2030 DENSO Group Mid-Term Management Plan “CORE 2030” Financial Strategy

First, I will review our 2025 Mid-Term Policy.

As President Hayashi explained, this includes net sales, operating income margin, and ROE, but I would like to add commentary from a financial perspective.

We aimed for steady, long-term improvement in DOE—dividend on equity—and raised it to 3.5%.

Share buybacks totaled 847.5 billion yen cumulatively from FY2021 to FY2025.

Regarding strategic shareholdings, we completed the sale of 25 out of the 30 issues we held at the end of FY2021.

We believe the five years saw steady progress in initiatives such as improving capital structure, reducing low-return assets, and strengthening shareholder returns.

On the other hand, due to factors such as quality-related costs, our operating margin has not reached the 10% target, and challenges remain in strengthening our earnings base.

Under the 2025 Mid-Term Policy, to strengthen and practice true sustainability management that achieves both business growth and the resolution of social issues, we also set targets aligned with our corporate philosophy of “Green” and “Peace of Mind.”

In the Green domain, despite environmental changes such as a slowdown in BEV adoption, we significantly reduced CO₂ emissions at our plants and led society’s transition toward carbon neutrality through improved functionality and expanded offerings of electrification-related products.

In the Peace of Mind domain, through technology development of ADAS-related products and by providing attractive products that are easier to adopt, we contributed to realizing a society where people can live with peace of mind—without traffic fatalities.

These sustainability initiatives of DENSO have been highly recognized both in Japan and overseas, from both financial and non-financial perspectives.

DENSO will continue creating social value and sustainably enhancing corporate value by driving growth in both the mobility domain and the Societal Value Expansion Domains—while also executing investments necessary for sustainable growth in parallel.

Toward 2030, we aim for net sales of over 8 trillion yen, an operating income margin of over 10%, and ROE of over 11%.

We will set KPIs across both financial and non-financial areas and steadily execute our strategies.

To improve capital efficiency, we will reduce our equity ratio to around 50%.

For shareholder returns, we will steadily raise DOE over the long term, targeting 4.0% or more. Share buybacks will be executed flexibly in light of our target capital structure and theoretical share price, in line with the progress of our growth strategies.

We will also position materiality KPIs—such as those related to Green and Peace of Mind—as important indicators for sustainably creating social value, and we will work on them accordingly.

In addition, our future initiatives particularly related to the environment will be formulated separately as “EcoVision 2035” and are planned to be announced within fiscal 2027.

Next, I will explain business growth.

Over the next five years toward 2030, we will steadily grow the mobility domain and, at the same time, nurture the Societal Value Expansion Domains into businesses that support companywide earnings.

In the mobility domain, by creating system value in the electrification and intelligence fields, we will grow the sales scale to 4 trillion yen—about 1.5 times the current level.

We will also accurately capture market needs and agilely transform our portfolio.

In the Societal Value Expansion Domains beyond mobility, we will leverage technologies and manufacturing capabilities cultivated in mobility, promote partner collaboration, and establish these domains as our second axis of contribution.

With an eye to achieving the 2030 growth targets and sustaining growth beyond that, we will execute effective investments to further strengthen our value creation foundations.

By balancing growth and investment, by FY2041 we will grow non-mobility domains such as FA and agriculture to 30% of total company sales, building a portfolio that secures sustainable growth and contributes to solving a wider range of social issues.

Next, I will explain the transformation of our business portfolio.

In mobility, we will define electrification, intelligence, and thermal management as growth domains and further expand them.

For internal combustion and thermal, while assessing market demand, we will identify domains in which to deepen technologies and domains in which to optimize competitiveness across the entire supply chain, realizing a portfolio that can flexibly respond to diverse powertrain needs in the market.

For fundamental technologies such as semiconductors and software, we will enhance development efficiency and speed, further strengthening them as foundations that drive our overall business competitiveness.

In the Societal Value Expansion Domains beyond mobility, we will also leverage technologies and manufacturing capabilities cultivated in mobility, promote partner collaboration, and expand these businesses.

Next is capital allocation.

By further expanding our stable cash generation capability, we will generate operating cash flow of 8.0 trillion yen over the five years from FY2027 to FY2031.

Based on the cash we generate and funds we procure, we will further strengthen investments for business growth and returns to our shareholders.

With a focus on balancing growth potential and capital efficiency, we will continue refining our financial foundation that supports sustainable growth—while controlling the areas of investment.

Let me provide more detail on business investments.

Over the five years through 2030, we plan business investment exceeding 6 trillion yen in total. The breakdown is 2.2 trillion yen for capital expenditures, 3.7 trillion yen for R&D, and 0.7 trillion yen for value creation foundations.

For capital expenditures, we will practice control based on growth potential and capital efficiency. While increasing mid to long term investments such as next-generation plants and carbon-neutrality technologies, we will raise the ratio of investment into growth fields—electrification and intelligence—to 70%.

By 2030, we will keep the depreciation-to-sales ratio below 5%.

For R&D, to further strengthen competitiveness amid changes in the external environment, we will invest 3.7 trillion yen—approximately 30% more than the past five years. Through process transformation, we will improve development efficiency beyond the increase in investment and raise the ratio of investment into electrification and intelligence, as well as advanced research.

We will also strengthen investments in value creation foundations—such as IT, intellectual property, and people—to realize sustainable growth.

From here, I will explain the FA, agriculture, and semiconductor domains where we will broaden our contributions further.

In both FA and agriculture, the essence of the challenges we face is common: workforce challenges due to a declining working-age population, and unstable production environments due to climate change, among other factors. More efficient and stable production environments are required.

In semiconductors, in response to strong societal demand, development and production of diverse, high-performance semiconductors are increasingly needed.

In each domain, by leveraging technologies cultivated in mobility and building stronger partnerships, we will contribute to solving social issues.

First, I will explain the FA domain.

As a comprehensive line builder that supports ideal factory building across the lifetime cycle—from concept design to production preparation to mass-production maintenance—we aim to solve workforce challenges.

By leveraging the manufacturing know-how cultivated by DENSO and by taking a bird’s-eye view of the entire supply chain, we have realized production lines that closely align with customer needs.

In the FA domain, to solve challenges more effectively and expand the business, we will establish broad partnerships through M&A.

By building a business foundation through partnerships across the lifetime cycle, by FY2031 we will expand the business scale to 300 billion yen—about four times the current level—and by FY2036 we will expand it further to 500 billion yen.

Next is the agriculture domain.

In agriculture, by combining the technologies DENSO has cultivated in the mobility business with the power of partnerships, we will deliver new value.

Since 2023, we have partnered with multiple partners in the Netherlands, a global leader in greenhouse horticulture, creating new markets.

By proposing and providing one-stop solutions that enable stable and planned production, we will contribute to stable food production and achieve business expansion.

In agriculture as well, synergy with partners is the key to business growth. While DENSO has traditionally taken leadership in Japan across businesses, for agriculture we will relocate the business division headquarters to the Netherlands—where advanced technologies and information are concentrated—to accelerate the speed of business execution.

In addition, to deepen synergy with partner companies, we will foster a culture in which cross-organizational teams create new value beyond organizational boundaries.

Through these initiatives, we will improve agricultural productivity by 75% and aim to grow the business scale in agriculture to 100 billion yen by FY2031 and to 200 billion yen by FY2036.

Next, I will introduce the direction of our partner collaboration.

DENSO has practiced business growth through collaboration with partners in fundamental technologies such as semiconductors and software, in growth fields in the mobility domain centered on electrification and intelligence, and in the Societal Value Expansion Domains such as FA, agriculture, and semiconductors.

Since 2017, our cumulative investment to acquire shares and businesses for strategic partnerships has totaled 560 billion yen.

To accelerate discontinuous growth and the transformation of our business portfolio, we will proactively promote strategic partnerships, including larger-scale collaborations.

While we steadily advance the growth investments I have described, we will also continue delivering stable returns to our shareholders.

Since we set DOE as a financial target in FY2021, we have steadily improved DOE. Toward 2030, we will aim for DOE of 4.0% or more and raise it in a stable, long-term manner.

We have also executed share buybacks flexibly since 2021, and in 2024 in particular, we decided on a 450 billion yen share buyback.

Going forward as well, based on our target capital structure and stock price trends, we will execute shareholder returns flexibly.

That concludes my explanation of DENSO’s path toward enhancing corporate value.

DENSO will achieve sustainable corporate value enhancement with two wheels: maximizing social value and maximizing capital efficiency.

We will continue to value dialogue with all of you and are committed to practicing management that drives sustainable corporate value enhancement.

Thank you very much.

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