Medium- to Long-term Management Targets

Medium- to Long-term
Management Targets

1. Overview of SUMINOE GROUP WAY

To ensure “change” for the future, we have formulated the Medium- to Long-term Management Targets.
This plan, called SGW (SUMINOE GROUP WAY), spans six years in two phases and is already under way.

2. Review of Medium- to Long-term Management Targets STEP I (2022-2024)

Medium- to Long-term Management Targets

Results and future tasks

SGW STEP I plan and results
(Net sales and operating income achieved the plan)

FY2024 plan FY2024 results
Net sales (million yen) 93,490 103,478
Operating income
(million yen)		 3,300 3,300
Operating margin (％) 3.5 3.2
ROE (％) 6.6 2.9
Capital investment
(3-year total : million yen)		 10,000 10,953

Achievements

  • Achieved profitability at the North and Central American base by restructuring the production systems of U.S. and Mexican subsidiaries (achieved profitability at all overseas bases for Automotive Textiles)
  • Implemented appropriate price pass-through
  • Increased recognition of the high environmental performance of ECOS® series, eco-friendly carpet tiles, under the horizontal recycling system
  • Expanded the space design business
  • Established a synthetic leather factory to sow the seeds for new development
  • Worked to expand recognition as a global supplier in the North and Central American market, which resulted in receiving orders from foreign manufacturers

Future tasks

Automotive Textiles

  • Strengthen capability for proposals through information sharing across businesses.
  • Strengthen the management base and increase profits in North and Central America.
  • Enhance proposals to foreign manufacturers and increase sales of new products.

Traffic Facilities

  • Increase profits by optimizing and streamlining the production system.
  • Expand sales by developing and increasing sales of functional products.

Interior Fittings

  • Increase recognition of the SUMINOE brand.
  • Implement strategies to recover sales of household products.

Functional Materials

  • Expand from existing businesses and product categories.
  • Effective use of human resources and production facilities at our Vietnam base.

Three-year Consolidated Income and Expenditure Plan・Results

(million yen)
Three-year Consolidated Income and Expenditure Plan・Results(2022-2024)
FY 2021 FY 2022 FY 2023 FY 2024 Comparison with
FY 2021
*Comparison with
FY 2024 results
Results Plan Results Plan Results Plan Results (Amount) (％)
Net sales 79,702 86,480 81,713 90,360 94,828 93,490 103,478 +23,776 +29.8％
Operating income 1,049 1,160 110 2,520 1,294 3,300 3,300 +2,251 +214.5％
Operating margin 1.3% 1.3% 0.1% 2.8% 1.4% 3.5% 3.2%
Ordinary income 1,211 1,350 950 2,730 1,575 3,530 3,668 +2,457 +202.8％
Profit attributable to
owners of parent		 409 620 281 1,280 320 1,960 874 +465 +113.6％
(million yen)
Segment Plan・Results(2022-2024)
FY 2021 FY 2022 FY 2023 FY 2024
Results Plan Results Plan Results Plan Results
Interior Fittings Net sales 31,024 33,750 32,811 34,430 36,598 35,120 37,142
Segment income 579 400 911 450 977 520 946
Automotive Textiles and
Traffic Facilities		 Net sales 45,102 48,980 45,005 51,910 54,314 54,170 62,800​
Segment income 2,102 2,800 1,127 3,590 2,230 4,170 4,427​
Functional Materials Net sales 3,130 3,410 3,548 3,680 3,550 3,840 3,127
Segment income △87 △140 △192 150 90 190 △66

3. Policy of Medium-to Long-term Management Targets STEP Ⅱ(2025-2027)

Policy of STEP Ⅱ

Priority Themes

By pursuing five priority themes while steadily raising the level of our true capabilities, we aim to achieve our target rate of return by the fiscal year ending
May 31, 2027.

Policy of each Business

Policy of Automotive Textiles

  • Market trends

    • Recovery from the deterioration of social and economic activities caused by the COVID-19 pandemic and shortage of semiconductors
    • Population decline in the medium to long term
    • Fluctuations of exchange rates, and soaring raw material prices and labor costs
    • Expansion of new demand, such as practical application of MaaS, a next-generation transportation service
    • Spread of the perspective of SDGs


    Tasks

    • Strengthen capability for proposals through information sharing across businesses.
    • Strengthen the management base and increase profits in North and Central America.
    • Enhance proposals to foreign manufacturers and increase sales of new products.


    Policy

    We will pave the way for improved profitability by updating our global strategy and advance investments for full-scale growth of our operations in North and Central America to increase our presence in overseas markets.


    • Develop a proposal system for synthetic leather and further increase orders.
    • Obtain new orders and expand sales for one-of-a-kind products, such as decorative fabric materials for car seats.
    • Find new customers through technical and design presentations.

  • Accelerating global expansion

    • By adding the Vietnam base to our current 11 overseas bases in six countries for the Automotive Textiles business, we will further strengthen our globally optimized supply system while working to increase the recognition of the SUMINOE brand overseas, which will lead to expanded sales for foreign manufacturers.

    Enhancing non-textile areas

    • The target of 10 billion yen in synthetic leather sales for the fiscal year ending May 31, 2027 was achieved in the fiscal year ended May 31, 2024. Going forward, with a synthetic leather factory in Mexico added as a new growth engine, we will work to strengthen our competitiveness by securing stable orders and optimizing/streamlining our production system.

Policy of Traffic Facilities

  • Market trends

    • Recovery from the deterioration of social and economic activities caused by the COVID-19 pandemic and shortage of semiconductors
    • Population decline in the medium to long term
    • Fluctuations of exchange rates, and soaring raw material prices and labor costs
    • Expansion of new demand, such as practical application of MaaS, a next-generation transportation service
    • Spread of the perspective of SDGs


    Tasks

    • Increase profits by optimizing and streamlining the production system.
    • Expand sales by developing and increasing sales of functional products.


    Policy

    As a market leader holding the top market share for over a century, we are committed to technological innovation while preserving traditional Japanese culture and techniques.


    • Ensure an efficient and stable production system.
    • Establish a safe and appropriate management system for technologies and know-how.
    • Create new markets through collaboration with other businesses.

  • Three-year Plan for Automotive Textiles and Traffic Facilities

Policy of Interior Fittings

  • Market trends

    • Changes in society due to external factors
    • Decrease in new housing starts
    • End of the COVID-19 pandemic
    • Concentration of office and commercial facility construction in urban areas
    • Weakened supply chains


    Tasks

    • Increase recognition of the SUMINOE brand.
    • Implement strategies to recover sales of household products.


    Policy

    Taking pride in being an industry pioneer, we will work to enhance the profitability of existing businesses and create new value.


    • Discover new demand and differentiate ourselves from other companies.
    • Actively expand market into mid- to high-end zones.
    • Strengthen sales by improving logistics efficiency in response to market changes.
    • Create synergy with the space design business.

  • Three-year Plan for Interior Fittings

Policy of Functional Materials

  • Market trends

    • Changes in consumer needs and purchasing trends due to climate change and lifestyle changes after the COVID-19 pandemic
    • Fluctuations of exchange rates, and soaring raw material prices and labor costs
    • Spread of the perspective of SDGs


    Tasks

    • Expand from existing businesses and product categories.
    • Effective use of human resources and production facilities at our Vietnam base


    Policy

    As a source of technology to be deployed throughout the Company, we will work to develop new functions such as smart textiles and foster new growth businesses.


    • Promote product development in response to social issues and market needs.
    • Reinforce development in new areas for the next generation, such as smart textiles.
    • Optimize operations at the Vietnam base through collaboration with other businesses.
    • Develop applications of our unique materials and processing technologies and expand the scope of applications to other fields.

  • Three-year Plan for Functional Materials

Policy for Technology Development

We will strengthen our research and technological capabilities, based on the enhancement of Group strengths and human resource development. We will “Bringing innovation to all kinds of spaces” to meet various needs that exist around the world.

  • Enhancement & integration

    • Absorption processing technology
    • Flame retardant technology
    • Resin compounding technology
    • Processing technology
    • Analysis evaluation technology

    NEW
    Create new and intellectual property-linked core technologies.

  • Enhancement of Group capabilities

    • Create synergies by promoting communication among Group companies.
    • Visualize intellectual property throughout the SUMINOE GROUP.

    Cultivate human resources

    • Promote sharing of technologies and quality through visualization of development cases and data.
    • Reorganize testing operations, existing development operations, and new development operations, and train relevant employees.
    • Create video manuals for measuring equipment to promote general use.
    • Actively recruit overseas personnel and mid-career personnel.

Three-year Consolidated Income and Expenditure Plan

(million yen)
Three-year Consolidated Income and Expenditure Plan(2025-2027)
FY2024 FY2025 FY2026 FY2027 STEP I and STEP Ⅱ
Comparison of final year
Results Plan Plan Plan (％) (Amount)
Net sales 103,478 105,300 106,000 109,000 +5.3％ +5,521
Operating income 3,300 3,300 4,200 5,000 +51.5％ +1,699
Operating margin 3.2％ 3.1％ 4.0％ 4.6％
Ordinary income 3,668 3,400 4,200 5,000 +36.3％ +1,331
Profit attributable to
owners of parent		 874 1,500 2,100 2,600 +197.3％ +1,725
Exchange rate
(1 dollar)		 145.31yen 144.00yen 131.00yen 125.00yen
(million yen)
Net sales by base(2025-2027)
FY2024 FY2025 FY2026 FY2027 STEP I and STEP Ⅱ
Comparison of final year
Results Plan Plan Plan (％) (Amount)
Net sales 103,478 105,300 106,000 109,000 +5.3％ +5,521
Japan 67,793 68,900 71,100 73,000 +7.7％ +5,207
North and Central America 18,469 18,700 17,300 18,700 +1.2％ +230
China 8,098 8,000 7,800 7,900 △2.5％ △198
Asia 9,116 9,700 9,800 9,400 +3.1％ +282
(million yen)
Breakdown by segment(2025-2027)
FY2024 FY2025 FY2026 FY2027 STEP I and STEP Ⅱ Comparison of final year
Results Plan Plan Plan (％) (Amount)
Automotive Textiles and Traffic Facilities Net sales 62,800 64,180 63,620 65,080 +3.6％ +2,279
Segment income 4,427 4,610 5,130 5,540 +25.1％ +1,112
Interior Fittings Net sales 37,142 38,040 38,790 40,030 +7.8％ +2,887
Segment income 946 1,000 1,130 1,360 +43.7％ +413
Functional Materials Net sales 3,127 2,650 3,090 3,390 +8.4％ +262
Segment income △66 △180 90 170 ― +236
Other Net sales 407 430 500 500 +22.7％ +92
Segment income 76 90 130 170 +123.3％ +93
Adjustment Segment income △2,083 △2,220 △2,280 △2,240 ― △156
Total Net sales 103,478 105,300 106,000 109,000 +5.3％ +5,521
Operating income 3,300 3,300 4,200 5,000 +51.5％ +1,699

Cost of Capital and Shareholder Returns

Action to Implement Management that is Conscious of Cost of Capital and Stock Price

  • Analysis of current situation

    • Cost of equity: 5 to 7%
      Calculation method:
      Calculated using CAPM, risk-free rate (approx. 1.0%) + beta value × market risk premium (approx. 6.0%)
      The risk-free rate is based on domestic long-term interest rates, and the beta value is calculated in-house.
    • ROE: 2.9%(FY2024 result)
      ROE continues to remain below cost of capital, and PBR continues to be below 1 times.
    • PBR: 0.5 times(FY2024 result)

  • Policy

    • ROE: 8%(FY2027 target)
    • ROIC: 8%(FY2027 target)
    • PBR: 1.0 times(FY2027 target)
    • WACC: 4%(FY2027 target)
    • Dividend payout ratio: 38%
      (From FY2025)

Initiatives to increase corporate value above cost of capital

Based on the premise of realizing value creation that exceeds market expectations, we will make thorough efforts to improve profitability and capital efficiency and utilize financial leverage, with the aim of achieving an ROE of 8% or more.

  • Initiatives to improve ROE

    • Improving profitability
    • Effective use of assets
    • Use of financial leverage

  • Improving profitability.

    Reducing expenses.

    Improve financial structure.

    Increase profits in North and Central America.

    Improve profitability of Interior Fittings business.

    Adjust cash and deposits and borrowings to appropriate levels.

    Optimization of inventory.

    Utilization of fixed assets.

    Utilization of internal reserves.

    Management with inventory turnover.

    Improving utilization rate of production facilities.

    Returns to shareholders and investment in human capital.

Cash allocation

Enhancing IR activities

We will continue to proactively communicate IR-related information by updating the content of the Integrated Report and our website regarding our sustainability activities.
Also, by increasing opportunities to communicate with shareholders and investors, such as IR interviews and company information briefings, we aim to gain greater understanding of our Group and ensure transparency.

  • Enhancing communication through IR activities

    • Increase the number of briefings for individual and institutional investors.
    • Upgrade disclosure materials.
    • Support for disclosure in English
    • Actively communicate information using websites and social media.
    • Increase recognition through PR activities.

  • Opportunities for dialogue with shareholders and investors

    • Financial results briefings for institutional investors and analysts
    • Small meetings
    • One-on-one meetings
      The number of sessions increased about three times that of 2019.
    • Briefings for individual investors

Returns to shareholders

We believe that returning profits to shareholders is an important management issue.
We will continue to ensure stable dividend payment and properly allocate the surplus, taking into consideration the trends in business performance.

Policy on shareholder returns

  • Stable shareholder returns

    • Dividends are basically paid twice a year, as interim and year-end dividends.
    • Except in unforeseen circumstances, such as a sudden deterioration in the business environment, dividends will be maintained at a minimum of 70 yen per share.

  • Continuous expansion of returns

    • The payout ratio will be raised from 33% to 38%. We aim at an annual dividend of 140 yen for FY2027.
    • We will continue to offer a shareholder special benefit plan that includes our own products.

4. Materiality

We identified our materiality based on the issues in the Medium- to Long-term Management Targets, which were derived from international standards regarding social responsibilities and sustainability, and through interviews with and surveys on stakeholders both inside and outside the Company.

Field Materiality(Key Issues) Themes
Value creation/
Revenue opportunities		 Improve the social value of the SUMINOE brand through innovation.
Provision of valuable products and services		 Pursuit of design, texture and functionality to provide a comfortable environment in all kinds of spaces
Inheritance and development of traditions and techniques
Development, manufacture and sales of environmentally friendly products
E
(Environment)		 Under our fundamental development philosophy "KKR+A(Kenko [Health], Kankyo [Environment], Recycling and Amenity)" and "Environmental Declarallon," we will promote the concept of "harmony with the earth."
Preservation of the global environment		 Response to climate change issues
Energy-saving and highly efficient production
Efficient use of resources/reduction of waste
Reinforcement of the environmental management system
Biodiversity conservation
S
(Society)		 Respect for human rights and diversity & inclusion
Human resource development and utilization
Penetration of the Group's philosophy, and creation of rewarding working environment
Occupational safety and health/Health and productivity management
Work style reform/work-life balance
Product safety and quality management
Supply chain management
G
(Governance)		 Build a foundation of corporate trust by ensuring transparency.
Enhance governance.		 Improvement of corporate governance
Thorough compliance and prevention of unfair competition and corruption
Reinforcement of risk management and promotion of business continuity planning (BCP)
Reinforcement of information security
Appropriate information disclosure and stakeholder engagement
“Notice Regarding Formulation of the Medium-to Long-term Management Targets for the Latter Three-Year” announced on July 12, 2024.
“Notice Regarding Formulation of Medium- to Long-term Management Targets” announced on July 13, 2021.

Note on forward-looking statements
The forward-looking statements in this document regarding the Company’s future plans, strategies, etc. are based on a reasonable judgment that is predictable at this point, and actual results may differ due to various factors in the future.