Financial Strategy
1

Financial strategy
Upon starting the 13th Middle-Range Planning (hereinafter “MP-13”), the Company developed the“Financial Strategy to Contribute to Sustainable Company Value Improvement” in April 2021 andcommunicated this strategy within the company.
In principle, the Company makes efforts to improve company value through the following financial
strategy from a perspective of free cash flow (hereinafter “FCF”).
1

Setting ROIC targets
In recent years, “a decline in earning power” has been raised as the Groupʼs issue, which some investors areconcerned about. In MP-13, in addition to traditional net sales and profit targets, the Company newly adopted
ROIC from a perspective of capital efficiency and shifted to management that focuses on “earning power.” MP-13
targeted consolidated ROIC of 7.0% or higher for FY2023 (final fiscal year of MP-13). This level surpasses capitalcosts and makes it possible to grow company value. However, since the fiscal year ended March 31, 2021, theglobal environment has changed drastically, including restrictions on outings and reduced movement of people
due to the pandemic, as well as rising prices of raw materials and supplies, the rapid appreciation of the dollar,
and the ongoing depreciation of the yen. Consequently, the Groupʼs performance, including net sales and profit,
has deviated downward from the initial plan. As a result, consolidated ROIC for the fiscal year ended March 31,
2023 stayed put at 2.1%. Although we returned to operating income in the fiscal year ended March 31, 2023 andwill improve operating income in the following fiscal years, we expect consolidated ROIC to be 2.4% in the fiscalyear ending March 31, 2024.

2

Improve asset efficiency rate through balance sheet (BS) management
The Company will conduct the following measures as part of the financial strategies to achieve the ROIC targets
and evolve into management that takes into account the balance sheet (BS) and cash flow (CF).

(1) Reduction of cross-shareholding

Trends in Cross-shareholdings (listed companies)

The policy states that cross-shareholding shall be less than Left axis: ■ Amount recorded on balance sheet Right axis: Number of companies(Millions of yen)(Companies)
10% of net assets at the end of each fiscal year on the24
20,0002531,2024
consolidated balance sheet, and that as of March(end of the final fiscal year of MP-13), cross-shareholding
16,0002018
shall be reduced by at least 30% compared to March 31,142021. As of March 31, 2023, cross-shareholding was 10.1% 12,000
1311,158
15of net assets at the end of the fiscal year on the consolidated
8,976
7,195
balance sheet, no more than a 19% reduction compared to8,000
106,247
March 31, 2021. This was due to an increase in the market
4,000
5value of the shares held, despite reducing our shareholding
for policy investments during the year under review. In00
the fiscal year ending March 31, 2024, we will continue to2020
2021
2022
2023
examine the rationale for our shareholding by company and(Year ended March 31) (Year ended March 31) (Year ended March 31) (Year ended March 31)
consider reductions.

(2) Improvement of cash conversion cycle (CCC)

Trends in CCC

Pre-MP-13
The Company is reviewing to improve the receivables(Months)
turnover cycle, inventory assets turnover cycle, and debt
6repayments cycle in order to cut down the cycle from 5.6
months on a balance base on March 31, 2021 to 4.0 months
or less on a balance base on March 31, 2024 (end of the4
final fiscal year of MP-13). The cycle was 5.7 months basedon balances as of March 31, 2023. This was due to anincrease in year-end product inventories at Mandom (Japan) 2
as a result of accelerated production of new products andsummer season products. We will make continued efforts to0
improve asset efficiency.
2021

MP-13

2022
2023
2024
(Year ended March 31) (Year ended March 31) (Year ended March 31) (Year ended March 31)
Target68

Mandom Report 2023

(3) Group cash management
About Mandom

The Company regularly checks the cash flows of each Group company, pools excess cash in the Company,
the headquarters of the Group, and utilizes it in high-profitability investments as the Group. In the fiscal year
ended March 31, 2022 and the fiscal year ended March 31, 2023, the Company pooled a total of 1.37 billion
yen in capital.

(4) Financing for strategic investment

3

Value Creation Story

With cooperation from our partner banks, the Company has secured a line of credit of 20 billion yen. There
was no outstanding balance as of March 31, 2023. The Company will utilize this financing for strategic
investments with due consideration to FCF and the profit and loss statement (P/L). For the 14th MiddleRange Planning (MP-14), we will consider a cash allocation policy that combines FCF and the line of credit.
Furthermore, the Company aims to share its earnings results and direction, including Middle-Range Planning,with our partner banks as appropriate in constructing a strong relationship.

Improve shareholder returns
The Company strives to increase FCF through BS management, boost ROIC, and improve shareholder returns.

(1) Dividend policy

Materiality

The Company regards the return of profits to shareholders as an important management issue. While always
keeping the improvement of capital efficiency in mind, we will comprehensively consider a number of factors,including FCF, investment plans, securing liquidity and economic conditions. We have a basic policy ofimplementing stable and continuous returns through dividends (numerical target: consolidated payout ratio of40% or more excluding special elements). In the fiscal year ended March 31, 2023, dividend was 38 yen, up
2 yen from the previous year, and the payout ratio was 178%.

(2) Acquisition of treasury shares
The Company will deliberate the acquisition of treasury shares after the comprehensive consideration ofeconomic status, company assets, FCF status, stock price trends, and other factors.
Middle-Range Planning

2Strengthening governance in accounting
In executing this financial strategy, the Company must also strengthen the financial governance thatunderpins the execution.
The Company is undertaking the following initiatives in order to strengthen the financial governance.

Performance for the Fiscal Year Ended March 31, 2022

1

Introduction of the Company-wide ERP system (SAP)In addition to improving the accuracy and speed of decision-making, Mandom is proceeding with theimplementation of SAP for the Group companies aimed at ensuring the accuracy of information and accelerationof consolidating earnings. We aim to build a structure in which 80% of consolidated net sales are covered bycompanies that have implemented SAP. As of March 31, 2023, such companies comprised 77% of consolidated
net sales. We are also proceeding with visualization of management information at each overseas Groupcompany.

2Standardization of accounting policies on a global base

3Company Information

The Company aims to speed up management decisions and strengthen Group management operations bychanging and aligning various systems, operation rules, and processes in the Group to standardize accounting
policies on a global base.

Minimize tax risks on a global base
The Company is making efforts to minimize tax risks in the overall Group while fulfilling our social responsibilities
through appropriate tax payment in all countries where the Group is operating business.

Mandom Report 202369

Middle-Range Planning

Middle-Range Planning Topics

Promotion of Digital Transformation of the Mandom Group
The Mandom Group stipulates “Shift to a company that creates new value through digitalization and open innovation” in its 13th
Middle-Range Planning (MP-13) basic management policies, and accordingly, is developing the internal infrastructure to “Achieve
success in DX (digital transformation) resulting in the realization of wellness.”

Promotion of digital transformation in MP-13
We have been promoting digital transformation throughout the Company,
establishing the DX Promotion Committee in May 2021, and became a certified
operator under the Digital Transformation Certification* in August 2022.

MP-13
basic management
policies

DX objectives* Digital Transformation Certification is a national initiativethat certifies companies that meet the basic requirements
specified in the Digital Governance Code based on theAct on Facilitation of Information Processing.

3. Shift to a company that creates new value through digitalizationand open innovation
1

Achieve success in DX resulting in the realization of wellness

Transition to a company that produces new value through digitaltransformation
Dramatically expand both the quality and quantity of Dedication to Service (Oyakudachi) bysimultaneously proceeding with initiatives for new businesses and improving efficiency ofexisting businesses through a digital foundation

IT strategy
In order to develop the IT environment necessary to shift to become a company that creates new value through promoting digitaltransformation, we have formulated an IT strategy based on the IT priority measures in MP-13.
It sets out three strategic themes as areas of focus: acquisition of new digital technology; data utilization; and reduction of technicaldebt. We are carrying out initiatives under MP-13 to achieve our vision for each theme.
Strategic Theme170Acquisition of new digital technology
To equip ourselves with organizational capabilities to utilize new digital technologies for operation process transformationand new value creation, we are acquiring knowledge and building up a track record in the utilization of RPA , AI, and lowcode/no-code development technologies.
RPA

To generate management resources through automation of routine operations, develop a system toproactively promote RPA in internal departments and implement it across the Company.

AI

Conduct research on AI technologies that will help solve the Companyʼs issues and consolidate in-house AI experience,and promote more optimal and advanced operations through the use of AI and machine learning technologies.

Low-code/
no-code development

Aiming to create agile operational applications in-house, promote their development using low-code tools
through collaboration between the business and IT divisions.

Mandom Report 2023

2

About Mandom

Strategic Theme

Data utilization
In order to effectively utilize data, which is the source of value creation via digital technology, Mandom promotes data
governance and data management by establishing a basic policy on data utilization, along with analyzing data-related
issues and monitoring the utilization and management of our data.

Value Creation Story

In addition, we built a cloud-based data utilization platform system that functions as a data hub for the entire company,
which can be expanded flexibly according to purpose and usage. Based around this platform, we are advancing various
data utilization measures to maximize the value of internal data assets and generate business results.

Conceptual diagram of the data utilization platform system
Data linkage

Sales results
Product information

Data martMarket information
Data lakeDatawarehouse‥‥‥

Analysis
Prediction anddetectionReduction of technical debt
In order to maximize business value through proactive use of new technologies, it is important to build and maintainan information system platform that can adapt quickly and flexibly to changes in the business environment. Therefore,
we have formulated company-wide governance rules on IT utilization, and are evaluating existing IT assets from a
combination of perspectives to identify and address technical debt risks that may hinder the use of new technologies.

Middle-Range Planning3

Data catalog

Visualization

Materiality‥‥‥

Strategic ThemeApplications

Information security measuresPerformance for the Fiscal Year Ended March 31, 2022

To protect the Groupʼs information assets from increasingly sophisticated cyber attacks and maintain a safe and secure businessenvironment, the Group implements information security measures covering all domestic and overseas Group companies fromorganizational, human resource, technical, and other perspectives.
For organizational measures, we established the Mandom Group Information Security Basic Policy and shared our basic approachand policy on information security across the entire Group. In addition, by referring to global standards and domestic guidelines, weestablished the Mandom Group Unified Standards for Information Security Measures on matters to be observed by Group companies.
All Group companies are implementing initiatives to comply with the standards.
For human resource measures, we conduct regular employee training throughout the year to ensure awareness about compliance withinformation security measures and about basic security procedures. We also internally disseminate information on security incidents
that have occurred in the world to alert employees.

Company Information

For technical measures, in preparation for any unforeseen situations, we have introduced Group-wide tools for early detection andresponse to security breaches, and have established and are operating a 24-hour/365-day security monitoring system through externalsecurity experts.
Through these efforts, the Group as a whole is promoting the optimization of information security measures.

Mandom Report 202371