Starting from fiscal 2019, TDK has enacted the Medium-Term Plan that covers the three-year period to fiscal 2021, and actively targets further enhanced corporate value through sustainable growth.
“Value Creation 2020”
Under TDK’s new Medium-Term Plan “Value Creation 2020” for the three years starting from the fiscal year ending March 2019, we want to contribute to society by creating the three values of “Commercial Value,” “Asset Value” and “Social Value,” and as a result grow our business. We want to leap to new heights by providing market-needed solutions based on our electronics components business, and make our contribution.
For more than 80 years TDK has been delivering products to the market through Monozukuri (manufacturing excellence), but going forward that alone will not be enough, and we want to further expand business through the idea of Kotozukuri (integrated solutions). To present solutions using TDK’s electronics components and rotate this business cycle, collaboration is crucial, in a network with customers, IC manufacturers and IoT solutions partners. We think that we will be able to create all sorts of businesses, including with those who have not been direct TDK customers up until now.
Aiming for Three Types of Value
The first goal of “Commercial Value” aims to achieve net sales of 1.65 trillion yen by the fiscal year ending March 2021. The second goal of “Asset Value” aims to achieve an operating income margin of over 10% and ROE of over 14%. Furthermore, we envisage capital expenditure over the coming three years to be 500 billion yen. The third goal of “Social Value” is the realization of sustainable and highly transparent management.
Mid-Term Financial Strategy
During the previous medium-term plan, we actively moved ahead with the transformation of our business earnings structure by utilizing funds obtained through the February 2017 transfer of part of the High-Frequency Components business to make capital expenditures for the growth of existing businesses, and to execute multiple M&As centered on the sensor-related businesses. However, we had negative free cash flows because we made investments ahead of schedule to ramp up production to meet buoyant demand, because we conducted large-scale reconstruction of domestic bases, and because the sensor business has yet to sufficiently recover investments. We recognize that we definitely did not have a strong financial position at the end of March 2018.
To support further growth going forward we need to execute growth strategies and improve our financial position. We plan for capital expenditure of 500 billion yen under the current plan, which is about the same level as the previous plan, and intend to continue active execution. We want to conduct well-balanced capital allocation to ensure shareholder returns and repayment of interest-bearing debt, as well as achieve positive free cash flows. Moreover, achieving the steady recovery of investments is an important issue. We will invest based on the earning capacity of investment capital already outlaid while at the same time we want to raise Company-wide asset efficiency through Monozukuri Innovation based on Arubeki-Sugata (ideal process).
Taking the above into account, we will set financial targets from three viewpoints and take action. The first target is capital efficiency. As stated in the “Asset Value” goal, we want to achieve an operating profit margin of over 10% and ROE of over 14%. The second target is returns to shareholders. We target a dividend payout ratio of 30% and a stable increase in dividends through growth of income per share. The third target is financial soundness. We want to achieve a stockholders’ equity ratio of over 50% and move back into net cash.