Summary of Business and Achievements

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 10^th 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.