COMPANY RESEARCH AND ANALYSIS REPORTSAKAI HEAVY INDUSTRIES, LTD.
6358
Tokyo Stock Exchange Prime Market

25-Mar.-2024
FISCO Ltd. Analyst

Noboru Terashima

FISCO Ltd.
https://www.fisco.co.jp

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SAKAI HEAVY INDUSTRIES, LTD.

25-Mar.-2024

6358 Tokyo Stock Exchange Prime Market

https://www.sakainet.co.jp/en/ir/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Outline of results for FY3/24 3Q............. ......................................................................................................

01

2. Outlook for FY3/24.. .....................................................................................................................................

01

3. Medium-term growth strategy.. .............. ......................................................................................................

02■Company profile---------------------------------------------------------------------------------------------------------------------------------------------------------- 03■Business overview---------------------------------------------------------------------------------------------------------------------------------------------------- 03
1. Business description. . ..................................................................................................................................

03

2. Characteristics and strengths......................................................................................................................

03

3. Market share and competitors.....................................................................................................................

04■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 04
1. Outline of results for FY3/24 3Q............. ......................................................................................................

04

2. Trends by region..........................................................................................................................................

05

3. Financial condition................................. ......................................................................................................

06■Outlook-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 07• Outlook for FY3/24.. .....................................................................................................................................

07■Medium-term growth strategy---------------------------------------------------------------------------------------------------------------------- 08
1. Business strategy.. .......................................................................................................................................

08

2. Capital strategy. . .................................... ......................................................................................................

08

3. Medium-Term Management Policy: Progress on KPI. ..................................................................................

09

4. Sustainability initiatives.......................... ......................................................................................................

09■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 11

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SAKAI HEAVY INDUSTRIES, LTD.

25-Mar.-2024

6358 Tokyo Stock Exchange Prime Market

https://www.sakainet.co.jp/en/ir/■ Summary
For FY3/24 3Q, operating profit increased by 62.7% YoY. Particularly
strong sales to North America, albeit with slightly slower profit
growth
Sakai Heavy Industries, Ltd. <6358> (hereinafter also referred to as “the Company”) is a manufacturer specializing
in road rollers for road paving and other road construction equipment. It has a long history in this field, and boasts
the industry’s market share in Japan at over 70%. In recent years, the Company has been focusing on developing
overseas markets, especially in North America and Southeast Asia.
1. Outline of results for FY3/24 3Q
In the consolidated results for FY3/24 3Q, net sales increased 9.8% year on year (YoY) to ¥24,301mn, operating
profit increased 62.7% to ¥2,580mn, ordinary profit rose 68.7% to ¥2,676mn, and profit attributable to owners ofparent increased 66.1% to ¥1,947mn. The results were largely in line with forecasts. By region, in Japan net sales
were up 1.9% YoY as capital investment trends reached a standstill, faced with frequent sales price revisions and abroad range of cost increases, despite a firm market environment against the backdrop of measures to accelerate
national land resilience. Overseas sales were strong, increasing 17.5%. In particular, net sales increased 31.8% YoY
in the U.S., due to increasing investment in road construction following the passing of the Infrastructure Investment
and Jobs Act and the effect of the weak yen. Sales to Asia were down 3.5%, due to slowdowns in the Chinese and
ASEAN markets excluding Indonesia (primarily Thailand and Vietnam), despite a recovery in demand in Indonesia.
The gross margin improved to 29.1% (vs. 25.6% in the year-before 3Q), due to factors including the effects of sales
price revisions, the normalization of transport costs, and the weak yen. SG&A expenses only increased 10.5%, so
operating profit rose significantly. Nevertheless, when looking at the three-month 3Q period alone, operating profit
only increased 18.5%, indicating slightly slower profit growth compared to 1H.
2. Outlook for FY3/24
For its FY3/24 consolidated results, the Company has not revised its forecasts from the upwardly revised forecasts
in FY3/24 1H, with a forecast for net sales of ¥33,100mn (up 5.2% YoY), operating profit of ¥3,300mn (up 31.7%),
ordinary profit of ¥3,300mn (up 41.8%), and profit attributable to owners of parent of ¥2,300mn (up 35.7%). Global
demand for construction machinery is forecast to remain solid as infrastructure investment increases globally,
but there are concerns about a dulling of demand in certain areas, so the Company has adopted a fairly cautious
outlook for 2H. In the U.S. market, which has thus far driven business performance, the Company has also adopted
a cautious outlook for 4Q in light of the possibility of delays in parts procurement due to conditions in the Panama
Canal, despite firm demand. While it is unlikely for actual results to fall below full-year forecasts at this time, it would
be unwise to harbor unrealistic expectations for additional upward revisions to the forecasts.

We encourage readers to review our complete legal statement on “Disclaimer” page.

01 11

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SAKAI HEAVY INDUSTRIES, LTD.

25-Mar.-2024

6358 Tokyo Stock Exchange Prime Market

https://www.sakainet.co.jp/en/ir/

Summary

3. Medium-term growth strategy
In June 2021, the Company released its “Medium-Term Management Policy” which runs through FY3/26. The
ultimate goal is to increase corporate value and shareholder value, and in order to achieve this, the Company will
promote a “business growth strategy” and an “efficient capital strategy.” In terms of numerical targets, in FY3/26,
the Company is aiming for net sales of ¥30.0bn, operating profit of ¥3.1bn, ROE (return on equity) of 8%, and will
aim to maintain a stable dividend payout ratio of 50%. Results were strong in the first year of the plan in FY3/22
and the second year in FY3/23, and FY3/24 has been solid thus far, but the plan currently remains the same, andthe Company has kept these numerical targets unchanged. Regarding the FY3/24 dividend, given the ROE is
forecast to exceed 6.0% and the promised dividend payout ratio of 50%, the Company announced an increased
annual dividend to ¥270.0 (interim dividend of ¥90.0 and fiscal year-end dividend of ¥180.0). The Company shouldbe rated highly for announcing a clear capital policy to improve ROE and then implementing shareholder returns inaccordance with that policy.
Key Points
Japan’s leading manufacturer of road rollers with a long history. Domestic market share is over 70%, and theCompany aims to grow by expanding its overseas market share• With a 62.7% YoY increase in operating profit during FY3/24 3Q, a 31.7% increase is forecast for the full year
• Medium-term numerical targets (net sales of ¥30.0bn and operating profit of ¥3.1bn for FY3/26) remainunchanged•

Results trends
Net sales (left)

Operating profit (right)

(¥mn)

(¥mn)

35,00031,45933,10026,59928,00022,744

4,000
3,300

21,62421,000

3,000

2,506

14,000

2,000

1,383
959

7,000

5,000

701

1,000

0

0
FY3/20FY3/21

FY3/22

FY3/23

FY3/24 E

Source: Prepared by FISCO from the Company’s financial results

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02 11

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SAKAI HEAVY INDUSTRIES, LTD.

25-Mar.-2024

6358 Tokyo Stock Exchange Prime Market

https://www.sakainet.co.jp/en/ir/■ Company profile
The leading manufacturer of road rollers with a long history
The Company is a specialized manufacturer of road rollers for paving roads and other road construction equipment,
and currently, the Company is the leading manufacturer in Japan, and boasts a market share of over 70%. In 1970,
the Company established a joint venture in Indonesia, as part of the Company’s effort to expand business overseas at
an early stage. As of the end of FY3/23, the Company has four domestic subsidiaries, and four overseas subsidiaries(U.S., China, two in Indonesia). The Company listed its shares on the Second Section of the Tokyo Stock Exchange
in 1964, and its shares were reclassified to the First Section of the Tokyo Stock Exchange in 1981. In conjunction
with the Tokyo Stock Exchange’s market recategorization in April 2022, it moved to the Prime Market.

■ Business overview
The leading manufacturer of road rollers with a domestic market
share of over 70%. Will seek growth by offering high added value
and expanding overseas market share
1. Business description
The Company’s main business is the manufacture and sale of road rollers used in road paving and other applications,and road roller-related net sales account for approximately 95% of all net sales. Also, the Company’s corporate
philosophy is to “Contribute to the social project of global land development through the road construction equipment business.”
In terms of net sales by region in FY3/23, net sales in Japan were ¥15,208mn (48.3% of total net sales), net sales
in North America were ¥7,751mn (24.7%), net sales in Asia were ¥7,796mn (24.8%), and net sales in other regions
totaled ¥703mn (2.2%). Moreover, in terms of net sales by region in FY3/24 3Q, net sales in Japan were ¥11,070mn(45.6%), net sales in North America were ¥6,626mn (27.3%), net sales in Asia were ¥5,503mn (22.6%), and net
sales in other regions totaled ¥1,101mn (4.5%).
2. Characteristics and strengths
As mentioned above, the Company is a specialized manufacturer of road rollers and other road construction
equipment, and the Company has the following special characteristics and strengths.
(1) Long history as a specialized manufacturer
The Company’s greatest strength is its long history as a specialized manufacturer of road rollers and other road
construction equipment. In other words, by deploying a global niche strategy through selection and concentration,
the Company has increased its level of expertise and accumulated its own unique technologies.

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03 11

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SAKAI HEAVY INDUSTRIES, LTD.

25-Mar.-2024

6358 Tokyo Stock Exchange Prime Market

https://www.sakainet.co.jp/en/ir/

Business overview(2) Technological capabilities
When it comes to hardening and paving roads, the necessary pressure, torque, and other variables (compaction
technology) differ depending on the specific land, land quality, soil, and other conditions. Therefore, roadwork
companies often require different types of road rollers to match individual worksites (ground, etc.). Because theCompany has been a specialized manufacturer of road rollers and other road construction equipment for many
years, it boasts a high level of technological capabilities with respect to compaction technology, and it is not easy
for its competitors to catch up to it.
(3) Credibility
Credibility backed by experience engineering and track record is also a strength of the Company. The technology
to ensure underground compaction quality is a black box, and is not something that is easy for late-arriving
manufacturers and non-specialized manufacturers to copy. For example, asphalt mixture brought in at hightemperatures must be worked on within a limited time, and if the work is of poor quality, it must be redone
which involves a large price. Also, work quality issues for roads and embankments are slow to emerge, andthe compaction quality at the time that work is completed tends to be a black box. For this type of experienceengineering, the Company’s strength lies in the fact that it is a brand which customers have used for many years
and that has accumulated long-term insight due to abundance of worksite experiences, and these are points thathave earned the trust of many customers.
3. Market share and competitors
According to data from the Japan Construction Equipment Manufacturers Association, in FY2022 domestic
construction equipment shipment value was ¥3.5tn, and road roller and other road construction equipment (theCompany’s main products) account for 2.3% of this amount. The Company has a share of over 70% in this roadequipment market, making it the leading manufacturer in Japan. Competitors include companies such as Hitachi
Construction Machinery Co., Ltd. <6305>, but none of these companies are specialized manufacturers. Some
overseas manufacturers have entered the market in Japan, but none have much of a presence. In Japan, theCompany’s earnings rise and fall along with the ups and downs of the market.
In the global market, although there are no accurate statistics, the Company’s market share (on a units produced
basis) is estimated to be in the 5-6% range. However, this is on a global basis, and if we limit the scope to the mainmarkets that the Company operates in (Japan, ASEAN, North America), the Company’s market share appears to bearound 15%. The Company’s main competitors in the global market include Caterpillar <CAT>, FAYAT SAS, HAMM
AG, and Volvo Personvagnar AB, but none of these companies are manufacturers that specialize in road rollers.

■ Results trends
For FY3/24 3Q, operating profit increased by 62.7% YoY. Strong
sales to North America and other overseas markets
1. Outline of results for FY3/24 3Q
In the consolidated results for FY3/24 3Q, net sales increased 9.8% YoY to ¥24,301mn, operating profit increased
62.7% to ¥2,580mn, ordinary profit rose 68.7% to ¥2,676mn, and profit attributable to owners of parent increased
66.1% to ¥1,947mn. The results were largely in line with plans.

We encourage readers to review our complete legal statement on “Disclaimer” page.

04 11

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SAKAI HEAVY INDUSTRIES, LTD.

25-Mar.-2024

6358 Tokyo Stock Exchange Prime Market

https://www.sakainet.co.jp/en/ir/

Results trends

The gross margin improved to 29.1% (vs. 25.6% in the year-before 3Q), due to factors including the effects of sales
price revisions, the normalization of transport costs, and the weak yen. SG&A expenses only increased 10.5%, so
operating profit rose significantly. Nevertheless, when looking at the three-month 3Q period alone, operating profit
only increased 18.5%, indicating slightly slower profit growth compared to 1H.
Overview of FY3/24 3Q consolidated results(¥mn)
FY3/23 3Q

FY3/24 3Q

ChangeResults% of net sales

Results% of net sales

Net sales

22,125100.0%

24,301100.0%

Amount
2,175

%
9.8%

Gross profit

5,654

25.6%

7,076

29.1%

1,422

25.1%

SG&A expenses

4,069

18.4%

4,496

18.5%

427

10.5%

Operating profit

1,585

7.2%

2,580

10.6%

994

62.7%

Ordinary profit

1,586

7.2%

2,676

11.0%

1,089

68.7%

Profit attributable toowners of parent

1,172

5.3%

1,947

8.0%

775

66.1%

Source: Prepared by FISCO from the Company’s financial results

2. Trends by region
Looking at each region, in Japan net sales increased 1.9% YoY to ¥11,070mn, as capital investment trends reacheda standstill, faced with frequent sales price revisions and a broad range of cost increases, despite a firm market
environment against the backdrop of measures to accelerate national land resilience. Overseas, net sales increased
17.5% to ¥13,231mn, due partly to progress in the recovery of demand for construction machinery in the mainmarkets in addition to the effects of the weak yen. In particular, net sales rose 31.8% to ¥6,626mn in the U.S. due
to increasing investment in road construction following the passing of the Infrastructure Investment and Jobs Act
and the effect of the weak yen. Sales to Asia were down 3.5% to ¥5,503mn, due to slowdowns in the Chinese and
ASEAN markets excluding Indonesia (primarily Thailand and Vietnam), despite a recovery in demand in Indonesia.
In other markets, net sales increased 108.2% to ¥1,101mn, reflecting firm conditions in the Oceania market, alongwith ODA projects for Africa.
Net sales by region(¥mn)
FY3/23 3Q

FY3/24 3Q

ChangeResults% of total

Results% of total

AmountJapan

10,86449.1%

11,070

45.6%

205

1.9%

Oversea

11,261

50.9%

13,231

54.4%

1,970

17.5%

North America

5,028

22.7%

6,626

27.3%

1,598

31.8%

Asia

5,703

25.8%

5,503

22.6%

-200

-3.5%

528

2.4%

1,101

4.5%

572

108.2%

22,125100.0%

24,301100.0%

2,175

9.8%

Other regions
Total

Source: Prepared by FISCO from the Company’s financial results

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SAKAI HEAVY INDUSTRIES, LTD.

25-Mar.-2024

6358 Tokyo Stock Exchange Prime Market

https://www.sakainet.co.jp/en/ir/

Results trends

Stable financial condition, ample cash and deposits of ¥7,674mn.
Inventory levels are slightly high in anticipation of sales growth
3. Financial condition
In terms of the Company’s financial condition as of the end of FY3/24 3Q, current assets were ¥29,871mn (up¥2,431mn from the end of the previous fiscal year). The main factors included a ¥190mn increase in cash anddeposits, an ¥895mn decrease in notes and accounts receivable - trade (including electronically recorded monetaryclaims - operating), and a ¥2,610mn increase in inventories. Non-current assets were ¥15,000mn (up ¥1,635mn).
The main factors include a ¥265mn increase in property, plant and equipment, a ¥58mn decrease in intangible
assets, and a ¥1,429mn increase in investments and other assets (mainly a ¥1,487mn increase in investment
securities). As a result, total assets were up ¥4,067mn to ¥44,871mn. Inventories increased, but only owing to anincrease in parts for increased production and safety stock. The increase in inventories is not a cause for concern
because it represents the Company’s adjustments to optimize inventory levels in response to an easing of supply
constraints for parts and other items.
Total liabilities were ¥16,440mn (up ¥931mn from the end of the previous fiscal year). The main factors among current
liabilities included a ¥657mn increase in payables (notes and accounts payable - trade and electronically recorded
obligations - operating), a ¥10mn increase in short-term borrowings, and a ¥506mn increase in non-current liabilities.
Total net assets stood at ¥28,431mn (up ¥3,135mn). As a result, the equity ratio as of the end of FY3/24 3Q was
63.2% (61.8% at the end of the previous fiscal year).
Net working capital (trade receivables + inventories – trade payables) at the end of FY3/24 3Q increased by 10.2%
to ¥12,827mn (up ¥1,182mn YoY). This was mainly due to a decrease in trade receivables (down ¥1,197mn), an
increase in inventories (up ¥2,262mn) and a decrease in trade payable (down ¥117mn). The inventory turnoverdecreased 0.16 times YoY to 2.79 times per year, mainly reflecting an increase in inventory levels due to increased
production and reduced risk of part shortages, despite steady sales (net sales).
Net working capital(¥mn)
ChangeFY3/23 3Q
results

FY3/24 3Q
results

AmountConsolidated net sales (annualized consolidated net sales)

28,931

33,635

4,704

16.3%

Trade receivables

9,765

8,568

-1,197-12.3%

Inventories

9,800

12,062

2,262

23.1%

Trade payables-7,920-7,803117-1.5%

Net working capital

11,645

12,827

1,182

10.2%

2.95

2.79

-0.16

Inventory turnover (times)

Note: Consolidated net sales (annualized) = Net sales of 1Q-3Q in the current fiscal year + 4Q in the previous fiscal year
Source: Prepared by FISCO from the Company’s results briefing materials

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SAKAI HEAVY INDUSTRIES, LTD.

25-Mar.-2024

6358 Tokyo Stock Exchange Prime Market

https://www.sakainet.co.jp/en/ir/■ Outlook
FY3/24 forecast is for a 31.7% YoY increase in operating profit• Outlook for FY3/24
For FY3/24 consolidated results, the Company is forecasting net sales of ¥33,100mn (up 5.2% YoY), operating
profit of ¥3,300mn (up 31.7%), ordinary profit of ¥3,300mn (up 41.8%), and profit attributable to owners of parent of¥2,300mn (up 35.7%). The upwardly revised forecasts in FY3/24 1H remain unchanged. The Company is assuming
an exchange rate of ¥140/USD.
The outlook for net sales and profit by region has not been disclosed, but the Company’s policy is to pursue sales
increases in all regions. Demand for construction machinery is forecast to remain stable as infrastructure investments
increase globally. On the other hand, there are many uncertain factors such as global inflation, security issues, andsocial structural changes, but by promoting profit structure reform, improving productivity and creating new added
value, and modifying global business activities, it is forecasting that the operating profit margin will increase by 2.0
points YoY.
Global demand for construction machinery is forecast to remain solid as infrastructure investment increases globally,
but there are concerns about a dulling of demand in certain areas, so the Company has adopted a fairly cautious
outlook for 2H. In the U.S. market, which has thus far driven business performance, the Company has also adopted
a cautious outlook for 4Q in light of the possibility of delays in parts procurement due to conditions in the Panama
Canal, despite firm demand. While it is unlikely for actual results to fall below full-year forecasts at this time, it would
be unwise to harbor unrealistic expectations for additional upward revisions to the forecasts.
Consolidated outlook for FY3/24(¥mn)
FY3/23

FY3/24

ChangeResults% of net sales

Results% of net sales

Net sales

31,459100.0%

33,100100.0%

Amount1,641

5.2%

Operating profit

2,506

8.0%

3,300

10.0%

794

31.7%

Ordinary profit

2,327

7.4%

3,300

10.0%

973

41.8%

Profit attributable toowners of parent

1,694

5.4%

2,300

6.9%

606

35.7%

Source: Prepared by FISCO from the Company’s financial results

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SAKAI HEAVY INDUSTRIES, LTD.

25-Mar.-2024

6358 Tokyo Stock Exchange Prime Market

https://www.sakainet.co.jp/en/ir/■ Medium-term growth strategy
As its medium-term growth strategy, the Company will seek to growits overseas market share, expand overseas business domains,and create added value by developing next-generation businesses.
FY3/26 targets of net sales of ¥30.0bn and operating profit of ¥3.1bn
are unchanged
In June 2021, the Company released its “Medium-Term Management Policy” which runs through FY3/26. The
ultimate goal is to increase corporate value and shareholder value, and in order to achieve this the Company will
promote a “business growth strategy” and an “efficient capital strategy.” In terms of numerical targets, the Company
is aiming for net sales of ¥30.0bn, operating profit of ¥3.1bn, ROE of 8% in FY3/26, and will aim to maintain a stabledividend payout ratio of 50% (DOE of 4%). As mentioned above, the forecasts for FY3/24 already exceed thesetargets, but the policy currently remains the same, and the Company has kept these numerical targets unchanged.
1. Business strategy(1) Domestic market: Create added value through stabilization and developing next-generation businesses
The domestic market for road rollers is already in its mature phase and the Company’s market share is large.
Therefore, the Company will aim to grow by adding new value to existing products (high-performance, etc.), inother words, by developing next-generation businesses.
(2) Overseas markets: Increase market share and expand business domains
In overseas markets, there are many regions (countries) where demand is increasing, and there is significant roomfor growth given the Company’s low market shares. Therefore, the Company will seek growth through the two
strategies of more fully cultivating existing markets and expanding its business domains.
(3) Numerical targets
As medium-term numerical targets, the Company aims for net sales of ¥30.0bn, operating profit of ¥3.1bn, andROE of 8% in FY3/26.
2. Capital strategy
As its basic policy for capital strategy, the Company will return profits to shareholders at a level that supports theCompany’s objective of ROE of 8%, and will increase shareholder value (improve capital efficiency). As a final target
for FY3/26, the Company will strive to achieve ROE of 8% and a 50% dividend payout ratio.
Generally, two things need to be improved in order to increase ROE. One is of course increasing profit attributableto owners of parent, while the other is suppressing shareholders’ equity (not increasing shareholders’ equity morethan necessary, or decreasing it). In order to increase operating profit, the Company plans to promote the businessstrategies discussed above, but at the same time, in order to keep from increasing shareholders’ equity more thanneeded, the Company plans to execute a dividend policy in which, if ROE falls below 3%, the dividend payout ratio
will be 100%, if ROE is between 3% and 6%, the DOE will be 3%, and if ROE is above 6%, the dividend payout
ratio will be 50%.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SAKAI HEAVY INDUSTRIES, LTD.

25-Mar.-2024

6358 Tokyo Stock Exchange Prime Market

https://www.sakainet.co.jp/en/ir/

Medium-term growth strategy

Basic capital policy approach

Source: Medium-Term Management Policy

In terms of share buybacks, through FY3/26 the Company will consider flexible share buybacks with an upper limitof ¥0.5bn to ¥2.0bn. With respect to investment securities, the Company will review investment securities from theperspective of business strategy. Also, concerning growth investment, the Company will consider utilizing leveragewith an emphasis on return on capital (ROIC).
3. Medium-Term Management Policy: Progress on KPI
Looking at the progress made on the main KPI announced in the Medium-Term Management Policy, for its FY3/24
full-year results the Company is forecasting net sales of ¥33,100mn and ROE of 8.6%, so it is expecting to achieve
the values in its medium-term management policy. Improvements to the profit structure in FY3/24 include upside
factors other than actual performance, such as the weak yen, in addition to penetration of sales price revisions
and the normalization of transport costs. Therefore, the Company will aim to solidify this profit structure and further
improve business performance moving forward.
Medium-Term Management Policy KPI

Source: The Company’s results briefing materials

4. Sustainability initiatives
The Company is proactively working on sustainability initiatives, and is advancing a variety of measures. Currently,
it is focusing in particular on the following measures.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SAKAI HEAVY INDUSTRIES, LTD.

25-Mar.-2024

6358 Tokyo Stock Exchange Prime Market

https://www.sakainet.co.jp/en/ir/

Medium-term growth strategy(1) Providing added value by contributing to the realization of a decarbonized society
The Company introduced its autonomous rollers (SV514D)* at construction sites in FY3/24. This will make compaction efficient, contributing to a reduction in CO2 emissions at construction sites.
*	Test data has shown that autonomous rollers enable approximately 20% more labor-saving than manned work.

(2) Resolving social issues and expanding business domains
JICA selected the Company’s stabilizer method (road repair technology) and products for a business validation
survey in Indonesia. Using the Company’s stabilizer method and products (PM550-s road stabilizers) aims to bothcontribute to infrastructure development in Indonesia and expand the use and sale of its products.
(3) Human capital management initiatives: Initiatives to increase the percentage of women in management
positions and reduce the gender pay gap
The Company set* a target of 15% for the percentage of women in management positions by March 2026.
The low percentage of women in management positions is considered to be one factor in a gender pay gap, asearnings by women are 82.4% of men among permanent workers, excluding those in management positions.
The Company’s policy is to actively work to improve the percentage of women in management positions from theperspective of reducing the gender pay gap.
*	This target was set on the basis of raising the percentage of women in management positions to approximately match
the percentage of management positions among all employees. Consequently, this target may be subject to change infuture due to changes affecting factors such as the number of employees and the number of employees in management
positions.

Human capital management initiatives

Source: The Company’s results briefing materials

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SAKAI HEAVY INDUSTRIES, LTD.

25-Mar.-2024

6358 Tokyo Stock Exchange Prime Market

https://www.sakainet.co.jp/en/ir/■ Shareholder return policy
Announced an annual dividend increase to ¥270.0 in FY3/24 in linewith its commitment. Aims to conduct share buybacks with an upper
limit of ¥0.5bn to ¥2.0bn by FY3/26
The Company works to secure a stable management base over the long term, and also places importance on thecontinuation of stable dividends, and makes it a basic policy to distribute results that are supported by businessperformance and a sound financial structure. Based on this basic policy, the Company decides dividends andconducts share buybacks. As discussed above, the Company’s medium-term shareholder return policy is as follows.
If ROE falls below 3%, the dividend payout ratio will be 100%, if ROE is between 3% and 6%, the DOE will be 3%,
and if ROE is above 6%, the dividend payout ratio will be 50%. With respect to share buybacks, the Company isconsidering flexible share buybacks with an upper limit of ¥0.5bn to ¥2.0bn by FY3/26.
Based on the above dividend policy, for FY3/24, given the ROE forecast to exceed 6.0% and the promised dividend
payout ratio of 50%, it announced an annual dividend of ¥215.0 (interim dividend of ¥90.0 and fiscal year-end
dividend of ¥125.0). However, in conjunction with the upward revision of full-year forecasts, the Company announced
that it will increase the annual dividend to ¥270.0 (interim dividend of ¥90.0 and fiscal year-end dividend of ¥180.0).
The Company should be rated highly for announcing a clear capital policy to improve ROE and then implementing
shareholder returns in accordance with that policy.

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