Bridge Report:（5290）Vertex Fiscal Year Ended March 2024

President Akihide Tsuchiya	Vertex Corporation (5290)

Company Information

Stock Information

* Stock price is as of closing on May 22, 2024. The number of shares issued is the number of outstanding shares as of the end of FY3/24, excluding treasury shares. The figures are rounded.
* A 3-for-1 stock split was executed on July 1, 2022. This stock split was taken into account, when calculating dividend yield, PBR and PER.
*ROE and BPS are the actual results for FY 3/24, and EPS and DPS are forecasts for FY 3/25.

Earnings Trends

*Unit: Million yen. The estimated values were provided by the company. Net income is the net income attributable to owners of the parent company. The same applies below.
*A 3-for-1 stock split was executed on July 1, 2022. DPS and EPS are recalculated retroactively back to FY 3/21. The dividend for FY 3/21 includes a commemorative dividend of 10.00 yen/share (30 yen before the 3-for-1 stock split).

This Bridge Report overviews the business performance for the fiscal Year Ended March 2024 and other information for Vertex Corporation.

Table of Contents

Key Points
1. Company Overview
2. Fiscal Year Ended March 2024 Earnings Results
3. Fiscal Year Ending March 2025 Earnings Forecasts
4. Review of the Second Mid-Term Management Plan
5. Conclusions
<Reference 1: Regarding the Third Mid-Term Management Plan>
<Reference 2: Regarding Corporate Governance>

Key Points

• In the fiscal year ended March 2024, sales decreased 5.8% year on year to 36,833 million yen, while operating income grew 3.0% year on year to 5,727 million yen. Sales decreased in the concrete business, the disaster prevention business, and the pile business, except the other business, so total sales fell below the company’s forecast revised on February 8. On the other hand, all kinds of profits exceeded the revised forecasts, thanks to the effects of the rise in selling prices. The sales and profit of the other business increased year on year, due to the acquisition of PROFLEX CO., LTD. as a 100% subsidiary on October 4, 2022.

   

• For the fiscal year ending March 2025, the company forecasts that sales will grow 8.6% year on year to 40 billion yen and operating income will rise 4.8% year on year to 6 billion yen. By enhancing the sale of existing and new products and adding value to selected products, they aim to increase sales and profit from the previous fiscal year. For dividends, the company plans to pay a common dividend of 50.00 yen/share, up 10.00 yen/share from the previous fiscal year. The expected payout ratio is 31.1%. They will aim to achieve a total payout ratio of 50% or higher, by increasing the dividend amount stably and continuously while targeting a dividend payout ratio of 30%.

   

• The company formulated the third medium-term management plan for the three years from the fiscal year ending March 2025 to the fiscal year ending March 2027. As the first step to realize VERTEX Vision 2034, they will carry out investment for growth to strengthen the business portfolio, and engage in the regrowth of core businesses with the improved business foundation and the development of new business as a long-term growth driver. We would like to pay attention to the progress of the third medium-term management plan, to see the outcomes of the measures set in the third medium-term management plan, which has been started.

   

1. Company Overview

The core business of the company is to manufacture and sell a variety of precast concrete, which supports our daily lives.

(1) Company History

In 2014, three companies, NIPPON ZENITH PIPE CO., LTD.,　HANEX CO., LTD. (former name: HANEDA HUME PIPE CO., LTD.), and HANEDA CONCRETE INDUSTRIAL CO., LTD., merged into HANEDA ZENITH CO., LTD., which was then renamed HANEDA ZENITH HOLDINGS CO., LTD.

On October 1, 2018, HANEDA ZENITH HOLDINGS CO., LTD. and HOKUKON CO., LTD. (based in Fukui Prefecture) established Vertex Corporation through joint stock transfer (which made HANEDA ZENITH HOLDINGS CO., LTD. and HOKUKON CO., LTD. wholly owned subsidiaries).
The companies set up a new business group.

In April 2019, HANEDA ZENITH CO., LTD., as the surviving company, absorbed HANEDA ZENITH HOLDINGS CO., LTD. (a merged company).

On April 1, 2021, Vertex Co., Ltd. was born through absorption-type merger carried out by HANEDA ZENITH CO., LTD. as the surviving company and HOKUKON CO., LTD. as the merged company, which were the core business companies affiliated with Vertex Corporation.

Vertex Co., Ltd. aims to achieve sales and profit growth by increasing its market share and boosting profitability in the mature markets of concrete and piles, and the growing market of disaster prevention through a multitude of approaches, including creation of business synergy and enhancement of business efficiency.

(2) Variation in performance

Even after the management integration, they have engaged in the development of the management base and profit generation, so the company keeps growing while securing the highest level of profitability in this industry. From the fiscal year ending March 2025, they will aim to enter the next growth phase.

*ZENITH HANEDA HOLDINGS in FY3/15-FY3/18, Vertex Corporation in FY3/19

(3) Long-term Vision

◎Purpose
With the company’s “one-of-a-kind technology” and “unique ideas,” it aims to provide new forms of security for the future of people around the world.

The corporate group has been creating new value and bringing peace of mind while facing changes in the natural environment and society. As a company that will continue to grow, it will strive to meet difficult needs with its one-of-a-kind technology and unique ideas and contribute to the realization of a sustainable society where people can live with peace of mind no matter where they live. The corporate group will continue to take on the challenge of creating new forms of security for the future of people around the world.

◎VERTEX Vision 2034
The company has formulated the VERTEX Vision 2034 as well as its purpose to achieve in 10 years.
The first medium-term management plan (FY 3/2020-FY 3/2021) was a period to solidify the business and management foundations following the business integration, while the second medium-term management plan (FY 3/2022-FY 3/2024) was a period to strengthen the business and management foundations to ensure sustainable growth. In the subsequent third medium-term management plan (FY 3/2025-FY 3/2027), the company will focus on (1) strengthening the business portfolio, (2) promoting sustainability-oriented management, and (3) strengthening human capital, R&D, and digital transformation. After implementing the subsequent fourth and fifth medium-term management plans (FY 3/2028-FY 3/2033), the company aims to achieve sales of 100 billion yen and an operating income of 15 billion yen by 2034.

[The ideal state the company wants to realize in 10 years]
The company has also outlined the issues it must address in the next 10 years, such as the declining working population, aging infrastructure, global warming, and intensifying natural disasters, and has defined “the ideal sate it wants to realize in 10 years” as a countermeasure against these issues.

[Long-term business portfolio concept]The company will work to strengthen its business portfolio in order to achieve VERTEX Vision 2034.

(Taken from the reference material of the company)

(4) Market Environment

The following are the points to keep in mind for understanding the company’s business environment:

◎Demand for investment in disaster prevention and mitigation remains strong.
Public works-related expenditures, which are important in the construction industry, have remained stable for the past 10 years. In particular, a certain amount is allocated each year for infrastructure repairs and public works. In addition, as the proportion of existing infrastructure that is over 50 years old is projected to increase, it is expected that high levels of demand for investment in disaster prevention and mitigation will continue. In this environment, the company recognizes the importance of enriching its track record and increasing the market share of its products in line with its business model.

(Ratio of major social infrastructure that was constructed more than 50 years ago)

(Taken from the reference material of the company)

◎Workstyle reform and labor shortages on construction sites: Expansion of precast construction methods
Precast concrete is a concrete product that is manufactured in advance in a factory. It is highly efficient in terms of workability and is expected to be a solution to the labor shortage and rising labor costs on construction sites. On the other hand, casting concrete in-situ is a construction method in which reinforcing bars are assembled at the construction site and ready-mixed concrete is poured. Precast concrete has the advantage of being about 1/2 to 1/5 as efficient in terms of on-site work efficiency as compared to casting concrete in-situ, but the disadvantage is that it must be transported from a factory, which generates restrictions on transport routes and can result in high transport costs depending on the distance. On the other hand, casting in-situ can be flexibly adopted for special and large structures without the restrictions of transport routes, but it also has the disadvantages of being inferior to precast in terms of work efficiency and its quality varies depending on weather conditions and workers. Currently, the majority of construction work is done by casting in-situ due to its economic advantage in terms of direct construction costs, and precast construction accounts for only 13% of the total. However, with the shortage of skilled workers and the need to improve construction efficiency in line with the reform of work styles at construction sites, it is expected that the use of precast construction will become more common in the long term than it is now. If the usage ratio reaches the same level as overseas, the ratio of precast construction methods may exceed 50% in the medium/long term.

（５）Business Details

The company has four reporting segments, which are Concrete Business, Pile Business, Disaster Prevention Business, and Other Business. The “Disaster Prevention Business” will be renamed “Slope Disaster Prevention Business” in the fiscal year ending March 2025.

The following is a table showing the group companies operating each business segment:

【Concrete Business】
The company manufactures and sells precast concrete. This is the company's main business area, accounting for about 70% of total sales and 67% of total operating income. In particular, the company's mainstay products are those for sewage and flood control, and the company boasts the industry's top performance in this area.
(Each photo is taken from the reference material of the company.)

Name of Business	Overview and Main Products
Products for sewerage and flood control[Core business]	Precast concrete for countermeasures against natural disasters such as inundation and flooding and for the effective use of water resources.
Road-related products [Core business]	Precast concrete used for new roads and the repairs of expressways, etc.
Infrastructure Maintenance[Business in the development stage]	Repair and reinforcement of concrete structures that have been in use for many years.
Railway-related products [Business in the development stage]	Precast concrete for speedy construction without disrupting operations.
Defense-related products [Business in the development stage]	Shelters and other defense-related products.

【Pile Business】
The company is developing a business that produces concrete piles used for building foundations.

[Reconstruction business]

Manufacturing and sale of concrete piles for construction foundations and pile driving.

[Slope Disaster Prevention Business]
The company manufactures and sells products for slope disaster prevention.

[Core business]

A wide lineup of construction methods and products developed in-house through performance verification tests for mountain roads and residential areas where disasters such as falling rocks and landslides are anticipated.

【Other Business】
Other businesses include hydraulic hose maintenance and ceramics, which are handled by a group of subsidiaries.

[Business in the development stage]

(6) Characteristics and Strength

◎Characteristics of the Business Model
Although general contractors are the company's direct customers, this model allows the company to market its products by offering proposals and support to design consultants and clients (government agencies and developers) from the early stages of a project. It is also a model that allows the company to introduce new products to the market ahead of competitors as a measure to address social issues, build a track record as a leading manufacturer, cultivate the market, establish a brand in the field, and increase sales.

(Taken from the reference material of the company)

◎Strengths
(1) Technical and development capabilities
The company has realized an advanced capability of giving proposals and competitiveness by systematically collaborating with all staff members, including sales and engineering staff, based on the technical and development capabilities shown by the number of patents acquired and the number of products ranked as No. 1 brand products.

(Taken from the reference material of the company)

(2) Highest profit margin in the industryBy combining technical, development, sales and organizational capabilities, the company has achieved the highest profit margin in the industry.

(Taken from the reference material of the company)

(7) Shareholder Return Policy

The cash generated will be appropriately allocated for further growth and shareholder returns. In the current medium-term management plan, the company plans to continue increasing shareholder returns, with an eye on stable and continuous dividend increases, targeting a dividend payout ratio of 30%, and a policy of flexibly achieving a total return ratio of 50% or higher.

(8) Management that takes capital costs into consideration

The company considers its current cost of capital to be around 8% and continues to aim for long-term ROE improvement and curb capital costs in the long term.

In addition, during the period of the medium-term management plan, the company will be focusing on enhancing its IR activities, such as expanding English-support and disclosure, and will aim to improve corporate value through dialogue with shareholders and investors.

(Taken from the reference material of the company)

2. Fiscal Year Ended March 2024 Earnings Results

(1) Overview of the consolidated results

*The figures include those calculated by Investment Bridge Co., Ltd. as reference values, and may differ from actual values (the same applies hereinafter).
*Unit: Million yen.

Sales and operating income grew 5.8% and 3.0%, respectively, year on year.
The sales in the fiscal year ended March 2024 were 36,833 million yen, down 5.8% year on year. Sales decreased in the concrete business, the disaster prevention business, and the pile business, except the other business, so total sales fell below the company’s forecast revised on February 8.
Operating income grew 3.0% year on year to 5,727 million yen. All kinds of profits exceeded the revised forecasts, thanks to the effects of the rise in selling prices. The sales and profit of the other business increased year on year, due to the acquisition of PROFLEX CO., LTD. as a 100% subsidiary on October 4, 2022. Gross profit margin rose 2.8 points year on year to 33.0%.
Due to the augmentation of personnel expenses, etc., the ratio of SGA increased 1.5 points from the previous fiscal year, but operating income margin grew 1.3 points to 15.5%. In addition, the growth rate of ordinary income fell below that of operating income, and net income declined slightly, due to negative factors, such as the compensation for damage amounting to 54 million yen, which was posted as non-operating expenses, and the loss on retirement of fixed assets amounting to 76 million yen and the impairment loss of 86 million yen, which were posted as extraordinary losses.

Results in the second half

In the second half of the fiscal year ended March 2024, sales and profit declined year on year, but operating income margin rose. Sales, operating income, and operating income margin have been stably high since the second half of the fiscal year ended March 2020.

(2) Trend of each segment

* Unit: million yen. The composition ratio of operating income means the ratio of operating income to sales.

*Prepared by Investment Bridge Inc. based on disclosed material.

◎ Concrete Business (5.4% YoY decrease in sales, and 0.3% YoY increase in profit)
Shipment volume fell below the initial forecast due to the delay in the completion of transactions, which was first expected to be seen in the fiscal year ended March 2024, until the next fiscal year or later, so sales declined 5.4% year on year to 25,726 million yen, but the profit in this segment rose 0.3% year on year to 4,899 million yen, as the company accelerated the shift to high value-added products. In addition, operating income margin increased 1.1 points year on year to 19.0%.
In the fiscal year ended March 2024, the unit price of products in the concrete business increased to 159% compared to the unit price in the fiscal year ended March 2020, which was 100%. This represented an increase of 23 points from the 136% recorded in the fiscal year ended March 2023. In addition, in the fiscal year ended March 2024, sales ratio of high-value-added products such as rainwater storage tanks, S-holes, SJ-BOX, and special products (track slabs), which the company is currently improving their sales, increased to 68% of the total concrete business. (66% in the previous fiscal year).

The effect of the revision to selling prices (2,528 million yen) is composed of the effect for value-added products (1,708 million yen) and the effect for general-purpose products (820 million yen). Unit selling price rose 17.2% from the previous fiscal year. The increase rates of unit prices of manholes, rainwater storage tanks, etc. rose. In addition, the decrease in sales volume (1,598 million yen) is attributable to the decrease of sales volume of box culverts and general-purpose goods due to the delay in construction in multiple large-scale projects.

◎ Pile Business (Sales declined 31.2% year on year and profit decreased 69.0% year on year)
The company made efforts to receive orders by streamlining business operations and utilizing their strengths while focusing on specific regions and transactions, but the demand in target regions was sluggish, so sales declined 31.2% year on year to 2,783 million yen. The profit in this segment dropped 69.0% year on year to 81 million yen, due to the decline in sales and the skyrocketing of raw material prices. In addition, operating income margin declined 3.6 points to 2.9%.

◎ Disaster Prevention Business (2.9% YoY decrease in sales, and 22.0% YoY increase in profit)
To cope with the storms and floods, which are becoming more serious, the Japanese government is proceeding with “The Five-Year Acceleration Plan for Disaster Prevention, Disaster Mitigation, and Building National Resilience,” so there is an upward trend. However, in the fiscal year ended March 2024, sales decreased 2.9% year on year to 4,765 million yen, as some transactions were delayed compared with the initial forecast. The profit in this segment rose 22.0% year on year to 1,557 million yen, thanks to the improvement in production efficiency through the decentralization of production bases in addition to the hike of selling prices since the previous year in response to the skyrocketing of raw material prices. In addition, operating income margin rose 6.7 points year on year to 32.7%.

◎ Others (Sales increased 21.1% year on year, and profit increased 44.8% year on year)
Thanks to the effects of acquisition of PROFLEX CO., LTD. as a 100% subsidiary on October 4, 2022, sales grew 21.1% year on year to 3,557 million yen and profit rose 44.8% year on year to 788 million yen. Operating income margin rose 3.7 points year on year to 22.2%.

(3) Financial position and cash flows

Main Balance Sheet

*Unit: Million yen. Trade receivables include electronically recorded ones, while trade payables include electronically recorded ones.
*Interest-bearing debt include lease obligations.

*Prepared by Investment Bridge Inc. based on disclosed material.

The total assets as of the end of March 2024 stood at 52,024 million yen, up 2,181 million yen from the end of the previous fiscal year. Regarding assets, cash & deposits, accounts receivable, investment securities, etc. contributed to the increase of assets, while inventory assets, goodwill, deferred tax assets, etc. decreased assets. Regarding liabilities and net assets, the major factors in increasing them were accounts payable, income taxes payable, retained earnings due to the increase in net income attributable to shareholders of the parent company, etc., while the major factors in decreasing them were short-term and long-term debts, liabilities for retirement benefits, the acquisition of treasury shares, etc. The capital-to-asset ratio as of the end of March 2024 stood at 64.5%, up 1.6 points from the end of the previous fiscal year.

Cash Flow

*Unit: Million yen.

*Prepared by Investment Bridge Inc. based on disclosed material.

In terms of cash flows, the cash inflow from operating activities increased due to the shrinkage of the decrease in liabilities for retirement benefits, the augmentation of accounts payable, the decline in payment of income taxes, etc. The cash outflow from investing activities shrank due to the decrease in expenditure for acquiring the shares of subsidiaries resulting in the change in the scope of consolidation, so the surplus of free cash flow expanded. On the other hand, the cash outflow from financing activities augmented due to the decreases in short-term and long-term debts, etc. As a result, the cash position at the end of the fiscal year was up 26.5% from the previous fiscal year.

(4) Major Investments (unit: million yen)

The company invested in the equipment for producing formwork, machinery, and molds for manufacturing products and equipment for producing ceramics.

(5) Shareholder return

◎ Dividend
The company plans to pay a dividend of 40 yen/share, and payout ratio is expected to be 27.8%.

◎To Acquire Treasury Shares
The company continuously purchased treasury shares, in order to enhance shareholder returns, improve capital efficiency, and implement a flexible capital policy in response to changes in the business environment.

3. Fiscal Year Ending March 2025 Earnings Forecasts

(1) Earnings Forecasts

*Unit: Million yen.

Sales are projected to increase 8.6% year on year, and operating income 4.8% year on year.
On April 1, 2024, the company set the purpose of “offering new forms of peace of mind to the future of people around the world with ‘one-of-a-kind technology’ and ‘unique ideas.” In order to attain this purpose, the company formulated “the long-term vision VERTEX Vision 2034” to achieve in 10 years by 2034 and “the third medium-term management plan” for the period from 2024 to 2026. By implementing the management strategy set in the “the third medium-term management plan” without fail, they aim to ensure the peace of mind and improve corporate value further.
For the fiscal year ending March 2025, the company forecasts that sales will grow 8.6% year on year to 40 billion yen and operating income will rise 4.8% year on year to 6 billion yen. By enhancing the sale of existing and new products and adding value to selected products, they aim to increase sales and profit from the previous fiscal year, amid the harsh business environment, including the skyrocketing of prices of materials and the augmentation of distribution costs. Operating income margin is projected to decline 0.5 points year on year to 15.0%.
For dividends, the company plans to pay a common dividend of 50.00 yen/share, up 10.00 yen/share from the previous fiscal year. The expected payout ratio is 31.1%. They will aim to achieve a total payout ratio of 50% or higher, by increasing the dividend amount stably and continuously while targeting a dividend payout ratio of 30%.

(2) Trend in each segment

* Unit: million yen. The composition ratio of operating income means the ratio of operating income to sales.
* The disaster prevention business was renamed the slope disaster prevention business in the fiscal year ending March 2025.

An increase in sales and profit in the concrete business is expected to contribute to year-on-year sales and profit growth for the entire company. On the other hand, the slope disaster prevention business is expected to see an increase in sales and a decrease in profit from the previous fiscal year.

(3) Earnings forecast for the first half of the fiscal year

The performance of the company tends to be better in the second half of each fiscal year. For the first half, the company conservatively expects that sales will grow year on year, but operating income will decline and operating income margin will drop year on year.

4. Review of the Second Mid-term Management Plan

（１） Numerical results

The sales and profit in the final fiscal year (ended March 2024) of the plan fell below the initial targets, due to the stagnation of construction, which is difficult for the company to control. For the three years of the plan, the company achieved the goals as a whole. The company considers that their performance is healthy from the viewpoints of the number of transactions and the revenue from each transaction. In addition, operating income margin and ROE exceeded the forecasts thanks to the improvement in profitability.

*Unit: 100 million yen.

(2) Evaluation of the basic policy

The company considers that they implement respective measures set in the second medium-term management plan as planned.

5. Conclusions

The sales and profit in the final fiscal year of the second medium-term fell below the initial targets, due to the stagnation of construction, which is difficult for the company to control. The goals for the three years have been attained as a whole. This can be said to be satisfactory. The company considers that it has completed the three priority measures: (1) to pursue the core business to promote organic growth, (2) to nurture growing businesses and increase new earning opportunities, and (3) to develop a management base for enabling sustainable growth as planned. Furthermore, the company strove to improve profitability by raising the unit selling prices of products and increasing the ratio of high value-added products, so the ROE and operating income margin in the final fiscal year of the plan exceeded the initial forecasts. The second medium-term management plan bore much fruit. Then, the company formulated the third medium-term management plan for the three years from the fiscal year ending March 2025 to the fiscal year ending March 2027. As the first step for realizing VERTEX Vision 2034, the company will conduct investment for strengthening the business portfolio, and strive to regrow the core business with an improved business foundation and nurture a new business as a long-term growth driver. In the concrete business, which is positioned as their core business, they will enhance the sale of existing and new products, add more value to selected products, and streamline operations by consolidating and closing some concrete factories. In the slope disaster prevention business, they will continue the sales promotion of products, conduct R&D, and add value to products for measures against landslides and rockfalls. Furthermore, they will invest in the growing businesses of infrastructure maintenance, railway, defense, and hydraulic hose maintenance. In the infrastructure maintenance business, they will concentrate on the businesses related to fire cisterns, for which the company boasts the largest share in the market of installation of fire cisterns, and farm irrigation, to enhance sale. In the railway business, they will cement the cooperation with general contractors and railway business operators, and develop products to meet customer needs by utilizing new materials owned by the company. In the hydraulic hose maintenance business, they will apply the business models that were successful in the Kanto region to other regions. The company has attained their goals as they promised, and we are looking forward to seeing how their efforts will pay off. The progress of the third medium-term management plan, which has been started, is noteworthy.
In the period of the third medium-term management plan, the company plans to conduct M&A actively within the budget of 10 to 15 billion yen. They have no choice but to carry out M&A, in order to expand their business with more growth potential. The possible target companies of M&A are enterprises that could strengthen the functions of their existing business and expand the business in peripheral areas, enterprises that possess products and services for their growing business, and so on. We would like to keep an eye on the progress of M&A with expectation.

<Reference 1: Regarding the Third Mid-Term Management Plan>

The company has formulated its third medium-term management plan covering the three-year period from the fiscal year ending March 2025 to the fiscal year ending March 2027.
As a plan for the first fiscal year based on VERTEX Vision 2034, the company plans to achieve 43 billion in organic sales and 6.5 billion in operating income. As the first step toward achieving 100 billion in sales and 15 billion in operating income in the future, the company will make growth investments to strengthen its business portfolio and work to regrow its core businesses, and nurture new businesses that will serve as a long-term growth driver.

【Numerical goals】
(7) Numerical goals (Values as of the announcement of the plan)

*Unit: 100 million yen.

[Priority Items]

◎Measures for core businesses
[Concrete Business]
The company will further strengthen its core business, which is the concrete business, in the area of rainwater flood prevention, where the market environment is healthy. The product portfolio has been established through the previous medium-term business plan, and the company will work to increase sales and profit by strengthening sales and adding more value to its products.

(Main efforts)
◆Strengthening the sales of existing and new products
<New products in the concrete business>

Vortex valve		Spiral hole
A device that controls the flow rate from the storage tank according to the water level without power, improving the storage capacity of rainwater harvesting facilities by up to 20% compared to conventional methods.		A manhole that allows rainwater to fall in a spiral along the inner wall, avoiding noise and vibration and allowing it to flow smoothly into the outflow pipe.

◆Further adding value to selected products
◆Improving efficiency through consolidation and closure of concrete plants
The company has begun consolidating or closing factories and bases owned through past business integrations. In light of the problem with logistics in 2024 and market trends, the company will work to respecify the range of transportation from each plant and improve efficiency.

[Slope Disaster Prevention Business]
In recent years, awareness of disaster prevention and mitigation and national resilience has been on the rise as a measure against natural disasters that have become increasingly severe. In addition, more measures are to be taken to strengthen national resilience. In this environment, the company will continue to work on expanding sales of products for measures against landslides and rockfalls, while engaging in further research and development and value-adding activities.

<Main Products>

Loop Fence Landslide prevention, debris flow and driftwood prevention
◆High maintainability ◆Flexible placement by adjusting cable mounting position ◆To withstand soil, falling rocks, and snow accumulation

◎Measures for Growing Businesses
The company will promote investments in the infrastructure, railroad, defense, and hydraulic hose maintenance in the concrete business as domains to be focused on in the future. By the end of the third medium-term management plan, the company aims to achieve total sales of approximately 8 billion yen.

◎M&A Strategy
In addition to organic growth, the company aims to strengthen and expand its business portfolio through M&A.

[Envisioned growth in existing businesses and growth through M&A]
During the period of the third medium-term management plan, while there is great potential for sales growth through M&A, it is expected that profit will mainly come from organic growth (no profit contribution is expected in the initial stage of M&A, but improvements are expected during the PMI phase).

(Taken from the reference material of the company)

◎Financial Strategy
The company has formulated a cash allocation plan for the current medium-term plan with the aim of achieving a balance sheet focused on capital efficiency.

(Taken from the reference material of the company)

[Details of investments for growth and upgrade]
In addition to the usual R&D and capital investments, the company has set an investment budget with an eye on “the ideal state it wants to achieve in 10 years.”

<Reference2: Regarding Corporate Governance>

◎ Organization Type and the Composition of Directors and Auditors

◎ Corporate Governance Report
Last updated in February 8, 2024
<Basic policy>
Our company’s basic policy regarding corporate governance is to strive to play active roles in management of the company group, and to enhance its corporate governance by establishing strategies and directions for the group, as well as to provide guidance and advice provided for the group companies, based on the recognition of the significance in establishing a corporate governance structure that brings efficient decision-making process, while securing transparency and soundness of the business.

<Reasons for Non-compliance with the Principles of the Corporate Governance Code (Excerpts)>

<Disclosure Based on the Principles of the Corporate Governance Code (Excerpts)>