Management Strategy | Corporate | Mitsubishi Materials Corporation

Overview of the Medium-term Management Strategy FY2031 (FY2031 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

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.

Efforts to Improve Corporate Value

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

Investment allocation and profit contribution

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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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Business Strategy

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

Metals Company

Target: Leader in Resource Recycling of Nonferrous Metals

Business strategy	Resources Business	Promotion of technological development to recover rare metal resources contained in copper deposits Acquisition of copper mining interests and securing copper concentrates through continuous investment in mines Expansion of electrolytic copper supply through SX-EW^* operations at copper mines
Business strategy	Smelting & Resource Recycling Business	Strengthening and expanding the networks to promote resource recycling Expansion of electrolytic copper production capacity Increasing the recycling rate by expanding the treatment of recycled products containing metal resources Creation of rare earths and rare metals recycling businesses Accelerating business developments in Japan and overseas (E-Scrap, home appliances, automobile recycling)

* Solvent extraction and electrowinning: A two-step hydrometallurgical process consisting of solvent extraction and electrolysis collection

Advanced Products Company

Target: Global First Supplier

Business strategy	Copper & Copper Alloy Business	Improve the recycling rate of wrought copper products and establish a scrap platform base Overseas (Luvata): Rapid entry into growing markets (xEV, healthcare, and environment) Expand sales and strengthen services to overseas customers with establishes a new overseas plant which carries out a downstream process, with the domestic plants as mother ones
Business strategy	Electronic Materials & Components Business	Highly capital-efficient management through continual restructuring of the business portfolio Strategic investment in focused products in growth areas Developing and securing human resources for the creation of new businesses and the promotion of business alliances Enhancing manufacturing capabilities and DX to enhance production sophistication and profitability Providing business and social value (SDGs) for carbon neutrality

Metalworking Solutions Company

Target: A Leading Company in Tungsten Products Recognized by Customers Globally

Business strategy	Metalworking Solutions Business	Transforming into a truly global company with the aim of autonomous business development in strategic markets <Carbide tools business> Stable supply of the world's top quality, high-efficiency products utilizing the strength of materials and coating technology <Tungsten business> Expansion of business scale for rechargeable batteries in addition to carbide tools, etc. Strengthening environmental responsiveness <Solution business> Commercialization of solution sales to manufacturing sites

Business strategy

Metalworking Solutions Business

Transforming into a truly global company with the aim of autonomous business development in strategic markets

Stable supply of the world's top quality, high-efficiency products utilizing the strength of materials and coating technology

Expansion of business scale for rechargeable batteries in addition to carbide tools, etc.
Strengthening environmental responsiveness

Commercialization of solution sales to manufacturing sites

Renewable Energy Business

Target: Expansion of Renewable Power Generation to Achieve 100% Self-sufficiency in Renewable Power Electricity

Business strategy	Renewable Energy Business	Consolidate the renewable energy business in the Strategic Headquarters as a company-wide effort to expand the business from a long-term perspective New development at one location every three years to expand geothermal business New entrants into wind power generation where power generation costs are expected to decline in the future Further development of new biogas plants

Business strategy

Renewable Energy Business

Consolidate the renewable energy business in the Strategic Headquarters as a company-wide effort to expand the business from a long-term perspective

New development at one location every three years to expand geothermal business
New entrants into wind power generation where power generation costs are expected to decline in the future
Further development of new biogas plants

Effective April 1, 2023, MMC integrated the "Environmental recycling business" previously under the Environment & Energy Business Company into the Metals Company and transferred the "Renewable energy business" to the "Renewable Energy Business Division", which was newly established under Strategic Headquarters. (As a result, the Environment & Energy Business Company was abolished as of the same date.)

Carbon Neutral

MMC Group aim to reduce Scope 1, which consists of direct emissions by the business operators, and Scope 2, which consists of indirect emissions resulting from the use of supplied energy of its greenhouse gas (GHG) emissions by 45% by FY2031 (compared to FY2021) and to achieve carbon neutrality by FY2046. MMC Group also aim to reduce Scope 3*, 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 FY2031 (compared to FY2021). Furthermore, MMC aims to achieve 100% self-sufficiency in electricity derived from renewable energy sources by FY2051. (We have revised the GHG emissions reduction target for the Group announced on February 10, 2023, based on our latest business structure.)
*Categories 1, 3, 15

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Strengthening Management Foundation

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.

Manufacturing strategy	Establishing each factory vision based on FY2031 Strategy, evaluating plant capabilities, and pursuing problem-setting and resolution "Differentiation of manufacturing capabilities" through bottom-up activities, enhancement of manufacturing infrastructure, and technological development and improvement
R&D strategy	Achieving sustainable enhancement of corporate value through the creation of new products, technologies, and businesses
Human resources strategy	Maximizing the value of human resources and creating an organization dedicated to winning Building a foundation for co-creation and growth
DX strategy	Use data and digital technology to promote the three pillars of improving business added-value, operational competitiveness, and management speed More than two years have passed since MMDX was launched, and in order to strengthen manufacturing and steadily implement conventional themes, MMDX has reorganized its themes, strengthened its structure, etc., and has entered a new phase as MMDX 2.0
IT strategy	To realize the MMC Group IT WAY, promote IT modernization to support business from the viewpoint of data utilization, work style, and security Investing on a scale of 10 billion yen, IT cost in FY2031 is 1.0% or less of the sales ratio (currently approximately 0.8%)