Value Creation Story

2030 vision
Review of the 14^th Medium-Term Management Plan
Outline of the 15^th Medium-Term Management Plan

2030 vision

The TS TECH Group’s Vision Statement—“A company dedicated to realizing people’s potential, a company sincerely appreciated by all”—underpins all of its business operations. By providing the world with attractive products even in the evolving mobility society, we will not only achieve our 2030 Vision but also help to build a more sustainable world. In doing so, we will continue to serve as a reassuring presence for all our stakeholders and be a company sincerely appreciated by all.

Review of the 14^th Medium-Term Management Plan

The 14^th Medium-Term Management Plan set out a management policy of “Corporate evolution through ESG management,” and during those years we moved forward with efforts to strengthen our corporate structure in various ESG-related areas that support business growth. We made progress on priority measures, but the extremely challenging business environment caused by the pandemic and material supply shortages left outstanding issues in terms of profitability. We will implement the 15^th Medium-Term Management Plan to ensure that all remaining challenges are addressed, such as achieving as yet unattained commercial rights targets in new business areas and remedying the downturn in capital efficiency.

Progress on Priority Measures

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◎: Very good 〇: Good △: Average

	Measure	Evaluation	Notable initiatives
Evolution for business growth	Commercialization of original technologies	◎	Acceleration of development of sensing and other technologies that lead to attractive products Announcement of next-generation vehicle interior XR Cabin Active incorporation of joint development and other types of open innovation Capital and business partnership with Imasen Electric Industrial Co., Ltd. Business partnership with ALPS ALPINE CO., LTD. Investment in teTra aviation corp. Application of advanced processing technology in mass production Newly established mold manufacturing and technology development bases
	Expansion of strategic commercial rights	△	Steady receipt of orders from major customers for target commercial rights through spec proposals that leverage our strengths and enhanced development collaboration Precise selection of target and strategic order development to acquire new customers and new commercial rights Although the number of new orders increased, the target for final orders received was not achieved
	Optimization of business operations structure	◯	Streamlining and increased efficiency through allocation reviews and restructuring of business operations both in Japan and overseas based on reorganization of production UK and Hungary: Reorganization of production hubs India: Reorganization of automobile and motorcycle businesses Mexico: Establishment of trim cover production company Poland: Establishment of seat production company
	Contribution to a sustainable society	◎	Establishment of the Sustainability Committee Identifying material issues and setting KPIs and targets for 2030 Stronger global CO2 emissions reduction activities and related management to help achieve a low-carbon society Endorsement of TCFD recommendations and disclosure response Enhancing resource management to achieve a circular society
Stronger business operations structure to support evolution	Recognition for top quality	△	Enhanced know-how and support from the first production base during global rollout of new models Prevention of defects by strengthening verification in the beginning stages of development Stronger quality control systems at Group and business partner locations Impact on income due to quality-related response costs
	Strengthening of continuous earnings structure	◎	Establishment of a lowest-cost procurement structure by enhancing our global procurement system More efficient administrative and indirect operations through active use of IT Studying and formulating financial strategies aimed at medium- to long-term growth
	Maximization of employee and structural efficiency	◎	Establishment of a system to promote advancement of diverse human resources Introduction of referral and return of former employees recruitment Implementation and utilization of employee engagement survey Rating: C Aiming to achieve highest rating of AAA Evolution of our evaluation system to accommodate various work styles Review of our training system for next-generation human resource development

Financial Trend

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		Fiscal 2020 results	Fiscal 2021 results	Fiscal 2022 results	Fiscal 2023 results	Fiscal 2024 plan

Revenue (Billion yen)		359.6	346.1	349.9	409.2	410
Operating income (Billion yen)		26.3	26.7	22.9	15.2	20
Operating margin		7.3%	7.7%	6.6%	3.7%	4.9%
ROE		5.9%	7.8%	4.3%	1.8%	3.4%
Average exchange rate	[USD]	108.7	106.1	112.4	135.5	130.0
Average exchange rate	[CNY]	15.6	15.7	17.5	19.8	19.0

Non-Financial Trend

The TS TECH Group measures its ESG quality using an evaluation method based on the Dow Jones Sustainability Indices (DJSI)^*1

In the 14^th Medium-Term Management Plan, our governance reforms, including becoming “a company with an Audit and Supervisory Committee” structure and enhanced disclosure of non-financial items, were all well received. This meant that we significantly improved our scores in the domains of corporate governance and social reporting. We will continue to move forward with advanced ESG management, which we highlighted as a challenge in the 13^th Medium-Term Management Plan (fiscal 2018–2020), as we strive to build an industry-leading corporate structure and deliver sustainable corporate growth.

DJSI Evaluation (Indicated as a percentile ranking within the auto parts industry^*2)

Pie chart of DJSI evaluation
percentile in the auto parts industry

A sustainability-related index that evaluates companies’ sustainability from ESG and economic perspectives, published annually by S&P Dow Jones Indices LLC of the United States
Indicates the company’s position in the industry, with the highest score being 100
New item from fiscal 2021, so no score recorded for the 13^th Medium-Term Management Plan

Major Initiatives

Endorsement of TCFD recommendations and disclosure response
Enhancing environmental management and CDP initiatives

Implementation of employee engagement survey
Expanded the deployment of Supplier Sustainability Guidelines and the scope of surveys about the guidelines

Transition to “a company with an Audit and Supervisory Committee” structure
Establishment of the Nomination and Compensation Committee
Diversification of the Board of Directors (appointment of female directors, etc.)
Establishment of the Sustainability Committee
Formulation of material issues and setting of 2030 targets

Outline of the 15^th Medium-Term Management Plan

Under the 15^th Medium-Term Management Plan, we are first of all focusing on the challenge of recovering profitability as soon as possible, to achieve further growth and deliver on our 2030 Vision. To do this, the plan sets out nine key strategies, comprising growth, regional and functional strategies. We also aim to help to build a sustainable world, as the ESG management initiatives we have been implementing since the 13^th Medium-Term Management Plan culminate, and always seek to be a reassuring presence for our stakeholders and “A company sincerely appreciated by all.”

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Financial targets	14^th Medium-Term Management Plan results	15^th Medium-Term Management Plan targets	2030 targets
Revenue (Billion yen)	409.2	480	700
Operating income (Billion yen)	15.2	44	68
Operating margin	3.7%	9.2%	9.7%
ROE	1.8%	8.5%	10.0%

Shareholder returns
Basic policy	Implementing sustained, stable returns unaffected by business results
Dividends	Stable increase in dividend payments, targeting DOE of 3.5% or more by the end of the 15^th Medium-Term Management Plan
Acquisition of treasury stock	Flexible share buyback during the term of the 15^th Medium-Term Management Plan amounting to cumulative total of 20 billion yen and appropriate retirement of treasury stock

Management policy Realizing ESG management
Priority strategies		Notable initiatives
Growth strategies	Securing cabin coordination capacity	Creating attractive cabin products and technologies Active co-creation activities with companies in other industries Research on how people spend time inside a vehicle, focusing on next-generation vehicles Enhancing systems and software development capabilities Development of electronic control device components such as seat-integrated ECUs Training of advanced engineers
	Further growth in new businesses	Strategic acceptance of orders for target commercial rights Securing commercial rights for derivative models that incorporate technologies from existing ordered models Securing orders for advanced development on future models by proposing next-generation technologies in advance New customer development Enhancing joint efforts between individual regions and the head office, centered on the New Business Management Division
	A higher share of major customers’ products	Receiving orders for seat trading rights through regional coordination Securing commercial rights in regions where no seat orders have yet been received Building new partnerships and deploying sales activities leveraging them Growing orders received for parts commercial rights Steadily receiving orders for next-generation shared frames Enhancing development to receive orders for light-vehicle frames Growing orders received through enhancing our competitive strengths in parts
Regional strategies	V-shaped recovery in North America	Achieving a reformed corporate structure capable of adapting to production fluctuations Thorough automation of production line to keep up with irregular production and cost increase pressures Strengthening cost competitiveness through optimization of specifications, materials, and processes
	Restructuring the China business strategy	New initiatives not bound by existing businesses Building new partnerships aiming to secure new customers Expanding use of local manufacturers to lower costs and reduce procurement risks
	Strategic growth in new businesses in Europe	Further business expansion with European automakers Sales development with Poland as a key station New establishment of a trim cover production company with a view to expanding adoption of components
Functional strategies	Supply chain restructuring	Toward a sustainable supply chain Balancing stability and profitability through risk visualization and efforts to promote local procurement Working with business partners to reduce supply chain CO2 emissions volume (Scope 3)
	Enhancing efforts to develop environmental technologies	Evolution of environmental technologies for early commercial use Establishment of technologies for product applications for biomass materials and eco-friendly steel materials Resource recycling accomplished by selecting materials and designing structures with recycling in mind
	Building high efficiency production structures	Building a production structure capable of outperforming competitors Continuous evolution of production lines through introduction of digital transformation and AI, and automation Improvement of production management efficiency through system reviews, etc.

Foundation	Human resources strategies/ Financial strategies /Earning a reputation as a quality leader/Promoting and firmly establishing sustainability

Securing cabin coordination capacity

Changes in automobiles brought about through technological innovation will transform the value required of vehicle interiors. In order to seize this business opportunity and translate it into further business growth, it is imperative to be able to coordinate not only seats but the entire cabin, proposing new value to customers and users. We will work to create products and technologies that, put together, can deliver attractive cabins, utilizing both our accumulated proprietary technologies and collaboration with companies in other fields.

Acquisition of cabin coordination function

Targeting further business growth

The TS TECH Group has to date achieved steady business growth, serving as a global partner to Honda Motor Co., Ltd. and its affiliates in the Honda Group. In order to achieve further growth, we aim to achieve our 2030 Vision not by securing a higher share of major customers’ (Honda Group) business but also by ensuring further growth in new businesses, for instance by acquiring new customers and commercial rights outside the Honda Group.

2030 targets