ブラザー工業（6448） – The Brother Group Announces Its Medium-Term Business Strategy, CS B2024

May 11, 2022 Brother Industries, Ltd. The Brother Group Announces Its Medium-Term Business Strategy, CS B2024 Brother Industries, Ltd. (President: Ichiro Sasaki) has formulated the Brother Group’s medium-term business strategy, CS B2024 for the period from FY2022 to FY2024. Economic, industrial, and social changes, such as rapid changes in global conditions, have accelerated even more significantly than before since COVID-19 started to spread. The business environment surrounding the Brother Group is expected to continue to change as well. Amid such changes, to continue to fulfill the expectations of stakeholders, we have shaped long-term vision regarding the sort of value intended to provide to customers and to society, and planned business strategies. The Brother Group Vision “At your side 2030” was announced in October 2021 and started from April 2022. It defines the Brother Group’s raison d’être and the values it intends to provide to customers and society leading up to FY2030 as “Our Purpose.” It also details “Our Approach”—which is how the Brother Group intends to provide value to realize “Our Purpose” of “By being ‘At your side,’ we enable people’s productivity and creativity, contribute to society, and help protect the earth.”—and sets out “Our Focus Areas.” CS B2024, the medium-term business strategy, was formulated with a view of achieving “At your side 2030,” and identifying themes to be undertaken in the first three years backcasted from it. At the same time, the Brother Group has identified five materialities, which are priority social issues to be addressed to contribute to society and help protect the earth, and also established sustainability targets related to the materialities. ■Outline of CS B2024Based on “Take off towards our new future” in CS B2024, the Brother Group will undertake businessportfolio transformation—including expansions in the industrial area and transformation in the printingarea—as well as management foundation transformation for a sustainable future.Theme: Take off towards our new future ●Four priority themes(1) Towards expansion in the industrial area✓Achieve significant growth in industrial equipment businessWe will contribute to enhancing competitiveness of manufacturing for customers and sustainability—such as reduction of CO2 emissions—by improving productivity and environmental performance toachieve significant growth in the industrial equipment business.✓Accelerate growth in Domino businessWe will accelerate growth by enhancing product strength in the digital printing area and strengtheningrelationships with customers in the coding and marking area, and at the same time, enhance industrialinkjet technology foundation to secure long-term competitiveness.(2) Towards transformation in the printing area✓Accelerate P&S business model transformationWe will strive to further strengthen the profitability of existing business even amid the harsh marketenvironment, and at the same time, promote transformation for the future, including accelerating the shiftto a business model that connects with customers, such as a contract-based business model, andexpanding commercial & industrial labeling business.(3) Towards the business portfolio of the future✓Create new businesses that help to address materialitiesWe will search widely for business opportunities that enable working people’s productivity and creativityand help protect the earth by further evolving Brother’s strengths.✓Evolving printing technology with inkjet at its core and expanding its range of applicationsWe will advance the evolution of printing technology with inkjet at its core and expand its range ofapplications in both the industrial and consumer areas.(4) Management foundation transformation for a sustainable future✓Undertake environmental efforts towards carbon neutralityWe will promote efforts towards achieving targets in reduction of CO2 emissions, resource circulation,and biodiversity conservation stated in the Brother Group Environmental Vision 2050. In particular, wewill undertake reduction of CO2 emissions through various activities to achieve carbon neutrality in theBrother Group’s business activities by 2050.✓Enhance and expand connections with customersWe will connect with even more customers and continuously provide more value than ever before ineach of our businesses. Furthermore, we will use data obtained through connections with customers tocreate even more customer value and seek business model transformation. In addition, we will achievestable product supply by building resilient supply chains.✓Foundation for all transformations – Evolve Brother’s unique management system Brother Value ChainManagement (BVCM) *1, encourage employees to take on challenges, and improve employeeengagementof the Brother Group.As a cornerstone of transformation, we will continuously evolve BVCM, encourage employees to takeon challenges, and improve employee engagement to continue to improve the productivity and creativity■Materiality and Sustainability targetsThe Brother Group has identified five materialities in order to “contribute to society and help protect the earth” as we set as “Our Purpose” in “At your side 2030.” We have set sustainability targets to address these materialities and will promote company-wide efforts to address them as a management issue. Materiality Targets for FY2024 – Supporting people’svalue creationContribute to society – Realizing a diverse andactive society- In the industrial equipment business, secure performanceadvantage of products that contribute towards improvingcustomer productivity and reducing CO2 emissions- In P&S business, build platform to connect directly withcustomers towards improving LTV*2 of customers- Visualize employee engagement at the global level and improveengagement survey scores- Enhance talent development and governance for encouragingthe assignment of local employees to top managementpositions of facilities outside Japan- Strengthen talent pipeline for healthy gender balance inmanagement positions and establish environment for achievingdiverse ways of working*3- Pursuing a responsiblevalue chain- Reducing CO2emissionsProtect the earth – Expand the scope and subjects of the human rights riskassessment on suppliers- Attain RBA*4 Gold certification for three Group manufacturingfacilities- [Scope 1 and 2*5] Achieve 47% reduction from the FY2015 level(9% reduction during the three-year period from FY2022 toFY2024)Ref.) FY2030 Targets: 65% reduction from the FY2015 level- [Scope 3*5] Take measures to reduce 150,000 tons through owneffortRef.) FY2030 Targets: 30% reduction from the FY2015 level- Achieve ratio of virgin materials used in products of 81% or less- Circulating resourcesRef.) FY2030 Targets: below 65%■Financial policyThe Brother Group will continuously improve shareholder value by achieving both business growth and sustainability goals. While strengthening shareholder returns based on a stable and continuous dividend policy, we will aggressively invest for the future, utilizing operating cash flow generated from our business as well as interest-bearing debt. ✓Prior investments for the futureThe Brother Group has set a total of 150 billion yen for prior investments aimed at transforming ourbusiness portfolio and realizing the transformation of our management foundation toward a sustainablefuture. Using this investment quota, we will make strategic investments such as strengthening variousfunctions and bases related to the industrial area and inkjet technology, as well as M&A, towards“business portfolio transformation.” In addition, we will promote environmental efforts, strengthen oursupply chain towards “management foundation transformation for a sustainable future.”Theme Main Items Amount – Towards expansion inthe industrial areain the industrial area- Reinforce production capacity in- Reinforce sales and service facilitiesBusiness portfolio transformation – Towards transformationin the printing area the machinery/FA area- Expand inkjet development and50 billion yen 30 billion yen – Towards the businessportfolio of the futuremanufacturing facilities- Strategic investments for M&A, etc.- Factory investment for localproduction for local consumption ofproducts and the realization of acircular economy- Introduction of energy-generationequipment at Group facilitiesfriendly building- Supply-chain resilience (expandfactories, add multiple functions)- DX investments (build platform forrelationships with customers,revamp enterprise system)- Construction of new environmentally70 billion yen Total150 billion yen Management foundation transformation for a sustainable future – Environmental efforts- Enhance and expandconnections withcustomers- Foundation for alltransformations✓Shareholder returnBased on our policy of stable and continuous shareholder returns, we will pay out a minimum annualdividend of 68 yen per share during the period of CS B2024 (with a consolidated payout ratio set at 35%based on the earnings forecast for FY2022), and also consider additional shareholder returns, includingan increase in the dividend level, depending on factors such as business performance. We will also flexiblycarry out repurchase of our own shares.■Financial targetsTowards FY2030, which is the final fiscal year of “At your side 2030,” in FY2024, the Brother Group will aim to achieve 800 billion yen in sales revenue and an operating profit ratio of at least 10%. In addition, while taking into consideration the harsh business environment and investments for the future, we will aim for ROE of 10% or more above capital cost. Exchange rate︓1USD=108.00JPY、1EUR=125.00JPY Sales revenue Operating profit ratio (Profit for the period ratio*)ROE Targets for FY2024 800 billion yen 10% at least (7% at least) 10% at least *Profit for the period attributable to owners of the parent company (assuming a corporate tax rate of 30%)*Regarding the above figures for FY2022:The forecast for FY2022 announced today is based on the assumption that 1USD=122JPY and 1EUR=133JPY. However, in the above “Image of changes in business portfolio,“ we have also applied 1USD=108JPY and 1EUR=125JPY for FY2022 in line with the assumed exchange rate for FY2024 target in order to explain the direction and size of growth in an easy-to-understand manner. The Brother Group will undertake all transformations with even greater speed, aiming to achieve the targets set forth in CS B2024, towards realizing “At your side 2030.” Brother’s unique customer-oriented management system defining the flow of value provision to customersCustomer lifetime value, which is the value to customers and profits generated for companies over the*1 Brother Value Chain Management (BVCM)*2 Life Time Value (LTV)entire usage period of products and services*3 Implemented at Brother Industries, Ltd.*4 Responsible Business Alliance (RBA)A set of standards for the supply chains of the manufacturing industry that ensures that working conditionsare safe, that workers are treated with respect and dignity, and that companies are responsible for theenvironmental impact of their manufacturing processes and procurement.*5 Scope 1, 2, 3business operators).Categories of greenhouse gas emission sources. Scope 1 is direct GHG emissions by business operators,Scope 2 is indirect emissions from the use of electricity, heat, and steam supplied by others, and Scope 3is indirect emissions other than Scope 1 and Scope 2 (emissions by others related to the activities of