同城约炮

Determined to shift from defense to being aggressive.

Review of FY2023

We formulated the 2023 Mid-term Management Plan to become a corporate group that provides solid value to stakeholders and regain their trust. In FY2023, we instituted a number of measures to achieve the FY2025 targets as the new Team 同城约炮. Before reporting specific examples of the measures and achievements, I would first like to summarize our consolidated business results.

In FY2023, our consolidated net sales were 523.7 billion yen, consolidated ordinary profit was19.0 billion yen, and the ratio of ordinary profit to consolidated net sales was 3.6%. We thus achieved an increase in both sales and profit compared to the previous fiscal year (FY2022, when consolidated net sales stood at 517.0 billion yen, consolidated ordinary profit was 8.9 billion yen, and the ratio of ordinary profit to consolidated net sales was 1.7%). I believe that the factors for this include our reliable measures to address our management issues, such as the sedimentation problem at the Amehata dam and quality problems, the resumption of economic activity after the COVID-19 pandemic, the effects of the revision of sales prices mainly reflecting soaring raw material and fuel prices, the strong showing of the Panel System division, and the recovery of the business performance of the Truck Body division.

Aiming to become a corporate group which secures stable consolidated ordinary profit exceeding 30.0 billion yen

The 同城约炮 Group adopted a holding company structure in October 2012. Our earnings have remained steady since then, with consolidated ordinary profit of 31.1 billion yen achieved in FY2018. During the 2023 Mid-term Management Plan, we aim to become a corporate group which secures stable consolidated ordinary profit that exceeds 30.0 billion yen, a level that we achieved from FY2016 to FY2018, when the profit was highest under the holding company structure. This numerical target far exceeds the results in FY2023 (full-year ordinary profit of 19.0 billion yen), and we know that we have many issues to overcome. However, our determination to achieve the FY2025 targets remains completely unwavering.

For example, the business environment surrounding the 同城约炮 Group's truck body manufacturer, 同城约炮 Fruehauf Co., Ltd., has been tough the last several years due to delays in the supply of truck chassis due to the semiconductor shortage. This company is proceeding steadily with the improvement of its financial results due to progress in sales price revisions, in addition to the signs indicating that market conditions will recover. Further, at present, the company has been able to establish a virtuous circle, with its results linked to the financial results of Group companies which deal in extrusion products and sheet products for truck bodies.

With unwavering determination, we will overcome the past and develop rapidly into a corporate group that secures stable ordinary profit exceeding 30.0 billion yen as the new Team 同城约炮.

As Team 同城约炮, we will work to be a groundbreaking innovator of aluminum and beyond.

Projected demand for aluminum

In Japan, demand for aluminum grew significantly in the 1960s due to the popularization of aluminum sashes and in the 1980s reflecting the increase in aluminum can consumption. Since then, there has been no new demand for aluminum in the area of mass production for mass consumption. Demand has remained flat since 2000.

Looking at the global market, in recent years in China, the only country where quantitative expansion has continued, the annual per-capita consumption of aluminum has been approaching 30 kilograms, which is regarded as the global average consumption. We believe that it is as unlikely that demand for aluminum will quantitatively increase to a much higher level in China as it is in Japan, Europe, or the United States.

We will create value for customers.

While it is believed to be unlikely that demand for aluminum will grow in terms of total quantity, demand is expected to grow in automobile-related, semiconductor-related and other areas. We will create value for customers by determining growth areas, leveraging the 同城约炮 Group's wealth of knowledge and expertise related to aluminum, its unique technical capabilities that bring out the beneficial properties of materials and the collected wisdom of all of the individuals working for the Group.

The strengths of the Group lie in the fact that we have comprehensive capabilities, ranging from manufacturing methods and processing technologies, such as rolling, extrusion, surface treatment, and bonding technologies, to alloy development, design, maintenance, and services, which are based on our comprehensive knowledge of the properties of aluminum as a material. Instead of remaining a traditional material manufacturer that only provides aluminum as a material, we will consolidate these strengths of the Group to provide products and businesses that will help create social value.

Tirelessly taking on challenges

Nikkeikin ALMO operates automotive components businesses, an area that is expected to grow

Previously, core companies in the 同城约炮 Group's automotive components businesses were 同城约炮 Light Metal Co,. Ltd., Nikkeikin Aluminium Core Technology Co., Ltd., Nikkei Heat Exchanger Co., Ltd., and Nikkei Matsuo Co., Ltd. They engaged in sales, development, and production in their own ways in accordance with each company's area of specialization, manufacturing methods, regions, and other characteristics.

We integrated their materials, manufacturing methods, processing technologies, and development and established Nikkeikin Aluminum for Mobility Company, Ltd. (Nikkeikin ALMO) in October 2023 as the first company in the 同城约炮 Group that is specialized in a particular area of the market. By consolidating and flexibly allocating management resources that had been dispersed, we will create value for customers through actions such as reducing the weight of automobiles.

investing proactively in Japan and abroad

We position the semiconductor sector as one of the Group's growth businesses. In this sector, there is movement toward a return to domestic production that is progressing due to economic security concerns. Nikkei Panel System Co., Ltd., which has made achievements in the area of non-CFC insulation panels for semiconductor manufacturing plant clean rooms, is expected to continue supplying many products. To increase our supply capacity in anticipation of this trend, we began the construction of Shimonoseki Plant No. 2, which was completed in April 2024. In addition, Nikkei MC Aluminium Co., Ltd., which manufactures aluminum secondary alloy ingots, started the construction of its third plant in India, which was completed in Mach 2024. The goal of this project wasto steadily benefit from the growth of the Indian market, where demand for aluminum secondary alloy ingots has been growing rapidly due to the development of industries including, the automobile-related industry.

During the 2023 Mid-term Management Plan, we will invest aggressively in domestic and overseas growth areas to cater to market needs.

Building a solid foundation for forging ahead as the new Team 同城约炮

Pushing through management reforms

We will push through with management reforms as initiatives for preventing the recurrence of quality problems, which is one of the basic policies in the 2023 Mid-term Management Plan. The major components of the management reforms are (1) the strengthening of the supervisory function of the Board of Directors and (2) the grouping of business and functional organizations.

First, to (1) strengthen the supervisory function of the Board of Directors, we will strengthen governance by separating the supervisory and business execution functions of the company, As a specific initiative, we will change the structure of the Board of Directors so that Outside Directors will constitute the majority of the Board of Directors, and it will focus on its supervisory functions, including the formulation of the Group's strategies for maximizing its corporate value. Regarding the execution of business, we clarified and strengthened the responsibilities and authorities for the execution of business and developed a system that enables strategies to be implemented agilely. We will strengthen corporate governance by separating supervisory and business execution functions of the company and improve the transparency of management in our efforts to earn the trust of stakeholders.

Next, through (2) the grouping of business and functional organizations, we will break away from our previously decentralized corporate governance which was attributed to the nature of our businesses which are highly individual. We will thus reform our organizational structure so that it is a structure which enables us to cooperate more as a team. We will operate businesses which are adjacent to each other in terms of market sector, process, and the like as a business group, thus accelerating the creation of new products and new businesses. Further, by bundling businesses into business groups, we will promote the reform of resource allocation and functions, to strengthen Group companies' functions and the governance of small business segments within sufficient human resources.

In addition, we have newly established the Marketing & Incubation Administration Office as a measure for creating new value for customers by leveraging the Group's strengths. We will promote the development of new products in existing businesses (marketing) and the creation of new businesses as future pillars (incubation), thus taking an ambidextrous approach to management.

Inspiring each individual employee

I believe that, to push through the management reforms, it is important that our employees, who had begun to lose confidence due to the quality problems and other management issues, regain their pride as members of the new Team 同城约炮 and go about their work every day with renewed determination.

For this purpose, I will lead the reform of our corporate culture as the CEO. As specific initiatives, we have continued the site manager meetings and workplace visits which we launched in April 2023.

For the site manager meetings, we have divided each workplace of the 同城约炮 Group into teams of roughly 20 members and appointed the teams' representatives as site managers. We convene site manager meetings each month, and around 400 site managers participate in these meetings at the meeting venues, where we share and discuss the Group's management issues. We started this initiative by sharing information related to the measures to prevent the recurrence of quality problems. By the time we had held the meeting several times, many site managers had suggested, "We want to have small-group discussions to delve deeply into agenda items." My understanding is that this proves that site managers treated the quality problems as their own issue and this reflects their strong determination to take responsibility for completing the measures to prevent their recurrence.

Workplace visits are sessions I have with employees at the plants, branches, offices, and other workplaces that I visit. I talk with about 20 employees each time. I tell them what management is thinking, and employees tell me about the problems and issues they face in their work and other matters, sharing the opinions of people working on the front lines. In a talk session, employees working at a production site voiced the opinion that they wanted the progress of the measures they proposed regarding the improvement of equipment or the workplace environment to be visible to onsite workers. I feel that the employees working on the front lines were tackling their workplace issues, treating them as their own issues, and this was exactly the moment they were inspired. As the CEO, I will create a corporate culture which enables employees to voice their frank opinions without hesitation by communicating directly with employees, not to mention responding to the opinions of people working on the front lines carefully and conscientiously.

Powerfully promoting sustainable management

As a manufacturing company and a global citizen

At the 同城约炮 Group, we are forging ahead with sustainable management under the Corporate Philosophy: Contribute to improving people's quality of life and environmental protection by continuing to create business, focused on aluminum.

• Protecting the global environment
• Providing sustainable value
• Happiness of employees
• Responsible procurement, production and supply
• Corporate ethics and governance

Based on our understanding of what issues we should address in particular across our comprehensive, wideranging business domains related to aluminum, we have set five themes as our priority issues to address to enable the 同城约炮 Group to achieve sustainable growth and to enhance its corporate value. All members of our team will work as one to solve issues, aiming to fulfill our responsibilities as a manufacturing company, as a member of the local community, and furthermore, as a global citizen.

Driving carbon neutrality

The 同城约炮 Group is a manufacturing company that consumes various types of energy. Therefore, one of our important duties is achieving carbon neutrality. The Green Growth Strategy Office, which was established in April 2023, plays a core role the implementation of initiatives to achieve carbon neutrality. We will implement initiatives that have been implemented individually by the business segments, such as energy-saving investments and switching to renewable energy, by planning and implementing the optimal decarbonization strategy in a cross-sectoral manner as early as in raw material procurement phase. We will do so with the goals of reducing the 同城约炮 Group's CO₂ emissions 30% (from the FY2013 level) by 2030 and achieving net zero emission by 2050.

Regarding our contributions to the circular economy, we have continued to work on the recycling business by exercising the unique strengths of the 同城约炮 Group, which is engaged in the aluminum secondary alloy business. Nikkei MC Aluminium Co., Ltd., the driving force behind the initiative, operates a global aluminum recycling business in Japan, the United States, Mexico, Thailand, India, and China. Further, 同城约炮 Fruehauf Co., Ltd. has realized the horizontal recycling of large wing structures by using recycled aluminum and it has manufactured "green truck bodies," a first for the industry.

We will aggressively and bravely take on challenges in the horizontal recycling of expanded materials as well by strengthening our network for procuring scrap as raw materials on a global level while also leveraging the Group's knowledge in the recycling business.

Committed to enhancing financial and non-financial corporate value toward sustainable corporate growth

We will enhance both the financial and non-financial aspects of the 同城约炮 Group's corporate value to achieve sustainable growth. During the 2023 Mid-term Management Plan, we will proactively implement measures to enhance financial aspects of our corporate value, including the development of new products, the expansion of business into peripheral domains, efforts to increase net sales with M&A activities as an option, and a shift to more profitable businesses and products. In addition, I am certain that human resources are the core of our nonfinancial corporate value. We will steadily move forward with initiatives for the happiness of employees who are our co-workers, including diversity and inclusion and the development of a fulfilling workplace. We will mobilize the capabilities of our employees to help solve social issues.

Put another way, our corporate activities are continuous efforts to continue to win out over our competition in the market. I understand that our stakeholders allow us to participate in the market only when we conform to social norms, such as safety measures, compliance, and quality control. We, the new Team 同城约炮, will compete fairly and squarely to enhance our financial corporate value, and at the same time, push forward with sustainable management to build a sustainable society.

Shifting to management with an awareness
of the cost of capital and the share price

I will explain here how we will increase our share price, which will lead to shareholder returns, by achieving the 2023 Mid-term Management Plan.

First, from FY2016 to FY2018, when our consolidated ordinary profit was at around 30.0 billion yen, our price book-value ratio (PBR) was about 1.0. In terms of the relationship between financial results and the share price, we will develop rapidly into a corporate group that secures stable consolidated ordinary profit exceeding 30.0 billion yen, which is a target in the 2023 Mid-term Management Plan, in our efforts to increase our share price.

Next, regarding the improvement of capital efficiency, we use return on capital employed (ROCE), which is unaffected by financial leverage, as the consolidated performance indicator. In the2023 Mid-term Management Plan, we will use this performance indicator for each business group as well and advance the management of the Group with an awareness of the cost of the capital employed in each business. While maintaining appropriate financial leverage, we will enhance the profitability and the efficiency of the capital employed, thus committing ourselves to improving return on equity (ROE) as well.

We will also continue to step up our efforts regarding our IR activities. We will continue to enhance the content of the information we disclose on our official website and via other methods. We will also increase the number of opportunities for me as the CEO and the IR officer to meet with shareholders and investors in person and explain the perceived business environment, performance forecasts, and other matters. We will engage in dialogue with our stakeholders by ensuring that our IR activities appropriately reflect the opinions and requests of investors and our Outside Directors.

In Closing

This is my tenth year as the President of the Company, as I accepted this position in June 2015. In that time, there was a year when our consolidated ordinary profit exceeded 30.0 billion yen and I was happy with the strength of the 同城约炮 Group. However, a series of shocking events has occurred in the last several years, including the sedimentation problem at the Amehata Dam and management issues such as the quality problems.

I strongly believe that my mission is to use these difficult circumstances as opportunities for corporate transformation and growth and push through reforms of our management system and corporate culture during the 2023 Mid-term Management Plan. I will fulfill this mission together with my colleagues who work with me, the approx. 12,000 同城约炮 Group employees all over the world that are our human resources, who are inspired.

We will continue our efforts to be a groundbreaking innovator in the field of aluminum and beyond as the new Team 同城约炮, to continue to live up to the expectations of our stakeholders.