A Message from the CFO
In line with the revised version of stake gambling Vision 2030, we will strive to improve shareholder value through cash generation and optimal allocation.
Takeshi Asai Directer, Senior Managing Executive Officer,
Head of Finance and Accounting Unit
CFO
Operating Results and Financial Condition
Fiscal year 2023 was a particularly harsh period for stake gambling as both net sales and operating income were down from the previous fiscal year and, as a consequence of extraordinary losses, we posted a net loss attributable to owners of the parent. The principal factors behind the significant decline we saw in operating income were falling shipments of high-value-added digital materials and materials used in mobility solutions, as well as the temporary suspension of operations at certain production sites in the United States and Europe, to pare inventories of pigments.
Looking at our financial position, while efforts to curtail inventories led to a decrease in net interest-bearing debt, shareholders¡¯ equity declined as a result of the net loss attributable to owners of the parent, causing the net debt-to-equity ratio (D/E) ratio*1 to deteriorate to 1.21 times.
Adoption of Policies for Cash Allocation
With the revision of stake gambling Vision 2030, we adopted policies for cash allocation with the aim of optimizing our use of cash generated. Over the three years beginning in fiscal year 2024, we will generate cash by promoting business transformation and structural reforms, improving working capital and shrinking assets, and will work to ensure its optimal allocation to realize a sound financial structure and enhance returns to shareholders. We will also strive to improve corporate value and push the price-book value (P/B) ratio back above 1.0 times.
- Expand and Stabilize Cash Provided by Operating Activities
While we have established a framework for strategic investments under stake gambling Vision 2030, it is taking longer than expected for newly acquired businesses to become profitable, pushing down capital efficiency, as measured using return on invested capital (ROIC) and return on equity (ROE). In fiscal year 2024, our focus will be on improving our operating performance by concentrating management resources on areas that are expected to generate profits promptly and reliably; emphasizing measures that will yield swift and consistent results; and pursuing synergies with, as well as on accelerating rationalization efforts in, newly acquired businesses. - Improve Working Capital and Asset Efficiency
A key focus in fiscal year 2023 was the reduction of inventories, particularly those of pigments in the United State and Europe, efforts that underpinned an improvement in working capital and shortened the cash conversion cycle (CCC)*2 compared with the previous fiscal year. Going forward, we will continue working to manage regional CCC targets with the objective of optimizing working capital. Regarding inventory management, in particular, the entire stake gambling Group will work as one to set business-specific targets and regularly monitor the progress of efforts. In addition, we will work to reduce cross-shareholdings and shrink assets in noncore businesses. - Promote Management that Is Conscious of Capital Costs
Despite the deterioration of our net D/E ratio in fiscal year 2023 to 1.21 times, we will take bold steps to achieve a D/E ratio of 1.00¨C1.10 times. Capital investments and strategic investments will stress profitability and decisions regarding additional investments will be made with a view to potential for securing profits. Thanks to the progress of structural reforms in various businesses, a degree of leverage exists, but financial management will continue to emphasize maintaining an A credit rating. - Strengthen Returns to Shareholders
Owing to the deterioration of earnings in fiscal year 2023, annual dividends per share for the period were ?80.00, down ?20.00 from fiscal year 2022, comprising an interim dividend of ?50.00 and a year-end dividend of ?30.00. From fiscal year 2024 forward, we will set a minimum limit for annual dividends per share of ?100.00 to ensure stable returns to shareholders. Any additional cash generated through the swift, proactive implementation of key measures will also be applied to shareholder returns.
*1 Net D/E ratio: Net interest-bearing debt / Shareholders¡¯ equity
*2 CCC is a metric that expresses the time (in days) it takes for a company to convert capital investments in raw materials and inventory into cash.
July 2, 2024
