Dai Nippon Printing, Co., Ltd.
Briefing on Financial Results: Q&A Summary(May 15, 2024)[Questioner 1]
Q: The results in the Electronics segment were a 11.2 billion yen increase
in income for FY2023, with a 4.1 billion yen decrease forecast for FY2024.
Please explain these, including the growth rate of the sales volume andthe sales amount of main products.
A: In FY2023, we achieved strong results due to increased demand andcapturing demand related to digital interfaces. In particular, metal masks forOLED production performed well as demand increased due to thereplacement of LCDs (liquid crystal displays) with OLEDs in smartphones, andalso due to the increased adoption of OLED in IT-related products such as
PCs and tablet devices. Optical film also contributed to performance as
demand returned from the inventory adjustment phase the year before lastand demand increased on an area basis due to larger televisions. Meanwhile,
we expect a decrease in income in FY2024 due to an increase in fixed costs
resulting from the start of depreciation of the metal mask production line at theKurosaki Plant (Fukuoka Prefecture) and the new optical film line at the endof FY2024, as well as a decrease in income due to the assumed exchange
rate set with a stronger yen. The increase in the fixed costs is approximately
4 billion yen in depreciation of the metal mask production line at the Kurosaki
Plant. We will refrain from disclosing the impact of the assumed stronger yen.
Q: What is the status of battery pouches in FY2023 compared to theprevious year and the forecast for FY2024? Also, you have set a targetof 100 billion yen in sales for FY2025, but what is your current outlook
for the growth of the battery pouch business over the next two or three
years, including any changes in your investment plans for the U.S.?
A: In FY2023, orders, mainly for battery pouches for EVs, have stagnated due toinventory adjustments since the end of 2023, but increased slightly throughout
the fiscal year. Weak demand for battery pouches due to this inventory
adjustment and uncertainty are the reasons for the downward revision of theLife and Healthcare segment forecast for FY2024. However, we view the firsthalf of FY2024 as the bottom for battery pouches and expect a slight increasein FY2024. In the long term, we believe that the shift to EVs will proceedsteadily, albeit somewhat gradually, in light of environmental issues, GHG
emissions, and other factors, although there are factors such as the issue ofthe U.S. administration. Although we cannot rule out the possibility that we will
make decisions on our U.S. investment plans in accordance with market
conditions in the future, there are no changes to our plans at present.
[Questioner 2]
Q: There was an explanation of the “Initiatives Aimed at Enhancement ofCorporate Value” shown on page 16 of the presentation materials. The
share price has been strong due to the unprecedented scale of purchaseof treasury shares and profit progress exceeding the Medium-termManagement Plan. Please describe any ideas for future initiatives thatyou feel are lacking, or if you are aware of any problems and would liketo make them a high priority. For my part, I expect the profit disclosure
aspect to be enhanced in relation to the “Expansion of information
disclosure” section in the upper right hand corner of page 16.
A: We set forth our long-term goals in our “Basic Management Policy” released
last year. In that announcement, we announced that the DNP Group will makewhat could be called “discontinuous” changes to develop and provide newvalue that differ from in the past, and that we will strengthen our financial andnon-financial capital to support our efforts to continue creating value. As partof this effort, we proceeded with the acquisition of treasury shares and thesale of strategic shareholdings, as described on page 22 of the presentationmaterials. Also, with operating income in the 70 billion yen range for the firsttime in 16 fiscal years, we believe we are on track for growth in terms of profits.
While our financial strategy will proceed steadily as planned, we believe it isimportant to increase profits more than ever on the business side, and wewould like to improve DNP’s corporate value by continuing to create value on
an ongoing basis. We will continue to increase dialogue with everyone andimplement management that is more conscious of the cost of capital and stock
price.
Q: Regarding the situation with battery pouches, we heard yourexplanation that orders have stagnated since the second half of FY2023
due to inventory adjustments. Please tell us the market conditions andresults for the last fiscal year, divided into sales for IT and those for EVs.
A: In the first half of FY2023, both sales for IT and EVs started off strong. Sales
to IT increased for the full year despite a slight decline in the second half.
Orders for EVs stagnated considerably in the second half due to inventory
adjustments. We expect orders for EVs to bottom out in the first half of FY2024,
as EV growth has now stagnated and seems to have settled down. For IT, we
do not expect a sharp decline as the market is slightly growing, butcompetition with other companies is emerging, so we believe the key point will
be how to secure orders.
Q: You explained that capital investment in FY2023 was below the target
due to the postponement of operation start dates to respond to market
changes. Was this for battery pouch manufacturing facilities?
A: As for postponement of operation start dates due to market changes, theoperation start date at the Tsuruse Plant (Saitama Prefecture) for battery
pouches was partially postponed. In addition, many instances ofpostponement of operation start dates due to delays in deliveries byequipment manufacturers caused by shortages in the supply of components
occurred in the Electronics segment.
[Questioner 3]
Q: Please tell us about the progress of profit and acquisition of treasury
shares compared to the Medium-term Management Plan. The operating
income forecast for FY2024 is 80 billion yen, an increase of 5 billion yen
from the plan, but please tell us if the forecast for FY2025 is also
expected to exceed the plan. The acquisition of treasury shares isprogressing at a pace exceeding the announced plan, at 150 billion yen
over 1.5 years, compared to 300 billion yen over the five years of theMedium-term Management Plan. Please tell us the background behind
the accelerated acquisition of treasury shares and whether there are anychanges to the plan of 300 billion yen over five years. Also, the balanceof strategic shareholdings has been growing due to rising stock prices,
so please let us know if you have a plan for using the increased amountof stock sold.
A: The Medium-term Management Plan calls for operating income of 130 billion
yen or more and equity capital of 1 trillion yen as the DNP Group’s vision forrevenue and capital structure, and we are currently working toward thesegoals. From the second year of the Medium-term Management Plan onward,
we intend to increase operating income by focusing on growth areas of thebusiness. We currently do not plan to revise our plans for the acquisition oftreasury shares because we believe that business and capital investments ingrowth business areas will become more important in the future. We wereable to raise our operating income plan by 5 billion yen from the initial plan of
75 billion yen to 80 billion yen in FY2024. The 85 billion yen plan for FY2025
will depend on conditions going forward, but there are no changes to the planat this time. We also expect an increase in proceeds from the sale of strategic
shareholdings due to rising stock prices, and we will consider using theproceeds, including the increase, mainly for strategic business investments.
Q: You explained that one of the reasons for the decrease in profits in theElectronics segment for FY2024 is that depreciation of the metal mask
production line at the Kurosaki Plant (Fukuoka Prefecture) will increase
by approximately 4 billion yen. Looking at page 11 of the presentationmaterials, depreciation for the entire company is almost the same
between FY2023 and FY2024. I believe this means that there arebusinesses expected to see a decrease offsetting the increase you
expect in metal masks. Please tell us about these businesses.
A: Depreciation of photomask manufacturing facilities in the Electronics segment
is expected to decrease. The useful life of this equipment is very short, andalthough depreciation of new investments will increase, depreciation ofexisting equipment will also progress quickly, so depreciation is expected todecrease in FY2024. Depreciation for FY2023 and FY2024 will increase forsome businesses and decrease for others, but it is expected to remain about
the same on a company-wide basis.

[Questioner 4]
Q: Page 16 of the presentation materials mentions “rising ROE.” In FY2023,
ROE was 9.8%, partly due to the posting of extraordinary income, etc.
However, in the FY2024 forecast, ROE is 8.0%, and ROE appears to havedeclined from the previous year. Please tell us how you evaluate ROE as
an actual value excluding strategic shareholdings, etc.

A: We estimate that the actual ROE for FY2023 was about 6.8%. For FY2024,
we plan to increase operating income by 6.0% to 80 billion yen, and webelieve that the actual ROE will be just under 7%, compared to the ROE of
8.0% based on our earnings forecast, which is an increase from the actualROE of 6.8% in FY2023.
Q: Page 16 of the presentation materials mentions “strengthening
shareholder returns.” Regarding the balance between dividends and theacquisition of treasury shares, I think it could be viewed as a low
dividend payout ratio. Please tell us your view on this.
A: Shareholder returns in the financial strategy of the Medium-term Management
Plan announced last May are closely related to the improvement of ROE. The
current plan to acquire 300 billion yen of treasury shares over five years isdesigned to rapidly reduce and control the accumulated equity capital to reachthe goal of 1 trillion yen. At present, we are steadily implementing thisacquisition of treasury shares as a means of returning profits to shareholders.
Regarding dividends, we believe that our financial and business structure willchange over the next few years, and we hope to consider and announce a
new dividend policy in the next Medium-term Management Plan.