Issues to be addressed
Transformation to management focused on capital efficiency
Our market capitalization, a market valuation that takes into account future growth, has remained below our net assets, and we recognize that it is critical to address this issue to restore the stagnant price-to-book ratio (“P/B ratio”) to a level of 1x or more by quickly improving profitability and achieving a return on capital that exceed cost of capital. Accordingly, we will achieve medium- to long-term corporate value enhancement through sustainable growth, by ensuring that each operating entity and/or business division will shift to management that is more focused on profitability and capital efficiency than in the past, and formulating and executing highly effective strategies. We plan to disclose around November 2023 the results of analyzing and evaluating our capital profitability and market valuation as well as policies, goals and/or management indicators for improving P/B ratio, specific initiatives and timeframe for the execution of these initiatives.
Enhancement of governance
In order to shift to a management that focuses on capital efficiency and to achieve a return on capital that exceeds cost of capital, we will need to further strengthen the supervisory function of our Board of Directors over execution of business and to enhance effectiveness of management. In order to steadily implement our agenda of improving profitability and capital efficiency, we have examined the skill set of our Board of Directors and decided to appoint an additional External Director with experience and knowledge in the areas of investment and financial capital markets.
Improvement of business profitability
Although the restrictions on activities in various countries and/or regions following the spread of COVID-19 have been eased, the recovery in profit has been slow due to inadequate response to changing consumer needs and consumer behaviors from the experience of COVID-19. We will achieve renewed growth by providing new customer experience value and creating new business, while at the same time continuing to reform our cost structure and improve business efficiency.
Other issues
The business environment surrounding the Company continues to undergo significant changes including a shrinking domestic market due to a decline in birthrate and aging population, changes in distribution such as the expansion of e-commerce, diversifying consumer needs, growing cost-conscious consumers, and further increase in raw material and transportation costs associated with geopolitical risks. In addition, environment issues such as climate change and human rights issues are becoming increasingly serious, and require appropriate response and prevention.
The Company will endeavor to achieve resolving social issues on one hand and sustainable growth on the other hand through our initiatives for “maximizing the value provided to customers”, “building an organization in which each employee can grow and be highly motivated”, “preserving the global environment for future generations”, “realizing a society in which everyone can excel at their roles” and “enhancing governance toward realization of sustainable growth”, which we have defined as our materiality (material issue) items.