17

Message from the Financial Director

Maxell, Ltd. Integrated Report 2022
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Introduction
Maxell Group’s Basic Management Policy
Table of Contents and Editorial Policy

Aiming to maximize corporate value throughpromotion of ROIC-focused management andstrengthening of our management foundation

History of Innovation

取締役

増田 憲俊

At a Glance
Sources of Value Creation
Value Creation Process

Noritoshi Masuda

Key Maxell products that provide value to society

Director

1 The Path to Realizing Our Vision
Materialities / Action Plans / KPIs
Message from the President
Message from the Financial Director
Financial Highlights
Non-Financial Highlights

2 Value Creation Report	Special Feature: All-solid-state batteries and the impact
they will have on society in the 3 focus areas

Review of Fiscal 2022

In fiscal 2022, we revised our full-year profit
forecast downward at the time of our secondquarter financial result announcement, andoperating profit was 5.638 billion yen, down 39.6%
year-on-year. The main factors behind this were
the global surge in raw materials costs and a
one-time cost stemming from the reform of ourdomestic BtoC business. We have been playing
catch up with the soaring raw materials costs
and have been quick to reflect the increases in
product prices in a reasonable manner based on
objective figures.
The decision to reform the domestic BtoC
business in fiscal 2022 was made based on thefinancial discipline and future prospects. Althoughdemand for ozone anti-bacterial deodorizers
expanded during the COVID-19 pandemic, leading
to increased profit, that demand subsequently
plateaued, resulting in a loss for fiscal 2022.
Furthermore, in order to concentrate on
business that leverages our strengths, Analog

Core Technologies, in April 2023, we transferred
the product planning, development, and sales
functions of this product group to DENKYOSHA
CO., LTD., a company with strong consumer
electronic product sales capabilities. Under thisnew structure, we will aim to expand our brandbusiness in the domestic consumer market.
As part of this business reform, we recorded
a one-time cost of approximately 600 million
yen, including expenses related to personnel
transfers. Some reform-related costs arecontinuing to be incurred in fiscal 2023, but
we will concentrate resources on businesses
focused on our Analog Core Technologies, andcontinue with reforms to ensure a steady returntowards profitability.
Regarding cash flow, in fiscal 2023, we plan
to invest aggressively, resulting in increased
investment cash flow and a slightly negative free
cash flow. The land sales we conducted in fiscal
2022 were aimed at addressing this in advance.

	Value Creation Process by Business Segment, andStrategy Progress Report

Domestic BtoC Sales Business Alliance
BtoC(domestic
sales)

Sales of approx.
9 billion yen(FY2022)

Brand business- Batteries- Audiovisual equipment- Health/Beauty care products

Transferred product planning,development, and sales
functions to DENKYOSHA

		 The Current Status of the Business Portfolio Shift, and the Future
		 Energy Segment
		 Functional Materials Segment
		 Optics & Systems Segment

Life solution

Brand business- Batteries- Audiovisual equipment- Health/Beauty care products

BtoC(overseas
sales)

BtoB

Approx. 20
billion yen(FY2022)

Hydraulictools

OEM business- Health/Beauty care products

Brand businessOEM business- Hydraulic tools

		 Life Solution Segment
Toward the Creation of New Businesses- Business will continue to be
conducted within Maxell Group- Business foundation
enhancement throughorganizational restructuring
including concentration of
resources

Consolidation and Enhancement of Sales ForceIntellectual Property that Supports New and Existing Businesses

3 Management Foundation Enhancement
Creating Human Resources and Organizations that Generate Value
Creating Economic Value through Environmental Activities
Reporting Based on TCFD Recommendations
Strengthening Group GovernanceCorporate Governance
Board of Directors

Objectives of Business Alliance- Expansion and reinforcement of BtoC business
Further expand BtoC business through integration of Maxell’s planning and development capabilities with DENKYOSHA’ssales capabilities- Maximization of corporate value
Accelerate maximization of corporate value through concentration of resources into businesses focused on our Analog
Core Technologies

Outside Director Roundtable Discussion

Data Section
Consolidated Financial Information
Maxell Group Network
Corporate Data / Stock Information / External Recognition

18

Message from the Financial Director
Progress with ROIC Management

Since fiscal 2019, we have been utilizing
return on invested capital (ROIC) as a core
metric across the Group. Since introducing
the ROIC metric, we have continued to explain
it to employees in order to deepen theirunderstanding. This has involved implementing
e-learning initiatives and emphasizing how theirefforts up until now have directly contributed toresults, thus helping to make it more tangible
for employees on the frontlines. We also now
use ROIC as one of the criteria in personnel
assessment. Furthermore, we now link theannual plans of each business division with ROIC,
setting targets that are closely aligned with thework of employees on the frontlines, such asdetermining how much sales prices need to be
increased to achieve the target ROIC.
In MEX23, our target is to achieve ROIC of
more than 7%, which exceeds the cost of ourinvested capital (WACC: weighted average costof capital) of 6%. However, due to factors such as
the deteriorating business environment leading
to reduced earnings, the outlook for fiscal 2023
is 4.8%. While strengthening investments for
future growth, we intend to further strengthen
management focus on capital costs. Throughthese efforts, we aim to achieve our target ROICof more than 7% from fiscal 2024 onwards.
As part of our efforts to enhance ROIC
through boosting profit, we are advancing
initiatives such as ABC-XYZ (profit and loss
control by business), and profit and loss
improvement by model project (PIPJ).
With ABC-XYZ, we visualize the profit or lossof each business, rank all business segments
based on factors like operating profit ratio andgrowth potential, and manage them within four
quadrants: “Resource concentration businesses”(A & B) and “Developing businesses” (C) withhigh profit ratios or growth potential and“Profit securing businesses” (X) and “Observing
businesses” (Y) with low profit ratios or growthpotential. By efficiently executing strategies inaccordance with each rank, we can boost the
replacement of our business portfolio. In fiscal

Maxell, Ltd. Integrated Report 2022
Go to previous view2022, factors like soaring raw materials costs
and component supply shortages, especially forsemiconductors, led to an increase in the numberof “Observing businesses” (Y) and the ratio of“Resource concentration businesses” (A & B)
was 43%. We will continue strengthening growthbusinesses to attain the materiality KPI of 50% infiscal 2023.
The profit and loss improvement by model
project is a financial discipline at the productlevel, focusing on profit and loss control foreach individual model. It is aimed at generating
profits by increasing the profitable products andreducing the unprofitable ones. The number oftarget models was around 6,000 in fiscal 2022,
and this is expected to decrease to approximately
5,000 in fiscal 2023. The reduction in losses forfiscal 2022 amounted to more than one billion
yen, and we are aiming for a similar reduction
in fiscal 2023. We will be brushing up our efforts
in this area and incorporating them into ourmonthly actions.
On the other hand, in order to optimize
denominator factors of ROIC such as inventory
and non-current assets, , we are focusing on
monitoring investments and improving the cash
conversion cycle (CCC). To shorten the CCC,
we are working on improving working capitalthrough actions like inventory optimization.
In fiscal 2022, the CCC grew longer due tofactors such as soaring raw materials costs
and semiconductor shortages, which led us
to increase inventory levels. We are aiming
for improvements through reducing andoptimizing inventory levels, including froma manufacturing perspective.
In terms of investment monitoring,
we conduct thorough examinations of the
profitability of investments through ourInvestment Committee. For new investments
amounting to 100 million yen or more, theInvestment Committee creates a checklist basedon which deliberations are conducted. Each
person responsible for technology, marketing,procurement, environmental issues, financial
affairs, legal affairs, and intellectual property,

Investments in our existing growth businesses
are progressing according to plan, and we
intend to step up our growth investments innew businesses. We will concentrate capital
expenditure on the “13 growth businesses,” andaim to deliver results starting from fiscal 2023.
Our capital expenditure for fiscal 2023 is
expected to increase significantly, from 3.8 billion
yen in fiscal 2022 to 8 billion yen. The cumulative

scrutinizes proposals based on their own
expertise to determine whether it contributes tothe enhancement of corporate value and if it istruly worth investing in. Cases that have passed
this review process are then referred to theManagement Committee and Board of Directors.
After an investment is carried out, progress
is monitored through reviews conducted on aquarterly basis.

Action
Plans

KPI

Sales proportion of highly profitable A and B businesses: Over 50% (FY2023)(return on invested capital)
Creating Value throughROIC Management- Thorough control by business- Incorporation into personnel
assessment system

ROIC trend
5.5%
3.5%

1.9%
2020

2021

2022

2023
(Forecast)(FY)

Key Maxell products that provide value to society

2 Value Creation Report

PIPJ

Image of operating profit distribution by model
Operating profit

Resource concentration
businesses(A & B)

Profitable
Unprofitable	Special Feature: All-solid-state batteries and the impact
they will have on society in the 3 focus areas	Value Creation Process by Business Segment, andStrategy Progress Report		 The Current Status of the Business Portfolio Shift, and the Future
		 Energy Segment
		 Functional Materials Segment
		 Optics & Systems Segment
		 Life Solution Segment
Toward the Creation of New Businesses
Consolidation and Enhancement of Sales ForceIntellectual Property that Supports New and Existing Businesses

43%

Products requiring
monitoring

3 Management Foundation Enhancement
Creating Human Resources and Organizations that Generate Value
Approximately 6,000 models

Activities in FY2022

Activities in FY2022

Activities in FY2022- Conducted share buybacks and selling off
of non-current assets- Monitoring of key businesses on a monthly basis
and acceleration of PDCA cycles- Decreased revenue due to deteriorating
business environment impacting ROIC

- Decision made to carry out reform of domestic
BtoC sales business- Streamlining through reducing numberof models (30% reduction compared to
FY2020)Targets for Activities in FY2023

Targets for Activities in FY2023

Targets for Activities in FY2023- Rotate PDCA cycles within each businessdivision to further enhance activities- Continuously and thoroughly monitor key
businesses on a monthly basis to advance
portfolio-focused management- Identify and implement intensive solutions
for worst-unprofitable models in eachbusiness- Strengthen growth businesses to achieve a 50%
ratio of A and B businesses- Expand number of highly profitablemodels through rigorous cost planning- Bolster growth investments for the future
while focusing on capital cost-conscious
management to improve ROIC

Value Creation Process

Non-Financial Highlights

Thorough Profit Generation:- Reduce unprofitable models andincrease profitable ones
- Enhance cost planning capabilities

FY2022

Sources of Value Creation

Financial Highlights

Business replacement- Strengthening growth businesses- Quick measures for unprofitable businesses

Profit securing
resultsbusinesses(X)
Developing
businesses(C)

At a Glance

Message from the Financial Director(profit and loss control by business)

Observingbusinesses
(Y)

4.8%

History of Innovation

Message from the President(profit and loss improvementby model project)

Proportion of ABC-XYZ net sales

Table of Contents and Editorial Policy

Materialities / Action Plans / KPIs

• Strengthen marketing for efficient R&D• Transformation to manufacturing that solves the social issues ahead of customer issues• Continuously improve business portfolio through the two axes of market growth and business earnings(ABC-XYZ control)

ABC-XYZ

Maxell Group’s Basic Management Policy

1 The Path to Realizing Our Vision

Boosting the replacement of businesses and products through continuous monitoring and thoroughgoing discipline.

ROIC

Introduction- Reduction of losses by more than one
billion yen

Creating Economic Value through Environmental Activities
Reporting Based on TCFD Recommendations
Strengthening Group GovernanceCorporate Governance
Board of Directors
Outside Director Roundtable Discussion

Data Section
Consolidated Financial Information
Maxell Group Network
Corporate Data / Stock Information / External Recognition

19

Message from the Financial Director
capital expenditure for the three fiscal years of2021, 2022, and 2023 is expected to be 13.9 billion
yen against the planned 16 billion yen, due todelays in component procurement caused by the
global semiconductor shortage in 2021 and 2022.
As for our growth investment capacity (fornew business creation, etc.), our projection forthe cumulative total for the three fiscal years of2021, 2022, and 2023, is 6 billion yen against theplanned 17 billion yen. We intend to maintain thecurrent growth investment capacity limit and step
up investments in growth areas such as all-solidstate batteries from fiscal 2023 onwards.

Working towards PBR Over 1.0

As we work towards achieving a price-to-bookratio (PBR) of over 1.0, it is crucial for us toenhance and maximize corporate value. We
will achieve this by driving improvements in

Go to previous view

both ROIC and return on equity (ROE), whilestrengthening our management foundation.
Expanding business earnings is the mostessential factor in improving ROIC and ROE.
The Finance & Accounting Department will
support this by promoting disciplined growthinvestments to further bolster the shift towards
BtoB business, accelerated launching of new
businesses, and expansion of existing growthbusinesses. Additionally, to enhance capitalefficiency for ROIC and ROE improvement, we will
utilize financial leverage and establish a structurethat facilitates flexible shareholder returns.
Regarding shareholder returns, dividend
payments will continue to be made in astable manner, in line with our basic policy ofmaintaining a dividend payout ratio of 30% to40%. We expect that the dividend per share forfiscal 2023 will be the same as in fiscal 2022 at
40 yen, with a projected dividend payout ratio of

35.2%. Additionally, in fiscal 2022, we conductedshare buybacks and disposition totaling 5 billion
yen. The total amount of share buybacks in recent
years has reached approximately 10 billion yen. In
terms of strengthening the business foundation,
we are committed to promoting sustainable
management, and enhancing governance, humancapital, and environment-focused management,
while also expanding and enhancing ourdisclosure of non-financial information.
We intend to disclose information on these
initiatives in the autumn of 2023. We will continue
to ensure appropriate returns to shareholders
and investors. Through investor relations andshareholder relations activities, we aim toenhance communication with stakeholders andwork towards achieving a price-to-book ratio ofover 1.0 as soon as possible.

Noritoshi Masuda
Promoting Management Approach to “Commit to Value,” Taking Into Account Cost of Capital and Stock Price

Expansionof businessearnings• Further shift towards BtoB
business

Initiatives• Accelerated launching of
new businesses(profit and loss control by business)• Expansion of existing
growth businesses• Thorough financial discipline• Acceleration of growthinvestments

ROIC andROE
enhancement

Visualizing profit and loss by business unit toboost business replacement

PIPJ

Enhancingmanagementfoundation

Promotion ofsustainable
management• Thorough financial discipline• Flexible shareholder returns

Investment monitoring

Pursuit of capital investment profitability,
selling off of low-yield and idle assets,
reduction of cross-shareholdings• Strengthening governance• Human capital management (promotion of diversity and inclusion)• Implementing environment management

Continuous and steady payment of dividends in linewith basic policy of “maintaining dividend payout
ratio of 30% to 40%”
InterimYear-end

Total

FY202220 yen20 yen40 yenFY2023 (forecast)

20 yen20 yen40 yenIntroduction
Maxell Group’s Basic Management Policy
Table of Contents and Editorial Policy
History of Innovation
At a Glance
Sources of Value Creation
Value Creation Process
Key Maxell products that provide value to society

Share Buybacks- Enhance shareholder return measures taking into
account current cash on hand, stock price, andother factors- Conduct share buybacks and disposition after
ensuring sufficient funds for investments for
growth1 The Path to Realizing Our Vision
Materialities / Action Plans / KPIs
Message from the President
Message from the Financial Director
Financial Highlights
Non-Financial Highlights

Buyback period

May 16, 2022 through March 10, 2023

Number ofshares acquired(total value)

3,645,700 shares (5 billion yen)

2 Value Creation Report

Plan after buyback

Disposition of all acquired shares	Special Feature: All-solid-state batteries and the impact
they will have on society in the 3 focus areas	Value Creation Process by Business Segment, andStrategy Progress Report		 The Current Status of the Business Portfolio Shift, and the Future
		 Energy Segment
		 Functional Materials Segment
		 Life Solution Segment
Toward the Creation of New Businesses
Consolidation and Enhancement of Sales Force

Increasing profitable models, and reducing
unprofitable ones

Reduction of excess / stagnant inventories,
etc.
Improvement of working capital (CCC shortening)

September 2023

Dividends

		 Optics & Systems Segment

Increased
profits(profit and loss improvement by model project)

Working capital improvement project• Utilization of financial
leverage

Director
Output

ABC-XYZ

Initiatives

Enhancing
capitalefficiency

Maxell, Ltd. Integrated Report 2022

Intellectual Property that Supports New and Existing Businesses
Input

Optimization of
inventory,
non-current
assets, etc.

3 Management Foundation Enhancement
Creating Human Resources and Organizations that Generate Value
Creating Economic Value through Environmental Activities
Reporting Based on TCFD Recommendations
Strengthening Group GovernanceCorporate Governance
Board of Directors
Outside Director Roundtable Discussion

Data Section
Consolidated Financial Information
Maxell Group Network

Early attainment of PBR of more than 1.0

Corporate Data / Stock Information / External Recognition