KAGA ELECTRONICS CO.,LTD.

1. Current Situation
In November 2021, the Company established its Medium-Term Management Plan 2024 for the three-year period from the fiscal year ended March 2023 to the fiscal year ending March 2025. Under its basic policies – “further reinforcement of profitability,” “reinforcement of management base,” “creation of new businesses,” and “promotion of SDGs management” – the plan established management targets for the fiscal year ending March 2025, the final fiscal year of the plan, for KPIs comprising net sales, operating income, and ROE, as follows.

In the fiscal year ended March 2023, the first year of the plan, the Company continued to set new record highs for net sales and each level of profit while also recording its highest-ever ROE, indicating capital efficiency. This performance, which was partly due to the tailwind provided by global supply shortages of semiconductors and electronic components, led to management targets for the final year of the plan being achieved two years ahead of schedule.
Based on the results of the first year, the Company updated its earnings forecast for the final year and presented them as the “latest outlook” in May 2023. In the fiscal year ended March 2024, which was the second year of the plan, the electronic components business was affected by such environmental changes as an increasingly severe inventory adjustment in the second half, as well as the disappearance of spot demand and a reduction in the size of transactions with a major customer of a Group company. In addition, the forecasts for the fiscal year ending March 2025, which was announced in May 2024, included the impact of the prolongation of the inventory adjustment and of salary increases that were not incorporated into the latest outlook. Taken together, these factors have made the net sales and operating income forecasts for the final year of the plan difficult to achieve.
Under these circumstances, we have positioned forecasts for the fiscal year ending March 2025, as a “commitment” to all our stakeholders and the latest outlook as a “challenging target,” and the Group will work together as one to accomplish the Medium-Term Management Plan 2024 in its final year.

2. Views on ROE
ROE can be divided into three components: net income margin, financial leverage, and total asset turnover. As shown below, the Company has set a “stable 10% or more,” with a consciousness of the cost of shareholders’ equity, as its management target ROE under the Medium-Term Management Plan. This is premised on the Company’s view that it will be able to achieve an ROE of between 12% and 15%, estimated from its most recent performance and future outlook.
The most recent results for ROE have exceeded the Company’s estimated cost of shareholders’ equity.

3. Future Initiatives
The Company will steadily implement the measures formulated under Medium-Term Management Plan 2024, further strengthening and accelerating these measures to continue to achieve robust results. This will enable it to receive a proper valuation of its business growth potential and earnings potential from the stock market and continue to improve its PBR. Its main measures are the following four points.

Measure (1): Steadily implement Medium-Term Management Plan 2024
The Company will engage in maintaining and improving business growth and profitability through the steady implementation of the various measures established in the Medium-Term Management Plan, aiming to achieve the management targets in the final fiscal year of the plan.

Measure (2): Enhance shareholder satisfaction
The Company will engage in enhancing shareholder satisfaction through the steady implementation of the shareholder return policy established under the Medium-Term Management Plan (1. consolidated dividend payout ratio of 25–35% as a measure of stable dividends, 2. pay special dividends as performance-linked dividends, and 3. flexibly and strategically implement share repurchases).
Under the next medium-term management plan, the Company will further deepen discussions aimed at further advancing and enhancing shareholder return measures.

Measure (3): Promote sustainability management
The Company has engaged in CSR and ESG activities for some time. The Sustainability Committee, chaired by the President & COO, will play a central part in deepening these activities and promoting sustainability management Group-wide.
In the fiscal year ending March 2025, specifically, the Company will engage in quantifying greenhouse gas emissions and formulating reduction targets, and aim to enhance ESG evaluation through external institutions such as the TCFD and CDP.

Measure (4): Maintain and further strengthen proactive IR activities
The Company will further deepen the regular communication of management information that it has implemented for some time, centered on the Investor Relations & Public Relations Department, which is a section specializing IR. These activities include company briefing sessions, financial results briefings, and other IR events for investors, as well as communication through the Company’s IR site, Integrated Report, and media (economics journals and specialist magazines). In addition, the President & COO will play a central role in energetically undertaking constructive dialogue with shareholders and investors, including those overseas.
The opinions and other comments received through these IR activities will be shared in meetings of the Board of Directors and utilized, including in the review of management strategy.