Corporate Strategy

ShinyaFidelity Management & Research Japan (“FMR”) has supported us for many years since we went public in 2015. Even during the period shortly after our listing, when we struggled to meet investor expectations, FMR has consistently supported us as a shareholder and continues to do so today.

ShinyaWhen I first became president, improving cash flow was an urgent priority. We re-evaluated all of our businesses and concentrated management resources on the key areas that required our focus. This led to a significant improvement in EBITDA, with ROE increasing from single digits to over 20%.

ShinyaWhen I first met you in 2019, our performance was not very impressive, and you provided us with some tough feedback. However, through continuous engagement with investors, we were able to incorporate your feedback into our management practices, and I’m confident that doing so has helped improve the quality of our management.

ShinyaAnd you have consistently provided advice regarding business portfolio management. Once our performance began to recover, you pointed out that our management goals might be too conservative. Given our past experience of failing to meet market expectations shortly after going public, we were determined to achieve the goals we committed to, while accounting for external changes and certain risks. This was the mindset with which we approached the previous five-year Mid-term Management Plan (hereinafter, the previous Mid-term Plan).

ShinyaThe Mid-term Management Plan before the previous one covered three years, but when I became president, I extended the plan duration to five years. In a VUCA^*1 era, I felt that a three-year period was too short to present a clear and significant direction for the future. When we first announced the management goals for the previous Midterm Plan, some investors have questioned whether we had learned from our past experiences. However, after thorough internal discussions, we were confident that we could achieve these targets if we took necessary steps. We recognized the need to implement stringent reforms quickly, so during the first two years of the previous Mid-term Plan, we advanced various initiatives to improve cash flow. In the remaining three years, we focused all our efforts on driving growth.

ShinyaWhen I was first appointed president, the situation was dire, with our market cap at around 45 billion yen and PBR of about 0.9x. There was a strong sense of crisis within the Company, and since we had repeatedly failed to achieve our committed targets, I sensed that employees were losing confidence. From the outset, I told them, “The world is becoming increasingly uncertain, and nobody knows what will happen next. We must become a lean company that can adapt to any situation and take on challenges to achieve further growth.” I also told them that for the Company to change, each of us must change, and if we have made up our minds to change, why not stand at the forefront of that change and enjoy the process?” I embarked on the reforms with a strong commitment, too. I sensed that as the results of the reforms became apparent, employees’ mindsets began to change, and they started to regain confidence.

ShinyaWhile selecting focusing businesses was important, I believed that, to truly transform the Company, top management needed to change first. We transitioned our institutional design from a company with a board of corporate auditors to a company with an audit committee to strengthen corporate governance that contributes to enhancing corporate value. We facilitated a generational shift within the executive officer team and ensured that all employees, including management team, genuinely believed the Company was undergoing change, fostering a transformation-oriented mindset. After that, we implemented initiatives for growth such as relocating our headquarters to better align management with the frontline operations, strengthening our business model, and M&A.

ShinyaExactly. I believe it is crucial that we make precise investment decisions while anticipating and managing an even wider range of risks going forward.

ShinyaYes, indeed. In 2016, we entered the automotive market, anticipating a major transformation in the industry. By gaining a clear understanding of technological trends and addressing market demand, we were able to grow our automotive business, which I believe has significantly boosted employee confidence.

ShinyaExactly as you say. The growth trajectory for our automotive business has become somewhat clear. During the previous Mid-term Plan, we made Kyoto Semiconductor Co., Ltd. (“Kyosemi”)^*3, specializing in optical semiconductors, a subsidiary with the goal of entering the photonics field as our next growth domains.

ShinyaSince entering the photonics business, we’ve realized there is much more room for technological innovation in this field compared to the consumer IT sector. When we present customers in photonics with what our technology can achieve, they are often surprised. We’ve already received numerous inquiries, and we have begun considering developing new products in the photonics domain by applying our technology.

ShinyaThis was an issue left unresolved from the previous Mid-term Plan. Learning from this, we have outlined a capital allocation strategy in the new Mid-term Plan that balances growth investments with shareholder returns.

ShinyaWe are aware of the expectations of our investors, including you, and we will make sure to clarify the points you have raised in the future.

ShinyaWe have several projects in the pipeline, including those in the R&D stage, and we are carefully prioritizing them and drafting strategies to ensure their success. We are constantly updating information on this front, and plan to share more details with you once we have reached a higher level of certainty.

ShinyaCertainly. We will continue to leverage our strengths and focus our investments on businesses that create unique value only Dexerials can offer, as well as those where we are the sole supplier.

ShinyaEarlier, you mentioned our strength in the “Design-in” approach. This strength is driven by our exceptional technological capabilities and talented personnel. In the new Mid-term Plan, we have earmarked 45 billion yen for non-financial investments over five years, focused on “Materialities” such as “Technologies” and “Human Capital”.

ShinyaAlong with the new Mid-term Plan, we have also unveiled our purpose statement, “Empower Evolution. Connect People and Technology.” Looking beyond the new Mid-term Plan period, our goal is to become a company that supports the resolution of a broad range of societal issues by providing materials, devices, and solutions essential for technological evolution, while achieving sustainable growth. We envision a future where we are chosen as an indispensable partner by investors including you, as well as by customers, communities, and stakeholders worldwide, to jointly create a better future. To achieve this, we must continue to grow steadily while expanding our business portfolio. Our purpose embodies this vision, and through backcasting, we have mapped out the next five years in the new Mid-term Plan, identifying the goals we need to aim for and achieve to realize this vision.

ShinyaWe are seeing an increasing number of “Dexerials fans” among investors, including you. Having experienced a period of missed KPI targets, we are even more committed to meeting our investors’ expectations. We will strive to surpass ourselves every day and to achieve sustained growth. We kindly ask for your continued support.