Seiko Epson Aktie

Thank you for taking time out of your busy schedule. I'm Seiko Epson President and Global CEO, Junkichi Yoshida. I will explain our Long-Term Corporate Vision ENGINEERED FUTURE 2035 and the Phase 1 of our Mid-Term Business Plan, which marks the first step toward achieving that vision.

I'd like to explain the key points about that Epson intends to transform and how we plan to grow. We thought hard about the decade leading up to 2035 and foresee dramatic changes to our long-standing assumptions.

For Epson to be a company that contributes to society, we believe that we must leverage our strength, namely our original efficient, compact and precise technologies and the philosophy. With technical innovation and engineering based on these, we believe we must continue our efforts to enhance corporate value and realize a sustainable society.

Under our Mid-Term Business Plan, which seeks to achieve the long-term corporate vision, we will redesign our business portfolio around the growth areas and the transition toward the capital efficient management. We see this as an opportunity to share with everyone our determination to drive this transformation.

I will explain the points you can see on the slide. According to our corporate purpose established in 2022, our philosophy of efficient, compact and precise innovation enriches lives and helps create a better world. Because of the state of the world today, we feel stronger than ever before that we must leverage our technology and the philosophy of innovation for the benefit of the society.

Founded 83 years ago, we have continued to develop our belief and the philosophy around innovation. This has enabled us to develop today's capabilities in precision micro-fabrication, MEMS materials and processing technologies, our optical and sensing control and the ability to integrate these technologies into overall designs and implement them in the real world. This foundation will also serve as a base for our growth as we move towards 2035.

Now I will talk about our long-term corporate vision for 2035. As we look toward 2035, the world is approaching a major turning point. Assumptions in areas like energy resources, human capital and geopolitical risks are changing. In a world where constant volatility has become the norm, economic growth will be predicated on the sustainability that must be built in from the start.

While emerging markets will continue to advance the development of the education systems and the social infrastructure will become increasingly important. Meanwhile, in developed economies, automation and technological advancement will be essential to fully leverage human potential.

With these global shifts in mind, Epson is looking ahead to the world of 2035. In such a world, it's essential to optimize energy resources and human potential. To achieve this, we must engineer solutions that are tailored to conditions of each region, industry and the work site. These optimal solutions must not just be theoretical concepts because they only gain meaning when they function effectively in the real-world environment.

Based on its efficient, compact and precise technologies and the philosophy, Epson will support the transformation of society and industry through technology and engineering, and will continue to deliver real-world value. To date, we have created many products grounded in our efficient, compact and precise technology platform. Our inkjet printers and projectors are among the best examples.

Epson's strength lies not only in our ability to develop our own technologies, but also in how we implement them in ways that genuinely benefit the society. Although we are often associated with the finished consumer products, we want to further develop our technologies and use our engineering ability to implement them in the real world.

From now, I'd like to share our vision that reflects this direction. Going forward, we will base our management on these changes. We will engineer and steadfastly implement optimal solutions based around our concept of efficient, compact and precise. While strengthening industrial competitiveness, we also expand the possibilities of society.

By simultaneously realizing both social and economic value, we will continue to generate sustainable growth. This is the vision we will achieve under ENGINEERED FUTURE 2035. By implementing ENGINEERED FUTURE 2035, we aim to create value and make meaningful contributions across 4 major domains.

First one, creating value under energy and resource constraints; second, supporting advances with the precision technologies; third, addressing labor shortage with the productivity and reliability; fourth, supporting learning, working and lifestyles. The markets for products and services related to these areas are growing rapidly, and we see them as significant business opportunities.

We will continue to create a sustainable value by combining technological development with our engineering capability. Here, you can see examples from each of the 4 domains of how Epson's technologies are already being applied or how they will be applied in the future.

Our contributions to these 4 domains are not based on the separate resources. What supports everything is our technology platform of efficient, compact and precise. We will not sell our technologies in isolation, but we'll deploy them in integrated multidimensional ways and implement them in the real world. This is the growth model we are seeking to recreate now.

Now we would like to explain how we plan to transform our business structure through value creation in these growth domains. Currently, around 70% of Epson's revenue comes from the printing-related businesses that meet the demand for printing on paper.

While we will continue to maintain these businesses as a stable earnings base, we will accelerate the expansion of the industrial domains that represent our growth areas. Specifically, by driving growth in industrial fields that leverage our precision technologies such as inkjet solutions, micro-devices, advanced materials and robotics, we will increase the share of the industrial business from the current 33% to 50% of total revenue.

Furthermore, because these areas offer higher added value, we will significantly raise their contribution to profit from 45% to 70%. By simultaneously transforming the business model of our existing businesses and proactively investing in the growth areas, we will expand our revenue scale while fundamentally reshaping our profit structure.

This is Epson's basic scenarios for years leading to 2035. I'd now like to look back at the Epson 25 Renewed, reflecting on what we have achieved and where we could have done better. After a lot of careful analysis, we have created a new plan to implement the business structure transformation for 2035 mentioned earlier, starting from the first year of Phase 1.

However, before I talk about the future, please let me review Epson 25 Renewed. In Epson 25 Renewed, we are likely to fall short of our revised FY '25 targets for ROIC, ROE and ROS. Although there were various external factors, we are mindful that there were serious issues relating to sustainable growth and improving capital efficiency. We recognize that we have not achieved sufficient capital efficiency.

You can see our achievements on this slide. We are able to significantly expand the sales of the printheads in China by leveraging our inkjet technology. In emerging markets, we are able to expand our business, in particular, high-capacity ink tank models. In addition to driving structural reforms, we also strengthened the foundations for the further future growth, for example, through the acquisition of Fiery.

In environmental contributions, we became the first Japanese manufacturer to achieve 100% renewable electricity use across all global sites. And our sustainability initiatives have received strong external recognition.

On the other hand, we also recognize 2 major issues. The first is the need to further improve capital efficiency. After the COVID-19 pandemic, the transition to operations prioritizing market supply increased cost pressures resulting in lower capital efficiency. We, therefore, need to implement a structural transformation of our earnings base.

The second challenge is the delay in launching growth domains. While external market factors played a role, we were slow to expand business domains where we should have accelerated growth. We need to concentrate resources into these growth domains.

Based on this review, we will now move forward with the Phase 1 of the new Mid-Term Business Plan. Let me explain. The Mid-Term Business Plan will serve as an execution road map for the long-term corporate vision, and we have divided a 10-year period into 3 phases.

Phase 1 covering 2026-2028 is positioned as a transform stage. It will be an essential phase in which we will transform the business from the ground up to achieve growth. Phase 2, '29 to '31, we'll accelerate and complete the shift to a growth model based on the foundation established in the Phase 1.

Phase 3, '32 to '35, we'll establish a business structure capable of continuously generating growth. To realize the long-term corporate vision, our top priority is to build a solid earnings based on the profit structure, improve capital efficiency and create a business model that can generate sustainable profits.

In Phase 1, we will rebuild the foundations for growth by reviewing our fixed cost structure, inventory portfolio and capital allocation. This is the philosophy behind our current strategy. We will then make proactive growth investments using the cash generated from the improvements.

The goals for Phase 1 are clear. We will address the challenges in the Mid-Term Business Plan, namely transforming the structure of our earnings base and focusing resources allocation on growth domains. As a result of improving capital efficiency, we aim to achieve return on invested capital of 8% or higher by FY '28.

We will place ROIC at the core of our management decision-making. Rather than focusing solely on revenue totals, we will emphasize how much value we generate relative to the capital invested. Accordingly, we will make all growth investments under strict ROIC discipline.

We will transform management to prioritize capital efficiency. Our top priority in transforming our profit structure is improving asset efficiency, including fixed cost and inventory turnover.

Over the next 3 years, we will implement a total of JPY 26 billion in fixed cost reductions. Our reforms will involve the redesigning our organization size and operations, but should not be seen merely as cost cutting.

We see this as a structural reform to generate the resources for growth investments. Our top priority in transforming our profit structure is improving asset efficiency, including fixed cost and inventory turnover. Over the next 3 years, we will implement a total of JPY 26 billion in fixed cost reductions.

It goes without saying that to transform our profit structure, we must further strengthen our ability to deliver the value created through our products and services to customers and continuously convert that value into earnings. As you know, 85% of our revenue is generated outside Japan. Driven by high-capacity ink tank models, emerging markets have supported our growth to date and the demand in these market is expected to continue expanding significantly.

This presents a major opportunity to leverage the sales and marketing foundation we have built over the years. We will, therefore, make active investments in these regions to expand and enhance our sales networks. At the same time, we will strengthen our ability to provide solutions that meet customer needs within each region, and we will further develop our business models.

By doing so, we aim to significantly elevate the quality of our sales and services, becoming a trusted and preferred brand in every region we serve. By concentrating resources on our growth domains, we will further enhance the value of the products and the service we create.

To support this, we have reorganized our business segments and the portfolio, clarifying the roles of each area. Precision Innovation encompasses businesses addressing fast-growing industrial markets that offer high added value such as inkjet applications, oscillators and high-performance materials. This segment will serve as Epson's growth engine.

Industrial & Robotics strengthens our advantages in commercial and industrial printing as well as robotics. By enhancing this strength and actively creating demand, we position this segment as our next major growth domain.

Office & Home Printing will continue to serve as a stable earnings base. Leveraging our large installed base and customer relationships, we will transform the business model and maintain this domain as a core source of consistent profit.

Visual & Lifestyle includes projectors, wearable and related businesses. We will further strengthen our relationships with the customers and position this segment as a contributor to earnings. This chart illustrates the current state of our 4 segments and how we expect them to look 3 years from now.

The size of each bubble represents operating cash flow. The horizontal axis shows ROIC and the vertical axis represents revenue. As shown, Precision Innovation will significantly enhance its cash generation capability through revenue growth, becoming Epson's core growth engine.

Industrial & Robotics will improve profitability through the strategic capital investments while preparing for its next phase of full-scale growth. This role of Office & Home as a stable earnings base remains unchanged. We will continue driving efficiency improvements and sales reforms. Visual & Lifestyle will improve ROIC through the completion of structural reforms.

The combined effect of these initiatives will result in a company-wide ROIC of 8%. We will base our investment decisions on cash generation and ROIC and reshape our business structure accordingly.

Let me now explain our approach to capital allocation. As we generate cash, we will remain constantly mindful of WACC, allocating capital preferentially to areas with the highest returns. By doing so, we will establish a virtuous cycle that further strengthen our cash generation capability. While maintaining financial soundness, we will balance investments for growth with proactive returns to our shareholders.

Based on this approach to capital allocation, we have set our targets for the fiscal '28 at JPY 1.5 trillion in revenue. Our KPIs are ROIC minimum of 8%; ROE, 10%; ROS, 8%. We will also increase the profit ratio of the device and industrial domains to 60% or more. The sales figure may appear conservative, but in light of our transformed target in Phase 1, we believe we require structural transformation. Over the next 3 years, we aim to demonstrate growth not only in scale, but also in quality.

Next, I will explain the strategies in each business segment. We have positioned Precision Innovation as the engine for driving company-wide growth and profit generation during Phase 1. It consists of these core businesses; inkjet solutions, centered on the printhead, micro-devices, centered on the timing devices and Epson Atmix, which holds a leading share in high-performance metal powders.

The market environment is changing rapidly as demand increases for the computing driven by massive data volumes, and for high-speed, high-capacity communications, challenges are emerging in energy supply and stable access to the critical resources. Against this backdrop, the need for energy saving and resource-efficient devices and production technologies is expanding.

Epson is a rare company capable of integrating precision machining, materials processing and MEMS design entirely in-house. We will invest JPY 130 billion between FY '26 and FY '28 to accelerate our growth in this segment.

Let me explain the business in Inkjet Solutions. Because it operates without heat and dispenses, only the precise amount of material needed in exactly the required location, Epson's Micro Piezo is an additive technology capable of transforming a wide range of specialized manufacturing processes, including electronic components, photovoltaic films and biotechnology.

Our key strength is that we do not only supply the printheads as a hardware, but also provide the surrounding technologies essential for utilization. These include technologies for drive control, inks and image processing that we have developed through many years of the product development.

To expand applications, we will pursue both organic growth and the co-creation investments and accelerate overall growth. The high-precision energy-efficient timing devices developed within our micro-devices businesses are experiencing significant new opportunities. This is driven by rapid growth in demand for high-capacity, high-speed computing and communications, particularly in AI and mobility, including autonomous driving.

Epson is one of the few companies capable of producing highly accurate timing devices that combine quartz manufacturing technology using crystals made in-house together with the semiconductor logic design. Because of this unique capability, we can achieve integrated designs that simultaneously deliver high precision, low power consumption and compact design, enabling significant technological advancement. We will leverage these strengths to further expand our market presence.

The Industrial & Robotics segment is a domain where we expect significant growth from the Phase 1 into Phase 2. To achieve this, we will significantly expand our solutions lineup by integrating hardware, software and services more comprehensively than ever before.

In commercial and industrial printing, we will strengthen our lineup of high productivity printers and expand our solutions in collaboration with Fiery. This will enable us to support the customers transitioning from the analog to digital and will accelerate the market transformation.

In robotics, we will move beyond the traditional manufacturing applications. We will integrate Epson's strength in sensing and control technologies with new capabilities such as AI. Through this, we will implement a business model that can be used sustainably over the long term and address needs in the various services sectors and labor-saving applications.

Through these initiatives, we will deepen our customer relationships and build a robust pipeline for the future growth. To support this direction, we will plan to invest JPY 50 billion in '26 to '28.

Office & Home Printing provides Epson with 3 major strategic assets: a broad B2C and B2B customer base supported by a massive global installed base, strong growth in emerging markets and deep customer trust in the Epson brand, competitive advantages from a global established supply chain.

Building on our track record of creating a large new market with high-capacity ink tank models, we are steadily driving technology shift towards inkjet in office and across vertical markets. We will further grow our market share in emerging and high potential markets where we are expanding share in excess of the market growth.

In addition to strong sales capabilities, we will strengthen our local planning and design functions, enhance our solution proposal capabilities and provide business models that ensure continuous and reliable fulfillment of customer needs. During this midterm business plan, we will complete the necessary structural reforms, solidifying this segment as a stable earnings base that underpins investment in Epson's growth segments.

Visual & Lifestyle is a business segment that leverage Epson's highly distinctive technological strength. Our projectors hold the #1 global market share. While the mobile market faces growth challenges, we will focus more deeply on the fields where projection technology is essentially essential such as education, projection mapping and immersive experiences, and we will cultivate the demand and maintain our presence.

We will further develop our profit structure to generate stable earnings. Wearable was one of our original businesses and continues to hold industrial-leading technologies capabilities. We will further refine our product strength and manufacturing excellence and will enhance profitability through operational efficiency.

Ultimately, it is the people who will drive the structural transformation and growth investments required to ensure our sustainable future. We are emphasizing human capital and promoting health focused management to enable everyone to enjoy good health and work to their full potential.

Developing the people who will drive Epson forward in this principle, under our long-term corporate vision, under Phase 1, we will further continue to redesign human capital across the entire Epson Group. I believe that enabling and motivating our 75,000 employees worldwide to work to their full potential is one of management's most important responsibilities. Epson is a technical company and many of our employees are engineers.

We will ensure that engineers can lead the advancement of the engineered future and will also enable nonengineering employees to apply an engineering mindset by designing strategies and activities precisely and accelerating the PDCA cycle. To do this, we will build a global foundation that can be shared our utilized -- and utilized across the organization.

This will include strengthening leadership development, initiatives that transform diversity into organizational strength and expanding opportunities to embody our values of integrity and effort and creativity and challenge.

I will now explain our stance on shareholder returns. As mentioned earlier, our financial policy is to balance growth investment and shareholder returns. While maintaining financial soundness, we are willing to take risks for growth, but we will not relax our discipline. This is the foundation of capital-efficient management.

Over the next 3 years, we expect to generate approximately JPY 160 billion in operating cash flow. Within that, we will proactively allocate capital to growth areas, including strategic investments. At the same time, for shareholder returns, we will set a minimum dividend payout based on the DOE of 3%. This represents a step forward from our previous dividend payout ratio target.

In addition, we will pursue more proactive returns through the flexible share buybacks. We plan to repurchase JPY 80 billion of our own shares cumulatively from the '26 to '28. We will execute both growth investment and shareholder returns with the financial discipline.

Finally, please let me summarize. As I mentioned at the beginning, the world will continue to change and generate new issues that will need to be solved. The need for our efficient, compact and precise technologies and philosophy, in other words, using small quantities of the resources with precision to create value will grow even further.

In an age of energy and resource constraints, we will facilitate a society that generates value with fewer resources. We will enable technological progress through precision engineering. We will enhance the productivity and reliability in a world facing increasing labor shortage, and we will improve the quality of learning, working and lifestyles.

Fortunately, we possesses the technological assets and the management foundation to meet these needs, and we are confident in our ability to deliver. This is what will drive our sustainable growth.

Our mission is to continuously anticipate the change to develop and grow and to meet the needs of the society and the industry. To fulfill this mission, we have established our long-term corporate vision, ENGINEERED FUTURE 2035 and have established clear targets for the 3 years of Phase 1 to bring that vision into reality.

Phase 1 is about transform. This means reshaping our earnings structure, concentrating resources in growth domains, improving capital efficiency and delivering shareholder returns. To achieve this, we will first undertake a decisive transformation of our earnings base. By thoroughly reviewing fixed cost and invested capital, we aim to realize JPY 26 billion in profit improvement over '26 to '28. At the same time, we will boldly concentrate resources in our growth areas.

Focusing on the precision innovation and industrial and robotics, we will invest JPY 280 billion in growth and strategic initiatives. We will demonstrate our policy of select and concentrate, not in words, but through capital allocation.

We will place equal priority on returns to our shareholders. Dividends will be set with a DOE of 3% as a minimum, and we will deliver more active returns combined with agile share buybacks. The decision-making vector behind everything I have discussed today is ROIC. We have committed to achieving a company-wide ROIC of 8% or higher by FY '28.

Investments, reforms and the business operations will be all be evaluated based on ROIC, and we intend to demonstrate Epson's transformation and growth through the results. We ask for your continued support as we advance Epson's transformation from a midterm -- mid- to long-term perspective.

We will manage our business with these changes as our starting point. We will design and implement optimal solutions based around efficient, compact and precise. By doing so, we will strengthen industrial competitiveness while expanding the possibilities of society. As we achieve simultaneous societal and corporate value, we will continue to generate sustainable growth.

This is the vision we aspire to under ENGINEERED FUTURE 2035. Thank you for listening.