Management Strategy

Based on its corporate philosophy of "For People, Society and the Earth", MMC Group has set out a new vision of "Circulating resources for a sustainable future" and a new mission of "Create a sustainable future (a prosperous, recycling-oriented and decarbonized society)". MMC Group will strive to enhance the value of its shares and corporate value through the FY2031 Strategy.
The outline of the FY2031 Strategy is as follows.

Our commitment

MMC group has set out "Our Commitment" of "For people, society and the earth, circulating resources for a sustainable future". MMC Group will build a recycling system of metal resources based on our strengths and realize growth throughout the value chain by expanding the scope, regions, and scale of our operations.

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Strategic roadmap

The FY2031 Strategy will be divided into two phases, Phase 1 from FY2024 to FY2026 and Phase 2 from FY2027 to FY2031, in order to achieve the Our Commitment. In Phase 1, MMC will promote improving profit growth and profitability by strengthening cost competitiveness and investing in medium- to long-term growth areas centered on resource recycling. In Phase 2, MMC will expand business scale through regional development including overseas, in addition to expansion of target business areas.

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Financial plans and targets

The financial indicators and targets planned are as follows.

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Capital allocation

During Phase 1, MMC plans cash outflows of ¥230 billion in growth investments, ¥130 billion in maintenance and upgrading investments, and ¥60 billion in dividends, etc., against a cumulative cash inflow of ¥420 billion. During Phase 2, MMC plans cash outflows of ¥330 billion in growth investments, ¥210 billion in maintenance and upgrading investments, ¥180 billion in dividends, etc., and ¥70 billion in interest-bearing debt reduction, against a cumulative cash inflow of ¥790 billion.

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Shareholder returns

Based on the recognition that returning profits to its shareholders is one of the most important management issues, MMC decides profit allocation based on a comprehensive assessment of factors across its management, which include earnings for the period, internal reserves, and financial standing.
With regard to the profit allocation during the FY2031 Strategy period, MMC will pay out for a dividend with a payout ratio of around 30% in Phase 1 from FY2024 to FY2026. MMC will also aim to enhance shareholder returns in Phase 2 from FY2026 to FY2031. In addition, MMC will continue to consider flexibly repurchasing its own shares in light of financial discipline such as cash flow conditions, stock prices, and net D/E ratios.

Business portfolio management

In Phase 1, MMC will implement measures such as cost reduction and process optimization to increase profitability by improving ROIC. In Phase 2, the ROIC spread, which is the difference between ROIC and WACC by business segment, will be positive in all businesses, including the Resources business, which requires long-term upfront investment. MMC will aim to maximize economic profit, which can be derived by multiplying the ROIC spread by invested capital (= ROIC spread × invested capital, hereinafter referred to as "EP ").

MMC's management policy for the business portfolio is as follows.

• Optimize allocation of management resources by managing the business portfolio with two axes of growth and profitability
• Evaluate business growth potential by EBITDA growth rate and supplement it by the market growth rate
• Aim to increase EP while maintaining and improving ROIC spread to improve enterprise value
• Accelerate the improvement of business value by improving efficiency through the integration of the Metals company and the Environmental recycling business (smelting and resource recycling)

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Investment allocation and profit contribution

Of the total growth investment of ¥560 billion through FY2031, MMC plans to invest ¥250 billion to contribute to a recycling-oriented society through investments in mines and the tungsten business, etc., ¥280 billion to contribute to a prosperous society by strengthening the competitiveness of the Advanced Products Company and Metalworking Solutions Company, and ¥30 billion to contribute to a decarbonized society by strengthening the geothermal power generation business, etc.

MMC's approach to investment allocation is as follows.

• Select investment targets considering the mission suitability, the balance between maintenance and upgrading, and growth investment
• Evaluate returns based on business characteristics and allocate them appropriately among businesses
• Maintain financial discipline with an overall net D/E ratio of 1.0 times or less, while maintaining financial soundness for each business

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Strengthening cost competitiveness

Under the FY2031 Strategy, MMC will also work to strengthen cost competitiveness and reduce costs by a total of approximately ¥24 billion (Phase 1: Approximately ¥9 billion, Phase 2: Approximately ¥15 billion).
The ratio of accumulated cost reductions to operating profit is expected to be approximately 13% in FY2026 and approximately 19% in FY2031.

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The target and strategy of each business segment under the FY2031 Strategy are as follows.

Metals Company

Advanced Products Company

Metalworking Solutions Company

Renewable Energy Business

Of the MMC Group's greenhouse gas ("GHG") emissions, we aim to reduce Scope 1, which consists of direct emissions by the business operators, excluding GHG emissions from resource recycling efforts, and Scope 2, which consists of indirect emissions resulting from the use of supplied energy of its GHG emissions by 47% by the fiscal year ending March 2031 (compared to the fiscal year ended March 2021). In addition, we aim to achieve carbon neutrality by the fiscal year ending March 2046, including GHG emissions from resource recycling efforts. MMC Group also aims to reduce Scope 3 *1, which consists of emissions from other companies that are related to the activities of business operators other than Scope 1 and Scope 2, by 22% by the fiscal year ending March 2031 (compared to the fiscal year ended March 2021). Furthermore, MMC Group aims to achieve 100% *2 self-sufficiency in electricity derived from renewable energy sources by the fiscal year ending March 2051. (We have revised the GHG emissions reduction target, due to the revised Act on Rationalization of Energy Use and Shift to Non-fossil Energy, the change of Act on Promotion of Global Warming Countermeasures' operation, and the application of a new reporting rule. Announced on July 31, 2024.)

*1

Categories 1, 3, 15

*2

Renewable energy self-sufficiency rate = amount of electricity generated by the Renewable Energy business / total amount of electricity purchased by the Group × 100

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As described below, MMC group will strengthen its initiatives to address issues common to the entire Group and continue to reinforce its management base to enhance corporate value.