We will continue to focus on the key strategies set forth in our new medium-term management plan, with the aim of achieving sustainable improvements in profitability. Through securing highly profitable opportunities, disciplined price management, the acceleration of productivity enhancements, the maximization of synergies from globalization, and the strategic optimization of our business portfolio, we seek to build an even stronger financial foundation and create long-term shareholder value.
Financial Strategy
Execution in Line with the New Medium-Term Management Plan “Next Innovation 2030”
We continue to place strong emphasis on long-term strategic growth in the allocation of both financial and human capital. Investment decisions are made globally, with the clear requirement that each project generates returns exceeding our cost of capital. At the same time, human resources are deployed flexibly and dynamically across the Group to support business expansion, strategic initiatives, and new growth opportunities.
In addition, we have achieved dividend increases for 12 consecutive years, with dividends growing at a compound annual growth rate of approximately 13% over the past decade. Looking ahead, we remain committed to providing stable and reliable dividends and will continue to enhance shareholder returns, targeting a payout ratio in the range of 20–30%. We will further strengthen our financial foundation through debt reduction and improvements in our net debt to EBITDA ratio, with the aim of supporting a higher and more sustainable payout over time.
Business results
Prioritizing Margin Expansion and Earnings Quality over Revenue Growth
For FYE2027, while we expect a continued environment of heightened uncertainty, we will remain committed to disciplined business execution. On a constant-currency basis, we forecast that consolidated revenue will increase by 1.8% year on year, while core operating income is expected to grow by 2.8%.
We will continue to focus on achieving profit growth that outpaced revenue growth, expanding margins, and strengthening our long-term financial foundation.
Financial position
Further Strengthening Our Financial Foundation
Until our previous medium-term management plan, we used the adjusted net D/E ratio as a key indicator of financial soundness. In FYE2026, this ratio improved to 0.59x, achieving the target of “0.7x or lower by FYE2026” set under the prior plan.
Under our new medium-term management plan, we have adopted the net debt to EBITDA ratio as our financial soundness metric, reflecting our focus on managing debt levels based on the cash generation capacity of our operations. We have set a target of “1.5x or lower by FYE2030” and will continue our efforts to maintain a strong and resilient financial foundation.
Cash flow
Appropriate allocation of operating cash flows generated by the business
Under our new medium-term management plan, we aim to generate cumulative operating cash flow of ¥1.17 trillion over four years. Approximately 70% of this cash flow will be reinvested into the business through capital expenditures and acquisitions, while the remaining 30% will be allocated to debt reduction and dividend payments.
Building on the disciplined business execution, productivity-enhancing initiatives, and efficient working capital management we have cultivated to date, we will continue to steadily generate operating cash flow.
Capital efficiency
Further Enhancing Capital Efficiency
We use ROCE after Tax as our key metric for measuring capital efficiency. In FYE2026, ROCE after Tax reached 7.1%, achieving the target of “exceeding 6.0% by FYE2026” set under our previous medium-term management plan. While we believe there remains significant room for further improvement in capital efficiency, we have set a new target of “exceeding 8.0% by FYE2030” under our new medium-term management plan and will continue to focus on enhancing capital efficiency.
To further improve ROCE, we are advancing initiatives including the accumulation of solid project investments expected to deliver high profitability and economic value, the agile execution of M&A, the optimization of price management, the expansion of productivity enhancement initiatives, and the promotion of globalization. In addition, we will actively pursue opportunities to expand innovative businesses where we assess a high likelihood of successful execution. In making investment decisions, we set hurdle rates above our cost of capital in each country and region, carefully assessing whether individual projects can reliably exceed these thresholds, and maintain financial discipline through regular reviews.
Looking ahead, we will continue to prioritize highly profitable business opportunities while advancing the optimization of our business portfolio to enhance earnings power across the Group. At the same time, we will pursue continuous improvements in businesses where strategic alignment has diminished.
Shareholder return
Stable and Reliable Dividend Growth
For FYE2026, we plan to increase the dividend by ¥11 from the previous fiscal year to ¥62 per share, resulting in an expected payout ratio of 21.7%. Over the past decade, we have achieved dividend growth at a compound annual growth rate of approximately 13%, reinforcing our commitment to enhancing long-term shareholder value.
We remain focused on strengthening shareholder returns and intend to continue delivering steady dividend growth, targeting a payout ratio in the 20–30% range. This will be pursued while maintaining financial soundness, reducing debt, investing in growth opportunities, and ensuring disciplined and balanced capital allocation.
Koichiro Kubo
Executive Officer,
Executive General Manager of Group Corporate Finance and Accounting, CFO