Global Digital Transformation Partner

With the aim of enhancing long-term, sustainable corporate value, our Group builds a healthy financial foundation while investing in growth areas and delivering long-term, stable returns to shareholders. Assessing the overall cost of capital, we continue to seek the right balance between financial health and capital efficiency to achieve an optimum capital structure for the Group.

One of our goals is to deliver sustainable growth and increase corporate value over the medium to long-term. To achieve this, our Group analyzes and evaluates return metrics to ensure we manage business with due consideration of cost of capital and returns. Our board of directors will deepen discussion on these topics based on the results of analysis to reinforce the Group’s business portfolios.

To help clients enhance productivity and brand value as their Global Digital Transformation Partner, our Group creates and manages a resilient, well-balanced business portfolio while flexibly adapting to changing social conditions.

Our Group is committed to strengthening our financial foundation while continuing to invest in growth areas. More specifically, we aggressively invest in high-priority businesses to address social challenges through sustainability transformation (SX) and digital transformation (DX) and to further expand revenues. Our fundamental approach is to allocate cash flows, generated from operating activities and liquidity on hand for investments. Starting from enhancing revenues of each business unit, we deliver stronger cash flow to invest in financial foundation and human capital – two pillars that underpin the Group’s sustainable growth - as well as in research and development on new technologies, eyeing potential mergers and acquisitions. Also, in line with our fundamental policy, which is to increase the market value of shares by returning profits to shareholders, we have adopted a dividend policy that focuses on the dividend payout ratio, which is closely related to the Group’s business performance.

Our Group holds shares for strategic purposes (cross-shareholdings) from a business perspective, such as to reinforce relationships with suppliers or to maintain or expand business relationships, and if holding shares is judged to be expedient for increasing corporate value over the medium- to long-term. We monitor cross-shareholdings on a monthly basis to check trading conditions and to determine whether holdings in the portfolio should be reduced, and reports the results of the analysis to the Management Meeting. In addition, the board conducts annual reviews to assess whether holding the shares is appropriate from the perspective of increasing corporate value over the medium- to long-term and if risk-reward is proportionate to the cost of capital, among other criteria. With this review process, we confirm that objectives for holding the shares in its portfolio align with its policy on cross-shareholdings. We carefully examine the possibility of disposing our holdings when we judge that there is no rationale for holding the shares.

Our Group continues to pursue the optimal level of cash on hand. We consider allocating cash on hand and future cash flows, as well as other available resources financed by interest-bearing liabilities for reinforcing the financial foundation, making investments in growth areas, and delivering appropriate shareholder returns, among others. As for underperforming businesses, our Group will remain flexible in making decisions including exit and downsizing options, while taking action to increase revenues.