■Future prospects for Chubu Kohan ＜5461＞
3) Sustainable infrastructure development
We aim to build a foundation where the Group can grow over the long term. We will promote human capital strategies, DX strategies and operational efficiency improvements, strengthening governance/risk management/compliance, efficient balance sheet management, environment/disaster prevention/BCP, subsidiary strategies, etc. The human capital strategy aims to maximize value-added labor productivity by improving employee vitality and work satisfaction. As the five pillars, we set an improved sense of belonging, motivation for growth, mental and physical health, good relationships, and an attractive reward system, and measure and verify the effects of policies through engagement surveys for employees, and aim for continuous improvement. In the DX strategy/work efficiency improvement, based on the expansion of operating hours in factories, in addition to strengthening preventive maintenance of equipment and promoting mechanization/systematization of some operations, we are also promoting labor saving by utilizing AI in office work, and strengthening decarbonization efforts by improving the efficiency of system infrastructure.
Regarding strengthening governance, risk management, and compliance, we will work on reviewing the composition of the board of directors (improvement in the ratio of outside directors, appointment of women), management control by a full-time board of directors, reviewing the composition of the Audit and Supervisory Committee, holding risk and compliance committees (twice a year), strengthening measures against climate change risks and cybersecurity, establishing internal reporting systems, and implementing compliance education for officers and employees. Regarding efficient balance sheet management, we will develop measures that are conscious of fund management and capital investment with an emphasis on profitability, and net asset control by strengthening dividend policies from the viewpoint of capital efficiency against the backdrop of a high equity ratio and self-financing power. Regarding the environment, disaster prevention, and BCP, based on the fact that the company is an “urban steel mill” located in a residential area, we will operate new electric furnaces with excellent soundproofness and implement indoor scrap yards in order to strengthen soundproofing/vibration measures. As countermeasures against the Nankai Trough earthquake risk, earthquake resistance of factory equipment, liquefaction countermeasures at power receiving stations, and remote backup of system data will be implemented.
As a subsidiary strategy, CK Corporation and Meitoku Sangyo, which have a high relationship in steel-related businesses, will be entrusted with missions such as participating in large-scale construction projects at the head office and strengthening their role in the 800,000 ton sales volume system under this mid-term plan. Other companies will also be encouraged to expand profits, strengthen corporate governance, and strengthen human capital initiatives. Note, the main KPIs in this mid-term plan are (1) steel product sales volume: 800,000 tons (thick plate+slab), (2) capital investment amount (strategic investment): 12 billion yen (based on budget acquisition), (3) ROE: 10%, (4) consolidated ordinary income: 15 billion yen, (5) shareholder return: 3.5% DOE, and (6) value-added labor productivity (calculated by (ordinary profit+depreciation and amortization costs+labor costs) ÷ number of employees): 40 million yen (approximately 33 million yen in 2023)). By achieving these KPIs, we aim for a total market value of 100 billion yen during this mid-term accounting period.
(3) Shareholder return measures
In the 21 medium-term management plan, the dividend payout ratio was initially 30%, but from fiscal 2023, the policy was changed to “whichever has a higher dividend ratio of 35% or 60.0 yen/share” from the viewpoint of strengthening shareholder returns and realizing stable dividends. As a result, the annual dividend amount for the fiscal year ending 2024/3 was 91.0 yen per share. In this mid-term plan, we introduced the concept of “DOE” as a policy to respond to requests from shareholders by steering more towards stable dividends and lowering shareholder return levels. This is an index showing how much profit an enterprise has distributed to shareholders' equity. Stable dividends that are not affected by the results of a single year are committed to shareholders, and dividends from the next fiscal year onward also increase as shareholders' capital is accumulated, so shareholders can expect dividend growth along with stable dividends. The expected annual dividend amount based on the earnings forecast for the fiscal year ending 2025/3 is 79.0 yen per share according to conventional rules, but with the introduction of DOE, the dividend amount will increase to 101.0 yen per share, and the dividend ratio will also exceed 44.8% and 40.0%.
(Author: FISCO Analyst Tomokazu Murase)