Capital policy related
Q-1. Please share each officer's opinion on their responsibility regarding the prolonged stock price decline.。
A-1. Regarding this matter, after confirming among the officers in advance that there were no differences in opinion, three representatives provided answers from the perspective of ensuring smooth proceedings at the General Meeting of Shareholders.
( Shoichi Kobayashi President)
I am truly sorry for the concern and inconvenience caused to our shareholders due to the stock price decline. While we are currently in a severe business environment where anything can happen day by day, I view this as an opportunity and believe it is my duty to steadily execute the mid-term management plan we are advancing. By implementing the mid-term management plan, I aim to lead to a recovery from the stock price slump.
(Takashi Hikiba, Managing Officer)
We sincerely accept this point. We also take seriously the concern caused to our shareholders due to the stock price decline. We believe our responsibility is to stabilize and grow our performance. Looking at the performance trend over the past 10 years, there have been difficult periods, but in the most recent two years, we have been moving towards a profitable structure. On the other hand, the previous fiscal year was challenging due to external environmental impacts. Going forward, by executing the mid-term management plan disclosed last year, we will work towards stabilizing and growing our business. Regarding the digital twin business, we will refine our technology and contribute to our customers within a large market. For high-performance materials as well, we will advance the development of new applications and products outlined in the mid-term management plan.
(Motoko Yamada, Managing Officer)
We sincerely acknowledge the points you have raised. Upon reviewing past stock price trends, we recognize that stock prices were low during periods of deteriorating performance and remained stably high during periods of sustained stable performance. Therefore, we believe that steadily executing the medium-term management plan will also impact the stock price. Regarding how we will achieve the medium-term management plan and whether we can truly achieve it, we would like to explain this to you at the shareholder meeting.。
Q-2. Regarding Chairman Kimoto, candidate number 4, the reference material on page 19 of the convocation notice shows a circle marked for 'Management' under the expertise items. Looking at the 15-year period from 2010 when Chairman Kimoto served as President, cash and deposits increased approximately 2.4 times from 5.1 billion yen to 12.6 billion yen, while Net sales decreased by about 12 billion yen from 23.2 billion yen, and net income for the period decreased by 63% when comparing the average of the initial years of his tenure with the average of the last three years. Furthermore, capital investment decreased by 45%. Additionally, while the Nikkei Stock Average rose approximately fourfold from 9,877 yen to 40,369 yen during the same period, our company's stock price fell from 278 yen to 50 yen, and market capitalization decreased by about 4 billion yen, or 28%, from 14.8 billion yen to 10.7 billion yen. Regarding dividends, they were raised by only 1 yen over the last 10 years of his presidency. Based on these circumstances, we perceive that significant corporate value has been eroded, and we cannot help but take a harsh view of his evaluation as a manager of a listed company. In light of this, please explain how Chairman Kimoto himself evaluates the fact that a circle is marked for 'Management' as his expertise.。
A-2. Regarding this question, we responded that we would provide an explanation after the resolution of the proposals. For the content of the explanation after the resolution, please refer to the 'Responses to Q2–Q5' provided later.。
Q-3. We have a question regarding the suitability of Chairman Kimoto, candidate number 4, as a director. We have previously been informed that the Board of Directors makes decisions in principle by unanimous consent. Therefore, we ask Chairman Kimoto, who we believe had significant influence over the appointment of the current three representative directors. At a previous financial results briefing, then-President Kimoto explained his thinking of maintaining substantial internal reserves, citing his experience of hardship due to credit tightening during the oil shock of the 1970s. However, we question basing the accumulation of large internal reserves on an experience over 50 years old and believe it has resulted in an excessive amount of internal reserves today. From the perspective of confirming his suitability as a director, please explain whether he still holds the same view.。
A-3. Regarding this question, we responded that we would provide an explanation after the resolution of the proposals. For the content of the explanation after the resolution, please refer to the 'Responses to Q2–Q5' provided later.。
Q-4. We understand that the treasury shares acquired by our company currently account for about 17.7%. We recall that Chairman Kimoto, candidate number 4, expressed the view at a previous shareholders' meeting that it would be sufficient to buy back shares in the market when the stock price is low and sell them when it is high. In this case, there seems to be no intention to cancel the treasury shares, and we feel that sufficient consideration is not given to stock price declines or shareholder interests. Please explain whether he still holds the same view.。
A-4. Regarding this question, we responded that we would provide an explanation after the resolution of the proposals. For the content of the explanation after the resolution, please refer to the 'Responses to Q2–Q5' provided later.。
Q-5. We have a question for Chairman Kimoto, candidate number 4, regarding future dividend policy. During his tenure as President, Chairman Kimoto explained that he would abstain from voting on resolutions concerning the important company measure of determining dividend amounts, citing his status as a shareholder. Is this approach still the same? Furthermore, we believe such an approach is one factor contributing to the PBR falling below 1x and hindering the company's growth. Please explain if there are any plans to correct this.。
A-5. Regarding this question, we responded that we would provide an explanation after the resolution of the proposals. For the content of the explanation after the resolution, please refer to the 'Responses to Q2–Q5' provided later.。
Q-6. We have a question for Outside Director Onodera, candidate number 8. We understand that one role of outside directors is to provide advice on management policies and operational improvements. Furthermore, we believe that correcting a PBR below 1x is an important issue for a listed company like ours. Please explain what specific initiatives Outside Director Onodera has undertaken over the past year since his appointment to address the correction of the PBR below 1x. If no initiatives have been undertaken, please explain the reasons and future policy.。
A-6. At the time of the previous shareholders' meeting, I had not yet been appointed, so regarding the question about PBR, I stated that I would spend one year deepening my understanding of the company and then report again. During this one year, I focused first on understanding the company. I attended all board meetings, participated in internal meetings and factory inspections, and also joined sessions where employees other than executives were conducting discussions. Through this process, I have confirmed that even in a challenging business environment, employees are sincerely engaged in their work. Additionally, at board meetings, I have candidly expressed opinions on points I believe require improvement, and these have been acknowledged by management. On the other hand, regarding how much I have contributed to the company's growth over this one year, I recognize that there are still aspects I should reflect upon. I will continue to work alongside the company and strive, from the perspective of an outside director, to convey to shareholders the company's approach, vision, and future direction.。
Q-7. Based on the response from Outside Director Onodera in Q6, regarding the improvement and correction of the PBR falling below 1, what do you consider to be the biggest factor preventing our company's PBR from improving?。
A-7. Throughout this one year, I have confirmed that our officers and employees are proactively working towards the mid-term management plan. However, I believe there is an issue regarding whether these efforts and the company's direction are sufficiently communicated to shareholders. Even if we work diligently, if that is not conveyed to shareholders, I recognize it could be one factor contributing to the current PBR situation.。
Q-8. Response to Questions 2-5
A-8. We will explain our response regarding the evaluation of management, retained earnings, handling of treasury stock, and approach to dividend decisions. We deeply apologize to our shareholders for the prolonged stock price decline. Our representative director feels responsible and takes this matter seriously. The representative director and other executives are each striving diligently in their respective roles, and we hope for your continued watchful support. Furthermore, given the current situation, the board of directors unanimously decided to forgo executive bonuses. Regarding dividends to shareholders, we have maintained the policy of paying dividends even during difficult periods of loss, and increasing them in line with profits when they are achieved. To protect the livelihoods of our employees, we also continue the policy of paying at least a minimum bonus to employees even when the company is in the red. Concerning retained earnings, our medium-term management plan includes capital investment plans. However, due to concentrated demand for data center construction and procurement of related equipment driven by AI advancements, there may be some delays in factory construction and machinery installation. Even under these circumstances, we are exploring innovative manufacturing methods. Regarding the handling of treasury stock, we are considering all possibilities, including cancellation, sale, and utilization for stock options. If any of our past statements have caused misunderstanding, we intend to reflect and reconsider. Also, I recall refraining from answering specific questions about treasury stock handling as it could potentially involve insider information. I continue to be absent from board meetings that decide dividend amounts. This is because I hold a certain number of shares myself, and speaking at such meetings could be perceived as prioritizing only the shareholder perspective as a major shareholder. Our company believes it is necessary to consider the distribution not only to shareholders but also to other stakeholders including business partners, employees, and the local community. My absence is not intended to disregard our shareholders.。
