
D
CO2-Recovering cement production process
Development of technology for the effective useof CO2, CCS project feasibility studyC onversion of electrostatic precipitators to bag
filtersI mplement measures toaddress aging cement plants
and modernize production
and facility management by
2030

E stablish a long-term stablesupply system for limestone
resources, the foundation of
the cement business pgrade of electric motors and control
Uequipment
Upgrade of specified high-voltage cables andtransformers
Modernization of facility management systems
Development of technology for automated kiln
operation that utilizes AI

C ommencement of development of the Yato areaof the Shin-Tsukumi Quarry
Commencement of development of the summitof Mount Kurohime at the Toumi QuarryE nvironmental assessment and postdevelopment survey of the Yato quarry area
Installation of a stockyard at the Horoshi area of
the Ofunato Quarry

In addition to replacing electrostatic precipitatorswith bag filters, work to restore the health of electricalequipment such as electric motors, transformers
and cables was performed. We will not only upgrade
aging facilities, but also promote the digitalizationof plants and the increased sophistication of
production and facility management.

Development work was initiated at the Shin-Tsukumi
Quarry and the Toumi Quarry to ensure stable
operations over the long term. Development workcommenced in the Yato area of the Shin-Tsukumi
Quarry in May 2023 and the Mount Kurohime
summit of the Toumi Quarry in September 2023,
with the aim of commencing ore production in
2029.

33

Medium- to Long-Term Vision, Value Creation Activities - Creating Value

Direction of the Next Medium-Term Management Plan
We will backcast from the 2050 Vision
to formulate the next Medium-Term
Management Plan from both financial andnon-financial perspectives.
Hideaki Asakura

Director and Senior Executive Officer

Long-term vision and next Medium-Term Management Plan

Aiming for sustainable growth and increased corporate value over the medium to long term, we are in the process of formulating
our "2050 Vision", with sustainability positioned as one of our top priorities and climate change, safety and inclusiveness, the circular
economy and resilience, and biodiversity as the main pillars.
We will spend the entire current fiscal year formulating the next Medium-Term Management Plan, which will start in FY2025 andwill backcast from this 2050 Vision with a view to resolving current issues as well as the medium- to long-term perspective, and will
focus on five key issues: "strengthening our domestic earnings base," "diversifying our overseas earnings," "recovering the financialbase and reviewing investment recovery criteria," "approach to human capital," and "realization of carbon neutrality."

Climate change

1 Delivering carbon neutrality
2 Reducing environmental impact
3 Popularization of environmentally

Backcast

sound products

equality

2 Occupational health and safety
3 Engagement with local

communities

4 Sustainable supply chain

Circular Economy and Resilience
1 Key player in the formation of acircular economy

2 Contributing to national resilience

Biodiversity

1 Nature Positive
2 Conservation of water resources

Next
Medium-Term
Management Plan

Strengthening
our domestic earnings base
Diversifying our overseas earnings
Recovering the financial base
Human Capital
Carbon neutrality

23
Medium-Term
Management Plan

Initiatives to deliver carbon
neutrality
Sustained growth investment
Strengthening plant facilities
Quarry development

34

Strengthening our domestic earnings baseFirst, in our main domestic cement business, we believethat our top priority is to have a firm pricing policy andcreate an environment and system in which the entire
supply chain, including users, can pass on cost increases
to prices and secure profits. Currently, most users haveaccepted energy price fluctuation in the form of an increasein cement prices, but we will continue to discuss a surcharge
system with users as another option and work towardachieving appropriate prices.

Diversifying our overseas earnings

While our U.S. business has grown to become theGroup's main source of income, we will also strengthen
our business in the growth market of Southeast Asia.
As the annual production capacity of Taiheiyo Cement
Philippines, Inc. will increase to 3 million tonnes when the
new production line is completed in May 2024, we will also
launch measures to steadily capture the strong demand. We
believe that an EBITDA margin of around 25% is desirable forour overseas cement business and we will work closely with
our domestic cement business to achieve high profitability
across the Group.

Approach to human capital

Regarding human capital, above all else the mostimportant issue is to nurture the younger generation, andwe will promote investment in education and the creationof systems for career advancement. It is also important tocreate a system that allows for a balance between work andlife while incorporating challenging work, for example, bytransferring employees to Group companies, including
overseas companies, in order to gain experience in work thatexceeds their job level. In addition to salary and benefits,
we believe that a company can only be attractive if it is anorganization that rewards effort.

Toward the Delivery of Carbon Neutrality

Regarding carbon neutrality, in addition to revising
investment criteria in line with carbon price trends, we willcontinue to discuss the transfer of investments to cement
prices. Also, the Global Cement and Concrete Association,of which we are a member, is studying a method toquantitatively evaluate the characteristics of atmospheric
CO2 absorption by concrete buildings during service, which
is a very supportive move for the cement industry. We will
promote our initiatives toward carbon neutrality while also
taking into account such global trends.

Recovering the financial base and reviewing
investment recovery criteria

Safety and Inclusiveness1 Workplace diversity, gender

2050
VisionNext Medium-Term Management Plan

Although we posted a net loss in FY2023, interestbearing debt increased as a result of the growth investments
set forth in the 23 Medium-Term Management Plan, whichwere generally implemented as planned. We will continue
investing to expand our overseas business, develop ourquarries and strengthen our production systems, and wewill strive to quickly recover our financial base so that theseinvestments can be funded by cash flow from operating
activities. In addition, as cement is mainly an equipmentbased industry and the scale of investment is large andrequires a long time to recover the investment, we will also
incorporate indicators such as ROIC and discuss investment
recovery criteria.

The renovation of the production line (Taiheiyo Cement Philippines, Inc.)

35

Medium- to Long-Term Vision, Value Creation Activities - Creating Value

Financial Strategy − Message from the Officer in Charge

We will build a solid earnings base andsteadily execute investments for growthand strengthening production lines.

Correlation of PBR and ROE (based on FY2014-FY2023 results)
ROE(%)
25.0
20.0
15.0
10.0

Masahiro Ban

Managing Executive Officer

5.0

PBR tends to exceed 1x
if ROE is over 10%

0

Looking back at FY2023
In FY2023, both operating income and ordinary income
declined, with major factor being the worsening profitability of
our main domestic cement business due to higher production
costs caused by soaring coal prices. In addition, due torecording the expense of our Chinese subsidiaries withdrawing
from their business as extraordinary losses, the ultimate result
was a very severe net loss of 33.2 billion yen for the fiscal year.

1,104

1,000

711
63.6
61.0
46.8 46.7
39.1
28.9

58.0
40.0
4.4

2022

-0.2

2023

2024

(Forecast)(FY)

The domestic Cement Business posted an operating loss of
36.9 billion yen due to being unable to absorb cost increases
during the fiscal year, despite efforts to raise cement prices. As
for overall operating income, we were able to secure a profitof 4.4 billion yen, contributed by CalPortland Company Inc.,.
We believe this is the result of our global strategy functioning
well. As we made growth investments and investments tostrengthen our earnings base, including the acquisition ofassets in the U.S., renovation of the production line at Taiheiyo
Cement Philippines, Inc. and strengthening of plant and quarry
facilities, under a situation where we were not able to generate
the cash flow from operating activities that we had initially

36

248.1
0.4

2021

403.4

270.5

0.7

400.0

-10.0

0

0.5

1.0

1.5

2.0

2.5

PBR (Price to Book Value Ratio)

The ratio used to compare a company's current market value to its book value.

0.6

Progress of the 23 Medium-Term
Management Plan

0.4

2022

2023

2024

(Forecast)(FY)

Forecast for FY2024

-33.2
2021

266.1

-5.0

PBR (multiples)Interest-bearing debt (billion yen)
Net debt/equity ratio (DER)

2020

Operating income (billion yen)
Net income (billion yen)
Cash ﬂow from operating activities (billion yen)

2020

Interest-bearing Debt and Net Debt/Equity Ratio (DER)

0.5

 perating income, net income and cash flow fromO
operating activities

909

planned, interest-bearing debt increased 132.8 billion yen on
the previous fiscal year to 403.4 billion yen.

For FY2024, we forecast a 110.5 billion yen increase in
net sales to 920.0 billion yen, a 53.6 billion yen increasein operating income to 58.0 billion yen, a 55.0 billion yen
increase in ordinary income to 56.0 billion yen, and a 73.2
billion yen improvement in profit to 40.0 billion yen comparedto the previous fiscal year. We expect a significant improvementin earnings due to factors including the increase in domestic
cement prices and earnings in the U.S. We recently announced
our first quarter results, and although domestic cement
demand is on a downward trend, cement price increases areprogressing as expected. Meanwhile, U.S. earnings were weakin the first quarter from January to March due to heavy rainson the west coast, but have been favorable since the second
quarter starting in April. Coal prices have also stabilized since
the beginning of this year, and we believe that the figures inour earnings forecast are achievable.

This fiscal year is the final year of the 23 Medium-Term
Management Plan, and although we had set managementtargets of an operating income on net sales of 11% or higher
and ROE of 10% or higher, it will be difficult to achieve thesetargets given the current fiscal year's forecasts. The same
applies to the financial indicators that have been set as
guidelines for achieving the management targets; the net
debt/equity ratio (DER) of 0.41x that was achieved in FY2022
was 0.65x at the end of the previous fiscal year and is expected
to remain flat in the current fiscal year. This fiscal year is the
final year of the 23 Medium-Term Management Plan and, atthe same time, it will also be an important year as a launching
pad for the next Medium-Term Management Plan. It will be
important to ensure the implementation of any unfinishedelements of the plan, including increases to cement prices,achieving a V-shaped recovery and linking these to the next
Medium-Term Management Plan. Despite the challenging
profit and loss results in FY2023, we are steadily implementing
the growth investments set forth in the 23 Medium-Term
Management Plan. In the overseas cement business, we haveacquired assets on the west coast of the U.S., and the results ofthese acquisitions are already being seen from the second halfof FY2023. In addition, the renovation of the production line at
Taiheiyo Cement Philippines, Inc. is scheduled to be completed
in May 2024 as planned, and the annual production capacity
will increase from 2.2 million tonnes to 3 million tonnes. By

increasing production capacity we will steadily capture an
increased market share, which will lead to further revenue
growth in the overseas business.

Toward the Next Medium-Term Management
Plan
Analysis of PBR below 1x

Regarding the issue of PBR being below 1x, it has remainedat this low level since falling below 1x before 2021 when coalprices began to soar, and this will be discussed during theformulation of the next Medium-Term Management Plan. In
the case of our company, we can calculate from past data thatPBR will exceed 1x if ROE exceeds 10%, so it is important torecover ROE as soon as possible. We believe that the expected
rate of return (cost of capital) sought by our shareholders isaround 8%, but our feeling is that it is becoming higher than
before. While this is an industry-wide problem, we surmise that
it is also due to a sense of unease and uncertainty about thetransition to carbon neutrality, as cement is an industry thatemits a considerable amount of CO2. In addition, there may beinadequate disclosure of our non-financial strategy initiatives
such as human capital investment and intellectual capital
investment. The Investor Relations and Communications Group,
General Affairs Department, will work with the Sustainability
Promotion Department which was established this fiscal year todisseminate information on these matters. Another factor that37

Medium- to Long-Term Vision, Value Creation Activities - Creating Value

may have contributed to the higher cost of capital is the highvolatility of the domestic cement business’ profits relative tothe external environment, that is, the inability to immediately
pass higher coal and fuel prices on to cement prices. This is
the primary challenge in increasing ROE, but it will also be achallenge in lowering the cost of capital. The key will be thedomestic cement business’ pricing policy. We worked hard
to raise the price by a total of 5,000 yen per tonne since lastyear, but rather than just discussing whether the 5,000 yen
is a reasonable amount or whether we should simply passcost increases on to cement prices in the future, we would
like to clarify the approach to the appropriate price of cement
throughout the entire supply chain. On top of that, I believe it isnecessary to once again demonstrate to institutional investors
and our shareholders that the domestic cement business is acash cow that can generate stable earnings.

Financial Strategy − Message from the Officer in Charge

growth investments if we determine there is an opportunityfrom a medium- to long-term perspective of five to ten years.
More than 30 years have passed since our initial investment
in our U.S. business, which has grown to become theGroup's largest earner. I think this is a classic example of why
investments related to the cement business must not be judged
in the short term. In the future, in order to continue stable
growth as the domestic population declines and a significant
recovery in cement demand is not expected, we would like ouroverseas sales as a proportion of the Group’s overall net sales toincrease to 50%, but it is important not to focus solely on the U.S.
business, but to grow our existing businesses in the Philippines
and Vietnam, as well as Indonesia and the rest of Southeast
Asia, in a well-balanced manner.
Our investment in human capital will also accelerate.
Currently, the Group is under pressure to respond to labor
shortages, including the shortage of drivers under the revisionof regulation in 2024. Domestically, our first priority is toincrease labor productivity and we are working to improve
individual skills not only in production and sales, but also in
the administrative departments. The basic strategy of our groupfrom now on is to generate stable earnings with a minimum
number of employees in Japan and to generate new cash flow
overseas where growth can be expected. We believe that thefundamental element of this is human resources who can be
active on the global stage, and we will build mechanisms thatenable these individual abilities to be utilized.

Continuing the strengthening of our earnings baseand growth investments

We are implementing the strengthening of our plant andquarry facilities as an important investment that is fundamental
to our domestic cement business, and will proceed in a planned
manner to ensure long-term stable supply. We will also
continue to invest in the steady transition to carbon neutrality.
We have launched our "Carbon Neutral Strategy 2050" andplan to achieve interim CO2 emission reduction targets by
2030, as well as complete the development of innovativetechnologies such as CO2 capture and utilization at the actual
plant level. These initiatives will require 100 billion yen by
2030. From 2030 onward, we will sequentially deploy theinnovative technologies at each of our plants.
We will continue to expand our overseas business while
capturing growth markets, and we will not hesitate to make

Introduction of ROICAs businesses related to cement are mainly equipment
intensive industries, the scale of investment is large andrequires a long time to recover the investment. Solid

Overseas net sales and ratio
Net sales (billion yen)
Ratio (%)* Overseas net sales and ratios are based on the customer’s location

228.6

230.8

233.0

318.3
249.0
39.3
35.1

24.9

26.1

26.9

management and decision-making are needed based on an
unbiased, long-term perspective at the business level, regional
level and company level. We are considering making ROIC, theconcept of how much profit is produced from invested capital,
one of our target indicators in the future. While ROE uses net
income as the numerator, ROIC uses after-tax operating income
as the numerator and total investment plus interest-bearing
debt as the denominator, thus making earning power visible inits true sense. As the three core segments of our group, namely
the Domestic Cement Business, Mineral Resources Business andEnvironmental Business, are closely related in terms of humancapital and non-current assets, including internal transactions,
ROIC will be used as an indicator of overall management, anda KPI tree will be developed for each segment. We believethat its introduction into each of our overseas subsidiaries,
the Construction Materials Business segment and the otherbusiness segments that operate their respective businesses
independently will particularly significant.

Financial Strategy

JCRA

net loss in FY2023, we paid the same amount in dividends as
the previous fiscal year, in line with our basic stance of providing
stable and continuous dividends. In the next Medium-Term
Management Plan, we will develop a returns policy that will
provide institutional investors and our shareholders with evengreater peace of mind. We will strive to increase corporate
value with an awareness of TSR (Total Shareholder Return),which takes into account not only dividends and treasury sharepurchases but also stock price fluctuations.

Dialogue with stakeholders

In terms of dialogue with institutional investors and otherstakeholders, each year the opportunities to discuss not only
financial data, such as financial results and forecasts, but also
non-financial data are increasing. The opinions and suggestions
which we receive are reported to management in a timely
manner, and we intend to increase the opportunities for
management to engage in direct dialogue with stakeholders in
the future.

TSR (Total Shareholder Return)

R&I

A-

A stable financial footing is necessary for the continued
execution of investment and policies. For this purpose thecompany must maintain an A issuer credit rating at a minimum.
In the current fiscal year we received a JCR issuer rating of A
and an R&I rating of A-. In order to maintain this A rating in the
future, we will first improve the profitability of the domestic
cement business and return cash flow from operating activities
to over 100 billion yen as soon as possible. In addition,
approximately 35 billion yen of Group companies’ surplus
funds are circulating within the Group under our financial
subsidiary’s cash management system, and we will strengthen
this system with the aim of further improving capital efficiency.
Regarding the delivering of carbon neutrality, we will consider
the procurement of funds in a manner that is consistent withthe "Technology Roadmap for Transition Finance in the Cement
Sector” formulated by the Ministry of Economy, Trade andIndustry. As a start, in March of this year we procured funds
through a transition-linked loan that was a first for the domestic
cement industry. In the future, this ratio will be increased in linewith our gradual decarbonization.

TSR (Total Shareholder Return)
Comparison index: Dividend included TOPIX (%)

122.15 124.57
94.96

85.94

97.54

80.49
59.22

51.49
2019

131.82

2020

2021

2022

73.14
2023

(FY)

TSR (Total Shareholder Return)The ratio of the return (mainly dividends and capital gains) earned on a stock investment
divided by the stock price (investment amount), which represents the overall investment
return for the shareholder. Calculated using the closing price at the end of each fiscal year
(last day of March) and based on an investment having been made at the closing priceon the last day of March 2018.

Shareholder Returns
2019

38

2020

2021

2022

2023

(FY)

Under the 23 Medium-Term Management Plan, our plan forshareholder returns is a total return ratio of 33%. Despite the39Medium- to Long-Term Vision, Value Creation Activities - Creating ValueDX Strategy
External (customers, stakeholders, society)

Providing safety and security to ourinternal and external stakeholders
by utilizing increasingly
sophisticated digital technology
and data.

• Expansion of web portal

Promotion of defensive DX

In recent years, it has become important to rapidly
advance DX in corporate activities in order to maintain andstrengthen competitiveness and to develop new businessareas. We recognize the importance of organizational andbusiness transformation, as well as the promotion of our corebusinesses of cement production and sales, and research anddevelopment, through the use of increasingly sophisticateddigital technology and data in order to materialize "our future
vision and direction" for the mid-2020s. We believe that DX
promotion will be one of the key drivers of these efforts.

Based on the results of the IT environment survey conductedin the previous fiscal year when formulating the DX strategy, we
have decided to promote stable production through advanced
control and automation of cement production processes, aswell as promote management from a new perspective, improve
operations and enhance services such as information provision
to customers. In June 2022, we launched the "DX Promotion
Team" in order to strongly promote these initiatives. The
DX Promotion Team will handle, on a company-wide, crosssectional basis, the individual DX projects that have beenpromoted by each department until now, and is working tomaterialize new services by making maximum use of the latest
digital technology.

Roadmap
Step 2

Utilization of the latest digitaltechnology

Step 1

Digital infrastructure• Establishment of an information
sharing platform with groupcompanies to create group synergy
and resolve issues• Provision of an electronic transaction
system through a web portal site forbusiness partners• Cultivation of "DX human resources"
with both business knowledge andadvanced digital skills

40• Advanced facility maintenance throughoperation monitoring of cement
production facilities using digitaltechnologies• Rapid detection of facility abnormalities
through periodic inspection of cement
production facilities using drones• Development of a remote support systemfor cement production facility operation• AI learning aimed at fully automatedoperation of cement production facilities• Improved operational efficiency andoptimization of logistics by using AI inship allocation planning• Development of a slump forecasting
system using AI image recognition in
concrete production

DX initiatives
will contribute asa key driverof our future visionand direction• Promote DX human resource
development• Raise employees’ awarenessthrough understanding of DX, etc.

Reform of business processes

Promotion of offensive DX
Reform of plant and quarry productivity• Workflow and RPA utilization• Introduction of electronic contracts
and electronic seal services• Utilization of BI tools (data)• Introduction of AI ship allocation
planning optimization system, etc.

Director and Senior Executive Officer

Implementation system• Concrete slump prediction (PreSLump AI)• Structural diagnosis using RFID withsensors, etc.

Reform of corporate culture
and climate

Hideaki Asakura
Current environment and objectives

Advancement of customer services• Utilization of drone and 3D laser scanners• Kiln automation, remote operator assistance• Utilization of anomaly prediction anddetection, VR• Cement quality prediction system, etc.

Internal (within the company)

DX promotion
Initiatives will be progressed to realize measures thathave been promoted in each business division, such as
the restructuring of business systems, development ofcommunication infrastructure, strengthening of plant facilities
and quarry development, the smart factory concept, andoptimization of the allocation of cement distribution vessels
through AI. We also recognize that acquiring and developing
DX human resources is essential for DX promotion. From theseperspectives, we are working on the themes shown in the
diagram as new business development that utilizes digitaltechnology.

Benefitsforbusiness
partners• Documents such as shipment records and invoices are athand instantly• Electronic data can be used for shipping and invoicing
statements• Online ordering simplifies the process• Prevents typographical errors, improves operational
efficiency and progresses labor saving

Benefits
to ourcompany• The process of sending invoices, etc. is eliminated• Transcription errors in inquiry information, vehicle
information, etc. are eliminated• Information can be shared with business partners in realtime
• Prevents typographical errors, improves operational
efficiency and progresses labor saving

Example: Web Portal

This service digitalizes information including shipment
records, invoices and payment information, and provides it
online. Service provision commenced in the Cement Businessin 2019 and in the Mineral Resources and Environmental
Businesses in July 2023. For business partners, digitalization
eliminates the time lag in the transmission of information,and the downloading of text data enables the contents ofstatements to be reused, thereby improving operational
efficiency and saving labor. Orders and applications can also
be submitted through this service, eliminating mistakes anddouble entries, thereby improving accuracy and speeding up
procedures.

41