Questions about management
Q-1. Your company has not achieved a PBR of 1 so far, and I would like to ask you about the target timing and specific methods for how you plan to utilize internal reserves, including cash and deposits, to achieve a PBR of 1 times. I believe that the current situation where the market capitalization remains close to the cash balance without shareholder returns is a problem as a management。
A-1. Over the past 10 years, PBR has been below 1 times, and we recognize that this is an important management issue. Specifically, we will enhance corporate value through environmental measures and growth investments in new businesses, as well as return to shareholders through the use of treasury stock and the elimination of cross-shareholdings. Through these initiatives, we aim to achieve a PBR of 1 times by the fiscal year ending March 2028。
Q-2. At the previous financial results briefing, countermeasures against a PBR of less than 1 were cited as an issue, but are you aware that even though the Company has conducted share buybacks of 300 million yen in the past, the stock price has fallen after the end of the repurchases, and each time the stock price has fallen below the level before the purchase。
A-2. We are aware that in the past, although the share buyback provided temporary support for the stock price, there were times when the share price fell below its original level after the acquisition was completed. Therefore, in our future capital policy, we will consider measures that will lead to the enhancement of corporate value over the medium to long term and the sustainable improvement of stock prices。
Q-3. At the previous financial results briefing, countermeasures against a PBR of less than 1 were considered an issue, but are you aware of the trend in the Japan market that even if you announce a policy with a dividend payout ratio of about 40%, stock prices will decline after a while and return to the level before the announcement?。
A-3. As you pointed out, we recognize that shareholder return measures alone tend to be difficult to directly lead to sustainable improvement in PBR. By promoting both business growth and capital policy, we will implement the following measures with the aim of improving our corporate value and improving our PBR.
・Improvement of profit margin with the aim of achieving an operating profit margin of 16%
・Expansion of earnings base through growth investment of 6,000 million yen
・Improvement of capital efficiency with the goal of achieving ROE of 8%
・Stable and continuous shareholder returns based on a dividend payout ratio of 40%
・Utilization of treasury shares and elimination of cross-shareholdings by 2027
Q-4. At the previous financial results briefing, it was stated that the company would consider investment (utilization of investment areas and cash and deposits) as a capital policy, and in the financial results report for the fiscal year ending March 2025, it was announced that profit is expected to decline by about 20% from the previous fiscal year in the next fiscal year. In order to enhance corporate value, we believe that it is necessary to utilize ample internal reserves to promote the development of new products, the expansion of facilities, and the incorporation of new fields through capital investment and R&D, but R&D expenses in fiscal 2025 will be approximately 600 million yen, the same level as the previous fiscal year, and will remain below the level of approximately 1 billion yen in fiscal 2010. Is the situation similar for capital investment?。
A-4. Under the Sixth Medium-Term Management Plan, we plan to invest a total of 6 billion yen in growth by the fiscal year ending March 2028, including environmentally friendly investments, new business investments, and other growth investments. With regard to R&D expenses, we have established a system to maximize development results through the improvement of the entire research process, such as "promotion of division of labor," "automation of experimental equipment," and "introduction of AI analysis," and we aim to achieve a contribution rate of 12% for new products by 2028. With regard to capital investment, we will strive to reduce environmental impact and improve productivity by both reducing environmental impact and improving productivity, such as by shifting to DX in factories, introducing renewable energy, and reducing eco-friendly materials and solvents, with the aim of strengthening our competitiveness in the future and building a sustainable production system。
Q-5. Please tell us about the disclosure of measures to realize management that is conscious of the cost of capital and stock price.。
A-5. Since this content is scheduled to be mentioned in the Sixth Medium-Term Management Plan, it has not been described in the supplementary materials for financial results。
Q-6. With the stock price stagnant for many years and the P/B ratio hovering around 0.5, the market's valuation of the company's performance and financial condition is significantly low, and many shareholders are likely to be dissatisfied. The reason for this may be the delay in the response of executives and their lack of judgment. At last year's briefing, many respondents said that they would consider it, but as a listed company, we believe that we should have taken measures earlier. The same applies to the use of retained earnings. Could you give us your thoughts on these points?。
A-6. Management takes seriously the fact that the Company's stock price has not been sufficiently evaluated by the market for a long time. In particular, in the past few years, we have given top priority to recovery from the impact of COVID-19 on our business performance, but it is true that there have been areas where we have lagged behind in our capital policy and response to medium- to long-term issues, and we will steadily advance our efforts to address management issues in the future. Regarding the Company's response policy, including the improvement of capital efficiency, we have responded in Q-3。
Q-7. The dividend forecast for the fiscal year ending March 2026 has been reduced by 1 yen to 7 yen. Please tell us the reason for the dividend reduction of 1 yen. In addition, the dividend payout ratio is set at 40% from the earnings forecast, but is it possible to make it a progressive dividend?。
A-7. The dividend forecast for the previous fiscal year was initially 6 yen, but due to the better-than-expected results, we have increased the dividend to 8 yen, including a special dividend. In addition, the dividend forecast for the current fiscal year was reduced to 7 yen per share, but we consider it to be an increase of 1 yen from the previous fiscal year. In addition, with regard to progressive dividends, we have a history of paying dividends even in the red, and we will continue to work on stable dividends based on the idea of Yoshi Sanpo.
We will aim for a dividend payout ratio of 40% in the future。
Q-8. Although the materials in the medium-term management plan indicate that WACC will be less than half of the current level in the fiscal year ending March 2028, the balance sheet forecast does not show a significant change in the composition of shareholders' equity and debt. In order to significantly reduce WACC, I think it is generally necessary to further reduce the shareholders' equity ratio, but what are your thoughts on this point。
A-8. The balance sheet forecast shown on page 25 of the Medium-Term Management Plan disclosed on May 16 contains only the amount necessary for day-to-day activities (operating debt and labor liabilities), and the rest are included in invested capital. By utilizing this invested capital for business activities and shareholder returns, we aim to achieve a WACC of 4.0% and an ROE of 8.5% as described on p. 22。
Q-9. As of today (May 16), the Company's price-to-book ratio (PBR) is remarkably low at 0.56 times, and the Company accounts for 12 billion yen (more than 60%) in cash and deposits, of which the amount is used for investments and shareholder returns。
A-9. As announced in the Medium-Term Management Plan, we are considering 3.1 billion yen for energy and environmental measures, and 2.25 billion yen for new businesses such as improving development efficiency. In addition, we expect to spend 3.5 billion yen from retained earnings and 2.5 billion yen from retained earnings. With regard to shareholder returns, we will secure profits through these investments and aim to pay dividends that achieve a stable dividend payout ratio of 40%。
Q-10. Could you give us a specific breakdown of your balance sheet as of 2028 (financial assets, business assets, etc.) in monetary terms?。
A-10. We will refrain from disclosing specific figures, but in addition to the investment in Q-9, we would like to secure about 5 billion ~ 6 billion yen for future production line expansion, in addition to the amount necessary to maintain the business。
Q-11. With regard to cash and deposits, do you think that "having funds leads to peace of mind"?。
A-11. Based on the lessons learned during COVID-19, we believe that securing funds for emergencies is also important in terms of removing employees' anxiety about employment。
Q-12. In response to the TSE's "management that is conscious of the cost of capital and stock price," in what specific direction will you aim to improve the stock price?。
A-12. Specifically, we believe that share buybacks are one of the various measures to be taken. In addition, it is not only about film, but also about further expanding the digital twin business。
