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 (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 aperspective of capital efficiency and will shift to management that focuses on “earning power.”
MP-13 targets consolidated ROIC of 7.0% or higher for FY 2023 (final fiscal year of MP-13).
This level would surpass capital costs and make it possible to grow company value.
In the final fiscal year of MP-13, we aim to recover to FY2019 levels, before the COVID-19 pandemic.

2Improve 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, taking into account the balance sheet (BS) and cash flow (CF).

(1) Reduction of cross-shareholding
The policy states that cross-shareholding
shall be less than 10% of net assets at theend of each fiscal year on the balance sheet.
As of March 31, 2024 (end of the final fiscal
year of MP-13), the Company policy is to
reduce cross-shareholdings by at least 30%
compared to March 31, 2021.
As of March 31, 2022, cross-shareholdings
was 9.1% of net assets at the end of thefiscal year on the balance sheet, a 30.3%
reduction compared to March 31, 2021.

Trends in Cross-shareholdings (listed companies)
Left axis: ■ Amount recorded on balance sheet(Millions of yen)

20,00024

Number of companies(Companies)

24

16,00012,000

Right axis:

25

20

18
11,09914

11,158

8,000

6,247

4,000

0

2019

2020

2021

2022

(2) Improvement of cash conversion cycle (CCC)(Months)

Pre-MP-13

MP-13

64

20

2021

2022

2023

2024

(Year ended March 31) (Year ended March 31) (Year ended March 31) (Year ended March 31)

Target64

Mandom Report 2022

105

(Year ended March 31) (Year ended March 31) (Year ended March 31) (Year ended March 31)

The Company is reviewing to improve thereceivables turnover cycle, inventory assets
turnover cycle, and debt repayments cycle inorder 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 the final fiscal yearof MP-13).
The cycle was 5.1 months based onbalances as of March 31, 2022, due to theimproved debt repayments cycle.

158,9760

(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, the Company pooled 1.2 billion yen in capital.

(4) Financing for strategic investment

3Value Creation Story

With cooperation from our partner banks, the Company has secured a line of credit of 20 billion yen.
In the fiscal year ended March 31, 2022, FCF was higher than the previous fiscal year and there was nooutstanding balance as of March 31.
The Company will utilize this financing for strategic investments with due consideration to FCF and the profit
and loss statement (P/L).
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 maintains a basic capital policy of the stable and continuous returning of profits to shareholders
through dividends. We had eight consecutive years of dividend increases until the fiscal year ended March31, 2020 before the onset of the COVID-19 pandemic. We restarted dividend increases from the fiscal year
ended March 31, 2022 and aim to continue increases after taking a comprehensive consideration of FCF,
investment plans, and liquidity.
The Company targets a consolidated payout ratio of 40% or more.

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

2

Strengthening governance in accounting

1

Performance for the Fiscal Year Ended March 31, 2022

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.

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 Group net sales are covered by companies
that have implemented SAP. As of March 31, 2022, such companies comprised 77% of Group sales.
We are also proceeding with visualization of management information at each overseas Group company.

2Standardization of accounting policies globally

3

Company Information

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

Minimize tax risks globally
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 202265