Summary of Business and Achievements

Financial Strategies

  1. * Titles shown were current as of the publication of the “TS TECH Integrated Report 2021” (Oct. 2021).

Aiming for Sustainable Improvements to Corporate Value

Aiming to be a value-creating company that contributes to the realization of a sustainable society, under the 14th Medium-Term Management Plan management policy of “Corporate evolution through ESG management,” the TS TECH Group is advancing two priority measures from two distinct angles: “Evolution for business growth” from a proactive angle, and a “Stronger business operations structure to support evolution” from a protective angle. We recognize that the mission of the Corporate Business Administration Division is to make medium- to long-term proposals from a financial perspective that take into account such proactive and protective angles, and to sound the alarm if necessary.

The automotive industry is currently facing a once-in-a-century period of transformation, and the market environment is also experiencing major upheavals. The TS TECH Group has built a sound financial foundation to date, supported by high profitability. Even in the midst of such a fast-changing market environment, we aim to enhance our corporate value by making our capital and asset management more efficient than ever before.

Toward Further Growth

During fiscal 2021, the automobile industry faced an extremely harsh operating environment, with the impact of the COVID-19 pandemic compounded by supply chain disruptions due to semiconductor supply shortages. The TS TECH Group had no choice but to drastically curtail production, resulting in a substantial decrease in revenues and profits compared to the initial medium- to long-term business outlook. However, while scrutinizing each and every capital investment and expenditure item, we have proactively invested in growth through rationalization and other means and also focused on investment in R&D to create new value.

Utilizing M&A, for example, to make Honda Cars SAITAMAKITA a consolidated subsidiary and Imasen Electric Industrial Co., Ltd. an equity method affiliate, we are allocating funds to build and develop the technologies, know-how, and collaborative relationships necessary for future business growth.

Going forward, as we look ahead to the achievement of the Medium-Term Management Plan and further business growth beyond, we will effectively and strategically utilize the funds of the entire TS TECH Group in regions and fields where growth is anticipated.

A Solid Financial Foundation Supporting Business Activities

At the end of fiscal 2021, the Group’s consolidated capital adequacy ratio was 70.9%, ensuring an extremely high level of safety, and the Group has sufficient liquidity on hand to handle growth investments or M&A using its own funds.

The TS TECH Group operates in 14 countries around the world, and by formulating “safe funding guidelines” that take into account risks in each region, country, and location, we have developed a cash management system that ensures reserve capital is retained at all times and facilitates flexible procurement of funds in an emergency.

At the end of fiscal 2021, the Group as a whole held 153.0 billion yen in cash and cash equivalents. We will work to develop a flexible cash management system and respond to any measures and growth investments with a sense of speed by appropriately controlling the cash that is dispersed around the world, while also taking into account various financial conditions, remittance regulations, interest and exchange rate standards, and other factors.

Management with a Focus on Capital Efficiency and Shareholder Returns

Historically, the TS TECH Group has earned a return on equity attributable to owners of parent (ROE) in excess of 10%. However, in the midst of the prolonged severe business environment, which included a series of plant stoppages at various sites due to the COVID-19 pandemic, the ROE for fiscal 2021 dropped to 7.8% (5.3% excluding gain on negative goodwill*1). In fiscal 2022, we are forecasting an 8.3% ROE, as we anticipate being able to link the increase in orders from our customers to earnings through the optimization of fixed costs and other efforts, based on the same standards applied throughout the TS TECH Group. In the future, we will not only maximize profits but also improve corporate value while emphasizing efficiency indicators for capital and asset management and promote the goal of achieving a 10% ROE.

Moreover, the Group considers the return of profits to our shareholders to be a top priority for management, and our basic policy is to maintain stable dividends by comprehensively taking into account consolidated business performance and the dividends payout ratio. The dividend forecast for fiscal 2022 is a 9 yen increase in real terms*2 over the previous period to 54 yen per share (108 yen pre-stock split), which will be the 10th consecutive year of dividend increases since fiscal 2012.

Moving forward, we will continue to strive to enhance our corporate value by providing stable, continuous dividends and actively utilizing internal reserves for further business growth.

  1. *1Arising from the addition of Imasen Electric Industrial Co., Ltd. an equity-method affiliate
  2. *2On April 1, 2021, the company enacted a 2-for-1 stock split of ordinary shares. The actual dividend for fiscal 2021 before the stock split was 90 yen per share, and after the stock split it was 45 yen per share, so the new dividend is an increase of 9 yen per share in real terms.

Results by Segment for FY2021

Japan

In the fiscal year under review, the Group worked to build a highly efficient production system by constructing a production line to enable production of new models and beginning work on a new plant as part of the consolidation of production in the Hamamatsu District.

While production did not stop due to the COVID-19 pandemic, select locations made adjustments to production volume.

FIT

Americas

In the fiscal year under review, the Group launched production of seats for the new Acura TLX.

The Group worked to build a highly profitable structure through enhanced quality assurance capabilities in each process.

Production stoppages caused by the COVID-19 pandemic began in late March 2020, but production largely resumed by mid-May.

CR-V

China

In the fiscal year under review, the Group launched production of seats for the new Honda Fit (Guangzhou) and the new Life (Wuhan), the sister model to the Fit.

In addition to increasing our market share of Honda business, we aggressively deployed sales activities aimed at acquiring new customers.

Production in fiscal 2021 was unaffected by the COVID-19 pandemic. Production in fiscal 2020 was stopped from early February through early March 2020.

ENVIX

Asia and Europe

In the fiscal year under review, the Group began production of seats for the new Honda City in India, Thailand, and Indonesia.

We worked to improve our business structure by consolidating bases, including the reorganization of our automobile business in India, and engaging in thorough streamlining efforts, all of which are anticipated to lead to earnings in fiscal 2022.

Production stoppages caused by the COVID-19 pandemic began in late March 2020. Segment production resumed in early May, with the timing of the restart of operations varying by country.

ACCORD

Financial/Non-Financial Highlights

Five-Year Financial Summary

(Million yen)
FY2017
(IFRS)
FY2018
(IFRS)
FY2019
(IFRS)
FY2020
(IFRS)
FY2021
(IFRS)
Fiscal year under review on a consolidated basis
Revenue 425,794 479,490 412,072 359,682 346,149
Cost of sales 355,176 399,329 338,031 300,307 288,671
Selling, general and administrative expenses 35,755 37,418 36,521 33,531 32,581
Operating income 34,557 47,346 38,793 26,326 26,742
Income attributable to owners of parent 19,622 30,115 25,750 15,064 20,741
Basic earnings per share (Yen)*1 144.29 221.45 189.35 110.77 152.89
Operating margin (%) 8.1 9.9 9.4 7.3 7.7
Return on equity attributable to owners of parent (ROE) (%) 9.6 13.4 10.5 5.9 7.8
Return on assets (ROA) (%) 11.4 14.7 11.7 8.2 9.9
Effective statutory tax rate (%) 30.1 30.1 29.9 29.9 29.9
Average actual tax rate (%) 29.9 22.7 25.0 29.7 22.5
Total at End of Fiscal Year
Total assets 322,202 351,944 358,265 341,820 390,478
Property, plant and equipment 76,576 73,532 71,515 68,530 69,053
Interest-bearing liabilities 3,506 4,182 1,742 4,014 5,228
Total equity 230,989 259,924 277,424 274,552 301,450
Shareholders’ equity 204,800 229,866 249,904 259,233 271,278
Revenue per Consolidated Segment
Japan 91,830 93,552 92,856 75,134 78,866
Americas 213,008 224,867 195,604 176,346 141,924
China 94,990 121,266 89,187 82,729 117,652
Asia and Europe 59,825 76,041 66,822 51,967 34,021
Overseas revenue 361,980 412,249 342,496 303,544 288,303
Overseas revenue ratio (%) 85.0 86.0 83.1 84.4 83.3
Stock Information
Cash dividends per share*2 70.00 80.00 84.00 86.00 90.00
Consolidated price to earnings ratio (PER) (Times) 10.4 9.5 8.4 11.5 10.8
Consolidated dividends payout ratio (%) 24.3 18.1 22.2 38.8 29.4
Total shareholder return (%)*3 116.2 165.7 129.8 109.3 140.8
  1. ROE: Net income/Total equity attributable to owners of parent (Average)
  2. ROA: Income before income tax/Total assets (Average)
  3. *1The company implemented a 2-for-1 stock split of its common shares effective April 1, 2021.
    Calculations are based on the assumption that the stock split was conducted at the beginning of fiscal 2017.
  4. *2For fiscal 2021, the actual dividend amount prior to the stock split is shown.
  5. *3Calculations are based on the share price taking into account the stock split.

Financial Highlights

Revenue/Overseas Revenue Ratio (Consolidated)

We operate in 14 countries around the world, and more than 80% of our revenue is from outside Japan.

Revenue/Overseas Revenue Ratio (Consolidated)

Operating Income/Operating Margin (Consolidated)

We have worked to thoroughly enhance our revenue structure, and we maintain a higher operating margin than our competitors.

Operating Income/Operating Margin (Consolidated)

R&D Expenses/R&D Expenses to Revenue Ratio (Consolidated)

Even when revenue declines, we devote generous amounts of management resources to research and development that will lead to the creation of new value, including the development of next-generation technologies.

R&D Expenses/R&D Expenses to Revenue Ratio (Consolidated)

Capital Expenditures and Amortization Expenses (Consolidated)

We are proactively making investments that contribute to enhancing our corporate value, which include measures related to new customers, automating production, and installing environmentally friendly facilities.

Capital Expenditures and Amortization Expenses (Consolidated)

Return on Equity Attributable to Owners of Parent (ROE)/Return on Assets (ROA) (Consolidated)

We will strive for efficient management of invested capital to further improve profitability

Return on Equity Attributable to Owners of Parent (ROE)/Return on Assets (ROA) (Consolidated)

Annual Cash Dividends per Share/
Dividends Payout Ratio (Consolidated)

As we strive to increase corporate value, we continue to pay out stable dividends, taking into account a comprehensive range of factors, including consolidated performance and the dividends payout ratio.

Annual Cash Dividends per Share/Dividends Payout Ratio (Consolidated)

Non-Financial Highlights

Energy Input (Consolidated)

We are actively working to conserve energy in our global operations through means such as ISO 50001 certification for energy management systems.

Energy Input (Consolidated)

CO2 Emissions per Unit of Production/
CO2 Emissions Volume (Consolidated)

We are working to further reduce and appropriately manage CO2 emissions in all processes, from product development to production.

CO2 Emissions per Unit of Production/CO2 Emissions Volume (Consolidated)

Training-Related Expenses (Non-consolidated)

Under our vision Statement of being “a company dedicated to realizing people’s potential,” we are actively working to create opportunities and environments that encourage employee growth and development.

Training-Related Expenses (Non-consolidated)

Percentage of Employees Taking Paid Leave (Non-consolidated)

For many years, labor and management have worked together to promote the use of paid leave, and we have maintained a high rate of paid leave utilization.

Percentage of Employees Taking Paid Leave (Non-consolidated)

Number of Patents Held (Consolidated)

In addition to creating more of the technology that is the source of our competitiveness, we are working to maximize the value of our intellectual property and minimize losses through appropriate management

Number of Patents Held (Consolidated)

Ethics and Compliance Issues
Number of Issues Recorded (Consolidated)

In fiscal 2021, there were a total of 109 ethics and compliance issues recorded by the TS TECH Group, including those brought for consultation to the TS Corporate Ethics Compliance Consultation Office. Investigations into each case found no violations of laws or regulations that would have a significant impact on our business activities.

Ethics and Compliance Issues Number of Issues Recorded (Consolidated)

Cases in Which the TS TECH Group Was Found to Be Involved in Corruption or Bribery (Consolidated)

0 cases

There were no cases in which the TS TECH Group was found to be involved in corruption or bribery (Period covered: FY2017-2021).

Fines and Penalties for Anti-Competitive Practices (Consolidated)

0 cases

The TS TECH Group did not experience any significant non-compliance issues that resulted in fines or penalties (Period covered: FY2017-2021).

  

Number of Political Contributions (Non-consolidated)

0 cases

TS TECH made no political contributions (Period covered: FY2017-2021).

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