Fujibo Holdings Co., Ltd. <3104> Mid-term Management Plan.

Since 2006, the company has developed and run five mid-term management plans to address management challenges as they arise. Following the mid-term management plan "Transformation 06-10," the key management theme transitioned from "Breakthrough," "Advancement," and "Acceleration" to "Enhancement," reinforcing the corporate structure through the restructuring of the business portfolio. In the fiscal year ending March 2022, the net income attributable to the parent company's shareholders exceeded 4.4 billion yen, marking a record high. The mid-term management plan "Enhancement 21-25," which started in 2021, aims to improve profitability by transforming into a profitable business and strengthening "earning power," targeting an operating profit of 10 billion yen in the final year.

1. Overview of the Mid-term Management Plan "Enhancement 21-25."

The first half of the mid-term management plan "Enhancement 21-25," which started in April 2021 and is now in its fourth year, is positioned as a transformation to a high-profit structure and a time for sowing seeds (2021-2023). The second half of the mid-term management plan (2024-2025) starting in 2024 focuses on achieving the desired state for 2025, with the urgent challenge being to make solid preparations to attain “discontinuous growth.” The key point is the timely and appropriate execution of "capital investment" for further expansion of the core business dealing with abrasives and chemical industrial products. In the case of large capital investments, there is a two-year time lag from order placement to operation, making early decision-making critical, which should be closely monitored going forward.

Currently, the semiconductor industry is experiencing volatility due to the silicon cycle, but this is a cyclical element, and structurally high growth is expected to continue, so the company will also proactively invest in equipment. To expand the business, it is essential to strengthen the hard aspects such as capital investments, M&A, and alliances, but balancing these with the soft aspects is also critical. Therefore, swiftly securing excellent "human resources" (especially R&D staff) and creating an environment where their abilities can be fully exhibited is an urgent challenge.

2. Management Objectives and Planned Figures.

The company aims to transition to "profitable business" as the overall policy of the mid-term management plan "Enhancement 21-25," improving profitability ("Social contribution with profit") and setting a management target of achieving an operating profit of 10 billion yen (operating margin of 16.7%) for the fiscal year ending March 2026. This is a challenging target, approximately double the operating profit of 5.2 billion yen for the fiscal year ended March 2021, requiring "discontinuous business expansion" during the plan's period. To achieve this goal, the revenue target for the fiscal year ending March 2026 is set at 60 billion yen, 1.6 times compared to the fiscal year ending March 2021. As previously mentioned, the key to realizing these revenue and profit targets is the timely and appropriate execution of capital investments or the success of obtaining external resources that can supplement the company's production capacity (through alliances and M&A).

Due to the semiconductor recession hitting from the second half of the fiscal year ending March 2023 to the first half of the fiscal year ending March 2024, significant profit reductions were seen primarily in the abrasives business, putting a brake on the company's growth potential. Even if semiconductor demand steadily recovers in the second half of the mid-term management plan (2024-2025), achieving the target for fiscal year 2025 (revenue of 60 billion yen, operating profit of 10 billion yen) may be challenging. The company plans to aim for revenue of 60 billion yen and operating profit of 10 billion yen from a mid-term perspective, continuing to invest in the growing abrasives and chemical industrial products business without easing these growth investments.

(Written by: Fisco guest analyst Keiji Shimizu)