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10th Medium-Term Business Plan(Sanyo Global Action 2019)

- Pursue sustainable growth by building a global brand of Sanyo -

Strategy of the 10th Medium-Term Business Plan

Based on our management principle of “Confidence-based Management,” we will firmly establish a strong corporate structure that will enable us to secure stable earnings by executing “Sanyo Factory Renovation” and strengthening our business foundation. In addition, we aim to further pursue technological superiority and to promote "Sanyo Special Steel - the Confident Choice" to a global brand, with the aim of achieving sustainable growth (human resources, technologies, and profitability) even in a challenging environment of intensifying global competition in the special steel industry, and rising raw material and energy prices.

Targeted KPIs

Priority Measures

Establish a strong corporate structure by strengthening the business foundation
(1) Strengthen competitiveness by executing “Sanyo Factory Renovation”
  • Eliminate bottlenecks at No. 2 Bar Mill, etc.
  • Streamline factory logistics and directly link production processes
  • Promote automation and improve efficiency through AI and IoT, etc.

Strengthen cost & delivery competitiveness

(2) Secure stable earnings

i) Steel Products business

  • Absorb the material/energy price hike through cost reductions and sales price increase
  • Capture the growing overseas demand for special steel
  • Improve the sales mix

Achieve stable earnings

ii) Non-steel Products business

  • Establish investment decided in 9th medium-term and capture growth market
    • Formed and Fabricated Materials: Local subsidiaries in Thailand(SSSP) and Mexico(SMM)
    • Special Materials: No.2 Metal Powder Plant
  • Non-Steel Products business sales: 1.5-fold growth vs. FY2016

Improve stability of earnings through expansion

(3) Enhance the management foundation

i) Promote agile, transparent management

  • Firmly establish the executive officer system(June 2017 onwards)
  • Continuously focus on safety initiatives, disaster prevention, environmental conservation and compliance structure

ii) Secure and train human resources

  • Strengthen the regular recruitment program for internationalization and transfer of expertise(2.7-fold increase from the 9th medium-term period)
  • Improve re-hiring scheme and continue to promote diversity management including support for women in the workplace, etc.
  • Implement work style reforms to achieve work-life balance

iii) Enhance shareholder return

  • Set 25% as the lower limit for the consolidated dividend payout ratio (currently 20%)
  • Aim for a consolidated dividend payout ratio of 30% in FY2019
Further pursue technological superiority by enhancing R&D and quality competitiveness
(1) Enhance quality competitiveness, mainly for bearing steel
  • Maintain Sanyo Special Steel’s internal quality superiority based on its core “Premium Cleanliness Steel Manufacturing Technology”
  • Develop external appearance quality through process improvements and a higher level of quality assurance

Aim to become “No. 1 globally in internal quality and external appearance quality”

(2) Promote R&D
  • R&D spending 1.1-fold increase from 9th medium term (4.6 → 5.0 billion yen)
  • Clarify functions of basic research and product development
  • Strengthen medium- and long-term R&D planning functions

Create products with high reliability and new technology rapidly and continually

Promote “Sanyo Special Steel-the Confident Ch Priority Measures oice” to a global brand
(1) Promote global branding measures

Enhance the source of our brand power (QCDD* power)

  • Strengthen the roles of our overseas bases
  • Establish a 6-center structure worldwide for the Formed and Fabricated Materials business
  • Build a global supply chain

Global branding

* Quality (Quality), Cost (cost)・, Delivery (delivery on time) Development (R&D)

(2) Promote initiatives aimed at further improvements in recognition
  • Strengthen the technical planning function and accelerate technical exchanges with customers
  • Enhance communication of information in Japan and overseas
    ... Actively expand PR and IR activities, etc.

Worldwide brand penetration

Investments
Planning for 50 billion yen in 3 years (x1.4 compared to 9th Medium-Term)
  • Strategic investment 25 billion yen/3 years
    ... “Sanyo Factory Renovation”, M&A, etc.
  • General investment 25 billion yen/3 years
    ··· Investment in cost reductions such as energy savings, labor savings, quality, updating of aging facilities, etc.