Mid Term Management Plan “NV2030”

NV2030 Basic Policy

Execute a balanced business strategy of offense and defense

Offense:: Further business expansion in Dental North America and Surgical

Defense:: Addressing intensifying price competition in dental devices, particularly in emerging countries

Executing business strategy: Offence and defense

Offence: Further business expansion

Launch competitive new products and expand the sales network in the Dental business
Develop new products and strengthen the sales structure to achieve growth in the Surgical business
Strengthen OEM and DSO business

Defense: Further cost reduction

Pursue cost reductions through offshoring of development and production functions via REFINE
Enhancing company-wide productivity by leveraging AI and promoting DX

Strengthening the business foundation to support growth

Development & production

Optimize development functions on a global basis
Strengthen global procurement functions
Improve productivity at mother factories “A1” and “M1”

Financial strategy

Balance sheet reforms: Raise equity ratio to 70%
Strategic investment (M&A): Plan 20-60 B JPY
Shareholder return policy: Raise total payout ratio to 70%

Performance Targets and KPIs

Mid Term Management Plan “NV2030” Performance Targets and KPIs

FY2030
Consolidated
net sales 100.0-120.0
B of JPY
FY2030
Consolidated
EBITDA 25.0-33.0
B of JPY
EBITDA margin 25% or higher
ROE 12%
Shareholder returns Total payout ratio of 70%
Adoption of progressive dividend policy*
Cash & marketable
securities to monthly
sales ratio 8 months or less

*Progressive dividend policy: We aim to provide continuous and stable shareholder returns by increasing dividends to the greatest extent possible and, in principle, refraining from reducing dividends once they have been raised.

Financial Strategy: Basic Policy

Outline of financial strategy

Target ROE is set at 12%, which serve as a key indicator
Aim to enhance equity spread by controlling cost of capital and improving ROE

Profitability

EBITDA margin of 25% or higher
Expansion of high-profit Surgical to lift overall group margin
For Dental, where price declines are expected, pursuit of economies of scale and operating leverage
Setting of a financial discipline target: Consolidated SG&A ratio below 35%

Balance sheet

Achievement of an equity ratio of 70% and financial leverage of 1.4x over the medium term
Progressive dividend policy and increase in total payout ratio to 70% (from previous 50%)
Optimization of inventory levels to improve CCC and strengthen global cash management

Funding cost

Regular review of cost of capital (risk-free rate, stock market trends, etc.)
Maintenance of bank credit rating through a balance of financial leverage and soundness
Improvement of liquidity by joining TOPIX (liquidity premium reduction)

Review of Previous Mid Term Management Plan “NV2025+”

Due to inflation, medical device regulations (MDR), and design changes caused by component shortages, costs have increased, resulting in operating profit, operating margin, and ROE falling short of targets.

Basic policy and key initiatives of “NV2025+”

Strategic expansion in Dental global market
- To keep and expand market share No.1 in Dental rotating instruments through strengthening competitiveness
  
  ○ Expanded global market share of dental handpieces (25% ▶ 28%)
- To increase market share in Implant- and Preventative dentistry-related products with upgraded product line-up
  
  ○ Launched new products in main areas: handpieces, implants, and oral surgery
- To expand branding in Sterilization and maintenance products under quick demand growing
  
  ✕ New sterilizer product was launched, but market share could not be expanded
- To expand business in the U.S. and China and boost market share in Europe.
  
  ○ Grew U.S. market share and reached No.2
  ✕ China sales slowed due to a weak market
- To prepare sufficient after-sales organization in global market
  
  ○ Strengthened global after-sales operations
- To make growth in life-cycle business as parts and consumables
  
  ○ Sales of consumables increased through the growth of surgical business and Oral hygiene products
- To strengthen branding and sales organization
  
  ○ Strengthened sales capabilities through continued branding efforts and cross-selling with three acquired companies
Growing new business for customer needs in super population ageing
- To expand product portfolio in Surgical business
  
  △ New products for attachments and disposables were launched, but the expansion of the product portfolio was limited
- To utilize external management resources
  
  ○ Progressed technology development through industry-academia collaboration and tie-ups with local medical institutions
Establish infrastructure for speedy product development and leading cost competitiveness
- To establish appropriate organization in product development and manufacturing
  
  ○ Completed strengthening of the business infrastructure (RD1, A1, A1+, M1)
- To strengthen global RA function and prepare for Class 3 QMS
  
  △ Efforts to streamline RA function and establish a Class III management system are ongoing
- To reform supply-chain management with implementing new ERP system
  
  ○ A new ERP and PSI system was implemented at the headquarters

Strategic investments

○ Secured strategic footholds through M&As: 1) U.S. dental market (DCI), 2) Global low-end market centered on preventive dentistry (REFINE), and 3) Broader product portfolio (Jaeger)

Capital policy

○ Introduced a total payout ratio of 50% as a shareholder return standard Implemented stable dividend increases and flexible share buybacks
○ Initiated balance sheet reforms to evolve toward management focused on capital efficiency