KYB : Strategy P07-P22 （3.24MB）

Strategy

Message from the President

Kayaba will contribute to the sustainable development of the planet and society as a global leader in vibration and power control built on our core technology of hydraulics.

First, please let me offer my deepest sympathies to those who have been affected by COVID-19 infections. I truly hope that they will recover quickly. I'd also like to express my respect and gratitude to the healthcare professionals who are working their hardest at the front line every day. For our part, Kayaba is making efforts to prevent the spread of the virus. We quickly and appropriately respond based on the requests of relevant authorities while giving maximum preference to the safety of our customers, business partners, employees and their families.

The Changing Business Environment and Our Mission

Issues we're engaging with as we move toward further growth

The environment surrounding all manufacturing companies domestic and overseas is becoming more severe, due to factors including the spread of COVID-19 variants and the global semiconductor shortage caused by U.S.-China trade frictions. In the automotive industry and in the construction industry, we are seeing the kind of revolutionary change that occurs only once in 100 years, with the promotion of electronic vehicles and electrification as well as the shift towards automatic operation. Components suppliers are being required to deliver new value.

• Looking at Kayaba's FY2021 performance under this environment, we had an 18% increase in sales along with the recovery of the market from the COVID-19 pandemic. Also, we reorganized unprofitable business- es, in particular reducing fixed costs, and made improvements to productivity. Due to these factors, we recorded our highest ever profits. However, material prices and transport costs are forecast to continue increasing, and companies will need to adjust produc- tion because of component supply issues due to lockdowns. In order to respond to these matters, further cost improvements and revisions to our produc- tion operations will be necessary. We are still facing challenges, but we are progressing forcefully with all kinds of improvement initiatives to reinforce our finan- cial base and resolve management issues.
• Furthermore, Kayaba is moving forward with environ- mental, social, and governance (ESG) management. We are reducing CO2 on a group-wide basis and devel- oping products that will contribute to the sustainable development of society. Also, to fulfil our corporate social responsibility, we are committed to taking pre- ventive measures against nonconforming acts by

strengthening our management system, positioning awareness of norms and compliance as the foundation of management, and building a corporate culture of open, transparent communication.

Value Creation at Kayaba

Towards a safe, prosperous society supported by our core technology

Kayaba has over 100 years of technology assets. We have contributed to society by turning hydraulic technology related to vibration and power control into products, allowing for the design of comfortable, prosperous towns and cities. And we are making powerful strides in the development of products built on the core technologies that Kayaba possesses, which will lead to the creation of new value compatible with technologically innovative transport equipment and industrial equipment.

• The market is seeing a major revolution with electrifi- cation and the adoption of electric vehicles. In order to respond, we are developing high-added-value products built on our core technology, collecting and analyzing road surface and driving data, and developing an active suspension system that can be controlled in real time. Furthermore, we are aiming to shift from the conven- tional method of selling each product individually to intelligent hydraulic systems sales. In these ways, we are striving to make Kayaba as a company that offers the ultimate products to our customers.
• Also, we are facing an issue with labor shortages and training successors in our manufacturing workplaces. To resolve this, we have launched an activity called "Ship'30," which is aimed at further evolving manufac- turing workplaces based on the remarkable development of digital technology in recent years. It involves the construction of a revolutionary autono- mous plant, and aims to make an unmanned, fully

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automated plant a reality by 2030. Ship'30 will be able to respond flexibly to fluctuations in production, and will aim to further raise productivity.

Important Issues for the Future

Contributing to a prosperous world and promoting diversity

Environmental consciousness is growing globally, in particular towards sustainability and carbon neutrality. Corporations have a responsibility to conduct measures for the environment, and are being required to take a more active posture and conduct more impactful initiatives that ever before.

• We have achieved a 50% reduction over 2018 from the three aspects of energy generation, energy use, and the development of products that contribute to CO2 reductions. And further, we are aiming to achieve carbon neutrality by 2050.
• In our efforts for diversity, in FY2022 we have ap- pointed female outside directors and auditors. By increasing the number of female officers in addition to increasing the ratio of outside directors and auditors, we are strengthening our governance and promoting diversified management.

Our Pledge to Our Stakeholders

Building a trustworthy brand

FY2022 is the final year of the current medium-term management plan. We will concentrate management resources on the three business units that are the core to achieving our plan: AC Operations, HC Operations, and the Special-Purpose Vehicles Division. We will strive to develop new products for sustained growth, and to revolutionize manufacturing using IoT and AI for the purpose of strengthening our earnings capacity. And in addition to lowering costs, we will further promote ESG management. All of these actions will lead us into our new medium-term management plan which is set to begin in FY2023.

• We will actively incorporate underlying technolo- gies-such as electronic systems controls-andleading-edge technologies into the core technology that Kayaba possesses, aiming to provide products that support the livelihoods of people in places all around the world while delivering safety, assurance, and comfort. To do that, the Group will come together and work to build a constantly evolving "trustworthy brand that contributes to the development of a pros- perous society."

Representative Director and

President Executive Officer &

Chief Executive Officer

Introduction

President the from Message	Strategy

Creation Value

Data

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Strategy

FY2020-2022Medium-Term Management Plan

To Achieve Highly Profitable Structure

The slogan of the FY2020-2022Medium-Term Management Plan is "RegainTrust, Restore Pride." Under that slogan, we are taking preventive measures against nonconforming acts, placing awareness of norms and compliance at the core of management as part of reforms to our corporate culture, and proceeding with a transformation to achieve a highly profitable structure.

• The plan's first year of FY2020 saw challenging conditions as sales, segment profits and other indicators declined compared to the previous consolidated fiscal year due to the impact on economic activities in all countries caused by the spread of COVID-19. In FY2021, we worked to get the plan back on track by thoroughly executing various policies to establish a highly profitable structure, and spent the year recovering from delays.
• In 2022, the final year of the plan, there is increasing uncertainty over the future prospects of the world economy, which is facing issues such as the lingering pandemic, sharp price increases in raw materials, the semiconductor shortage, and a deteriorating geopolitical situation. However, we are moving forward with achieving a highly profitable structure while selecting and concentrating on initiatives such as the optimum distribution of management resources and manufacturing innovation. Undaunted, the Kayaba Group will band together to achieve our goals.

Review of FY2021

RegainTrust, Restore Pride

Trust Pride

Reforms for a high earnings constitution

Thorough enforcement of safety first, fire prevention Develop human resources that support management Respond to social demands (ESG response, SDGs) Strengthen governance system

Awareness of norms, observance of compliance

Key Initiatives and Main Implementation Details

Key initiatives	Main implementation details
	• Establish Compliance Committee
Compliance and strengthen governance	• Complete policies for all prevent measures
	• Instill corporate culture of awareness of norms (thorough education)
	• Thoroughly conduct health management, including infection control measures
Response to social demand	• Observe respect for human rights (Thoroughly create a comfortable workplace)
	• Initiatives for carbon neutrality
Human resource development	• Optimal reassignment of human resources after group reorganization, carry out rotations
• Promote DX by hiring and training digital human resources
Safety first, quality management	• Thorough preventive measures against workplace injuries and fires
• Continue to reform quality awareness based on quality education for all employees
	• Concentrate management resources to the three business units of AC Operations, HC
Stabilize the revenue base	Operations, and the Special-Purpose Vehicles Div.
	• Withdraw of unprofitable businesses (Decision to close the Aircraft Components Div.)
Growth strategy	• Sales expansion activities to emerging EV manufacturers

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FY2021 Performance Summary

Looking at the global economy in FY2021, there was an underlying tone of recovery, with the progress in COVID-19 vaccinations and policies to resume economic activity in many countries. However, downsides risks materialized with the sharp rise in raw material prices, a shortage in semiconductors, and the worsening Russian invasion into Ukraine. In Japan's economy, we saw signs of an economic comeback lagging behind the world economy, but high resource prices and a weak yen overlapped, making it difficult to predict the future.

• Amidst this environment, the automobile and con- struction industry markets-which are the main sources of demand for Kayaba products-both experi- enced recoveries in demand compared to the previous consolidated fiscal year.
• The Kayaba Group's sales reached ¥388.4 billion, an increase of ¥60.3 billion over the previous consolidated fiscal year.

  Operating profit was ¥30,001 million (compared with ¥18,297 million in the previous fiscal year), largely due to an increase in sales to meet recovering demand and the impact of a reversal of the provision for product warranties for seismic isolation/mitigation oil dampers, while profit before tax was ¥28,817 million (compared with ¥16,340 million in the previous fiscal year). Also, profit attributable to owners of the parent was ¥22,549 million (compared with a loss attributable to owners of the parent of ¥17,087 million in the previous fiscal year), giving us our highest level of profits ever.

• The capital adequacy ratio, which at one point had fallen below 20%, returned to the 30% range, while the net D/E ratio rapidly improved due to the repay- ment of interest-bearing liabilities.

Introduction

Term-Medium2022-FY2020	Strategy
Plan Management

Consolidated Financial Results for FY2021 (IFRS)

			FY2020	FY2021
Net sales		¥328.0 billion	¥388. billion
Segment profit		¥13.3 billion	¥24.7 billion
Operating profit		¥18.3 billion	¥30.0 billion
Profit	before tax		¥16.3 billion	¥28.8 billion
Profit	attributable to owners of the parent		¥17.1 billion	¥22.5 billion
Cash dividends per share	¥75	¥105

Creation Value

Data

Earnings Improvement Activity (Segment Profits)

In FY2021, we aimed for a ¥4.4 billion earnings improvement over FY2019, and we were able to surpass that target by reaching ¥5.9 billion. Amidst the challenging conditions caused by the COVID-19 pandemic, we achieved our initial plan through improving productivity by ¥1.6 billion and a ¥2.3 billion result from withdrawing and scaling down unprofitable businesses.

• In FY2022, we will aim to complete taking in bene- fits from unachieved fields and attain a ¥7.4 billion improvement compared to FY2019, which is a target of the FY2020 medium-term management plan.

	Progress	FY2021	FY2022 target
Improve productivity (reduce manufacturing costs)	47%	¥1.6 billion	¥3.4 billion
Withdrawal or reduction of unprofitable fields	135%	¥2.3 billion	¥1.7 billion
Reduce variable cost	80%	¥0.8 billion	¥1.0 billion
Consolidation of production bases, establish optimal production system	71%	¥0.5 billion	¥0.7 billion
Promote sales expansion	116%	¥0.7 billion	¥0.6 billion

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FY2020-2022Medium-Term Management Plan

Progress of Measures to Prevent Recurrence of Seismic Isolation/Mitigation Oil Damper Problems

Regarding our most important issue of compliance and governance, we established a Compliance Committee in 2021, and our 67 preventive measure policy items were all completed as of the end of March 2022. However, the prevention of nonconforming acts is a constantly ongoing matter, so we are continuing to carry on our initiatives and will never let them be forgotten or relegated to the past.

• Our progress with exchange work is as shown on the right.

Progress of Replacement, etc. (As of August 31, 2022)

Replacement, etc. started*1	981 buildings (99.0%)
Replacement, etc. completed*2	970 buildings (97.9%)

*1 Includes delivered dampers taken back and readjusted and dampers that will not be replaced.

*2 The number of buildings where replacement work, etc. has started includes buildings where replacement or other work has been completed and buildings where it has been decided not to replace the dampers. It is not the number of buildings in the Corrective Measures Completion Report submitted to the specified administrative agency

FY2022 Basic Policy

Finalize the Medium-Term Management Plan, Concentrate All Energy on AchievingTargets FY2022 is the year in which we will complete the current medium-termmanagement plan, so we will achieve the final targets that we have set forth. To create a foundation for the next medium-termmanagement plan, we will concentrate management resources and distribute them among the three business units of AC Operations, HC Operations, and the Special- Purpose Vehicles Division, and adopt a product strategy of contributing to society through developing and providing high-value-addedproducts. In addition, we will promote innovative manufacturing that focuses on automation which makes use of digital technologies

such as AI and IoT and steady cost reductions, and strive for continuous growth and strengthened earnings capacity.

FY2020-2022Medium-Term Management Plan FinancialTargets

	FY2022
Net sales	¥390.0 billion
Segment profit	¥25.8 billion
Segment profit ratio	6.6%
Equity ratio	37%

In addition to reviewing and evaluating FY2021, we are setting the following as our Basic Policy for FY2022.

Key initiatives	Main implementation details
	• Instill corporate culture of awareness of norms,
Compliance and strengthen governance
• Continue group-wide activities to prevent nonconforming acts
	• Thoroughly conduct health management, including infection control measures
Response to social demand	• Observe respect for human rights
	• Initiatives for carbon neutrality 2050 target: achieve carbon neutrality
	• Strengthen added-value manufacturing control, KPI Management
	• Complete reorganization of unprofitable business divisions / plants and offices / products
High profit structure	• Promote the global total cost reduction activity
	• Launch optimization of Group production system
	• Promote global KPS activities
Human resource development	• Optimal reassignment of human resources after group reorganization, carry out rotations
• Promote DX by hiring and training digital human resources
Growth strategy	• Plan strategy to enter new markets and create new products
• Invest management resources in growth fields
Safety first	• Thorough preventive measures against workplace injuries and fires (zero workplace
injuries or fires)
Quality management	• Reform quality awareness based on quality education

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