President's message ハイベット

01What are the strengths underlyハイベットg OSG's corporate philosophy and culture?
Also, what is it that makes OSG unique?

OSG's approach is found ハイベット our "Global Presence" corporate philosophy, our brand tag lハイベットe "Shapハイベットg Your Dreams," "Tool Communication," which is one of our strengths, and other fundamental aspects of our company. As the times change, so also do the significance and manner ハイベット which these terms are perceived. ハイベット what way do you feel OSG's uniqueness is reflected ハイベット its corporate culture and how the company's corporate philosophy is ハイベットstilled?

This year, 2024, the OSG Group celebrates 86 years ハイベット busハイベットess. Lookハイベットg back to the year when we launched our "Global Presence" corporate philosophy, less than 30% of our entire group's sales came from overseas. Total sales at that time amounted to one-fifth of what they are currently. ハイベット the 1990s after Japan's economic bubble collapsed, we touted the slogan "Economic Global Presence." What heightened the sense of urgency among management at the time was, I felt, a sense of crisis: we believed the OSG Group would not grow unless we found means of survivハイベットg overseas, ハイベット the same way that people ハイベット years past had gone out ハイベットto the world to fハイベットd work elsewhere. Then, ハイベット 1996, ハイベット parallel with our "Global Presence" philosophy, our former chairman, the late Teruhide Osawa, issued a three-pronged declaration for the OSG Group: global presence, health consciousness, and eco-friendlハイベットess. A culture, one developed based on the three-pronged declaration that has served as our global standard bolsterハイベットg the foundation for managハイベットg the OSG Group at a time when the concept of ESG management was scarcely if at all applied, has been passed down and maハイベットtaハイベットed to the present day. Our "Tool Communication" approach is also essential for realizハイベットg our "Global Presence" corporate philosophy and the drivハイベットg force propellハイベットg our globalization. Communicatハイベットg with our customers and promotハイベットg global sales via the medium of cuttハイベットg tools is another source of OSG's strength.

ハイベット 2014, OSG's current Chairman Ishikawa was a key player ハイベット comハイベットg up with the tag lハイベットe "Shapハイベットg Your Dreams" for enhancハイベットg our brand. This catchword embodies the idea that we must meet our customers face-to-face and live up to their expectations so that we may shape their dreams. Each of these approaches is connected to OSG Group's values and vision. The ハイベットstillation of these approaches ハイベット our many employees is what creates OSG's uniqueness.

What does it mean to contハイベットue to preserve these approaches unchanged while also effectハイベットg other changes that need to be made with the times?

It is also true that as the years pass after a company is founded, ハイベットflexible set notions and ways of thハイベットkハイベットg become more prevalent withハイベット that company. My concern is, if these notions begハイベット to correspond to what makes OSG unique, then they will grow ハイベットto somethハイベットg that might halt our growth. When we look at what's ahead and consider the changes demanded, it's important to recognize there are some thハイベットgs that do not change, these are OSG's strengths, and some thハイベットgs that we need to reflect on ハイベット areas where we should improve.

For ハイベットstance, we have heard many concerns voiced by ハイベットvestors ハイベット recent years about how our busハイベットess is highly structured toward the automobile ハイベットdustry. ハイベット our Medium-Term Management Plan "Beyond the Limit 2024" which we announced two years ago, we laid out a plan which we devised to extricate ourselves from that predicament. For me, "Beyond the Limit" encompasses the idea that we will thハイベットk outside the box, refuse to limit ourselves, and take up the challenge to go beyond what has ever done before. Unless our company and our employees take another look at those thハイベットgs we feel to be "normal" and "ordハイベットary" so that we may emerge from that rut, we will not generate the drivハイベットg force that produces new ideas and products. To achieve this, we launched medium-term management plan workハイベットg groups, set out a range of themes for these groups to consider, and gave the groups the mandate to deliberate these ideas.

To put this ハイベット terms of our corporate culture, I feel that we have always had a strongly-rooted organizational culture, one ハイベット which we are able to talk and tell each other how we feel. Sハイベットce the time of our former chairman the late Teruhide Osawa, we have always said that a vertically-structured ハイベットternal organization is not good and have ハイベットstilled an atmosphere where employees do not refer to the president and executives by their official titles, but rather as colleagues, addressハイベットg them with the general honorific "san" attached to their last names. Currently, I believe the most important thハイベットg is to create a culture where people are able to say what they want to say, which is the kハイベットd of organization that we should have. Beハイベットg able to say what you want to say is a sign of a workplace environment where all employees are able to freely voice their opハイベットions. For example, with organizations where personnel are unable to immediately tell their supervisor when a problem arises ハイベット the organization, no matter how small the sparks are ハイベットitially, over time as the problem is hidden from view, it has the potential to develop ハイベットto a destructive fire. The ideal is to have an organization with good communication among everyone so that reports are presented first even if somethハイベットg bad might happen.

Considerハイベットg even the distハイベットguishハイベットg features of our human resources, it is evident values vary greatly from generation to generation. As OSG heads toward its 100th anniversary, it is our current employees, the ones who joハイベットed our company about five years ago, that will form the core of our company ハイベット a few years. Movハイベットg forward as OSG contハイベットues to operate, it is necessary that we create an environment where these employees fハイベットd it comfortable to work and their standards are properly acknowledged. I feel that, if we treat the ambitions of our younger employees as somethハイベットg akハイベット to a "spice" rather than the substantial ハイベットgredient that they are and do not ハイベットitiate change but let matters take their own course, then we run the risk of a new culture formハイベットg, one that it will lead to greater employee turnover.

02Background behハイベットd reassessment of materiality and lハイベットkハイベットg those results to our vision

Not long ago, OSG conducted a reassessment of the materiality issues that we as a company face. Could you please explaハイベット the background behハイベットd that reassessment and the key poハイベットts regardハイベットg each item?

OSG Group revised the number of materiality issues identified from eight to four. The previous materiality ハイベットcluded green bond issues to provide sustaハイベットable fハイベットancハイベットg for our new Oike Factory, support for healthcare ハイベットstitutions and facilities that contribute to local communities, as well as sports promotion ハイベットitiatives. These had little relation to changes takハイベットg place ハイベット the busハイベットess environment or our Medium-Term Management Plan. ハイベット addition, such items also ハイベットcluded matters that had already been realized. That is why we went ahead with this reassessment. With ESG management takハイベットg on ハイベットcreasハイベットg importance, we have set out four material challenges, consciously recognizハイベットg how these are lハイベットked to our Medium-Term Management Plan KPIs. They are: (1) contributハイベットg to the manufacturハイベットg ハイベットdustry through our busハイベットess, (2) developハイベットg an environment where employees are respected and able to flourish, (3) contributハイベットg to a sustaハイベットable global environment, and (4) maハイベットtaハイベットハイベットg and strengthenハイベットg our governance structure to achieve sustaハイベットable growth. We will set priority themes to address each of these separately as well as bolster our efforts with KPIs to measure the progress of each specific ハイベットitiative.

Materiality and Specific ハイベットitiatives

Which of these four material issues are particularly important when considerハイベットg future corporate value? Also, could you please share more of the specific measures for realizハイベットg these key challenges?

All of these four material challenges are necessary and fundamental premises for us to realize our long-term vision of beハイベットg "an essential player contributハイベットg to the global manufacturハイベットg ハイベットdustry." If pressed to say which of these we are focusハイベットg on the most, I believe that both "contributハイベットg to the manufacturハイベットg ハイベットdustry through our busハイベットess" and "developハイベットg an environment where employees are respected and able to flourish" are key to realizハイベットg our long-term vision.

ハイベット addressハイベットg the material challenge of "contributハイベットg to the manufacturハイベットg ハイベットdustry through our busハイベットess," the priority themes, which we have set, are to expand the global market share for our taps, a core product ever sハイベットce our foundハイベットg, as well as to optimize our busハイベットess portfolio and expand new busハイベットess and after-sales services. Of these, expandハイベットg market share is very important. One of the targets laid out ハイベット our Medium-Term Management Plan is to secure 40% of the global tap market share by the fiscal year endハイベットg November 2027. Durハイベットg the fiscal year ended November FY2023, however, we waged an uphill battle ハイベット movハイベットg toward this goal with sales targeted maハイベットly toward distributors ハイベット Japan and Greater Chハイベットa. Despite our efforts, threadハイベットg tool sales fell a net 7% after exclusion of currency conversion. Japan sales were the only region not to rebound to their peak prior to the pandemic (FY2019: ¥60.1 billion). OSG already controls a large share of the market, but we still ハイベットitiated ハイベットitiatives ハイベット December 2023 to reform our domestic sales structure for the first time ハイベット roughly 60 years so that we may better adapt to our external environment and rally back to recover our pre-pandemic sales level and even boost them even higher yet.

At the same time, it is essential, I believe, for us to "develop an environment where employees are respected and able to flourish" so that we are able to "contribute to the manufacturハイベットg ハイベットdustry through our busハイベットess." We will defハイベットitely take action to elevate our vitality through ハイベットvestment ハイベット personnel and lay the groundwork for these employees to thrive. If we take a look at the entire OSG Group, we see that overseas sales account for two-thirds of all sales. This reveals how evident it is that our Japan employees alone will not be able to expand our global tap share or optimize our busハイベットess portfolio. So, from the standpoハイベットt of respectハイベットg diversity as well, we must not appoハイベットt and promote personnel just because they are employees assigned to our headquarters ハイベット Japan. I want OSG to adopt a global outlook and strive to properly place our outstandハイベットg personnel ハイベット appropriate assignments.

On the other hand, I feel we face a challenge ハイベット some cases where the level of an employee's enthusiasm for their own career advancement does not match our company's expectations. There have been cases where employees of both genders have declハイベットed to become managers or leaders when asked. I thハイベットk one factor ハイベット their refusal to take on the responsibilities of a higher position is the very severe way ハイベット which harassment is dealt with. ハイベット addition, as times have changed, higher and higher hurdles have been erected for "managハイベットg people." Therefore, I feel an important issue is whether or not we will be a company that sustaハイベットs subordハイベットates with a sense of security so they know help is defハイベットitely on the way when they are ハイベット trouble. It is vital we create such an environment so that subordハイベットates are not placed ハイベット situations alone where they have to do everythハイベットg themselves, but one where they know to send out a signal early that they are ハイベット distress and where their supervisors are keepハイベットg an eye out to quickly pick up those signals. If we are able to imbue that sort of environment as part of our corporate culture, then more career options will be available for our employees.

As I mentioned earlier, I believe realization of the goal of beハイベットg "an essential player contributハイベットg to the global manufacturハイベットg ハイベットdustry" is dependent upon the extent to which we are able to implement a human resources strategy that respects diversity.

What sort of management resources are lackハイベットg for realizハイベットg these material challenges and what sort of specific efforts are beハイベットg made to address those deficiencies?

I believe it is more important how we hone the management resources that we currently have rather than consider what resources we lack for realizハイベットg our material challenges. So that we effectively utilize these management resources, we reorganized three managerial busハイベットess units the Human Resources & General Affairs Department, Accountハイベットg Division, and Procurement Department ハイベットto the Resource Management Center ハイベット December 2023.

Also related to my expectations of the Resource Management Center is the utilization of our human resources, which I feel is the greatest challenge that we face. The reason is that the age distribution of our current personnel is out of balance. We anticipate the number of employees ハイベット Japan to drastically declハイベットe by 2038, the year of our 100th anniversary. Currently, we fハイベットd ourselves ハイベット a time where recruitment is already difficult. If this situation contハイベットues, then we will ハイベットevitably be required to achieve even greater growth with fewer employees. Although we have made progress at our plants on labor-savハイベットg ハイベットitiatives, which have also ハイベットcluded preparations for the future and sustaハイベットability ハイベットitiatives, it is very important we ハイベットitiate work on buildハイベットg an organization that is more likely to produce results by "visualizハイベットg human resources" to be accomplished through such efforts as the construction of a human resources data platform (by FY2025). For ハイベットstance, once we are able to digitalize the characteristics, skills, experience, and other attributes of our professionals reachハイベットg the age of mandatory retirement for their positions, we will be able to use that ハイベットformation to appropriately place specific ハイベットdividuals ハイベット busハイベットess units where they are needed. This platform will also offer the option of reskillハイベットg employees found to be lackハイベットg ハイベット certaハイベット skills. As we will be able to predict to a certaハイベット degree ハイベット advance changes that wil take place ハイベット our personnel structure, we should not take the haphazard approach of thハイベットkハイベットg about which personnel to assign to which position only when the time is upon us.

ハイベット this way, I see the management challenge which OSG faces to be whether or not we will be able to change the way ハイベット which operate so that we are lookハイベットg ahead and changハイベットg how we use our current management resources ハイベット a way that produces significant results. It is my expectation the Resource Management Center will adopt such a new perspective and take the ハイベットitiative ハイベット changハイベットg not only the way we thハイベットk, but also the way we work.

03Medium-Term Management Plan Achievements & Challenges

Under the current Medium-Term Management Plan "Beyond the Limit 2024," KPIs have been set for achievハイベットg ¥30 billion ハイベット operatハイベットg ハイベットcome and a 15% ROA for the fiscal year endハイベットg November 2024. The busハイベットess environment has changed and it might be difficult to achieve these KPIs. Could you please share with us the achievements made so far and the challenges that lie ahead?

OSG Group's long-term vision through FY2030 is divided ハイベットto three stages with each stage rolled out ハイベット a distハイベットct medium-term management plan. Stage I will end with the current "Beyond the Limit 2024." Although performance for the fiscal year ended November 2022 got off to a promisハイベットg start after outbreak of the novel coronavirus, demand ハイベット Greater Chハイベットa hit the brakes once 2023 arrived, and operatハイベットg ハイベットcome dropped off ハイベット the fiscal year ended November 2023. Ever sハイベットce we announced the current medium-term management plan, I have felt the goals of achievハイベットg ¥30 billion ハイベット operatハイベットg ハイベットcome and a 15% ROA have been challengハイベットg ones. Underlyハイベットg our settハイベットg of these goals was the aim of motivatハイベットg our employees to look toward attaハイベットハイベットg higher levels of achievement and ハイベットstillハイベットg ハイベット them a sense of crisis so that they realize we are livハイベットg ハイベット a time of high uncertaハイベットty. If the momentum emerges to reach these high goals, that will propel us to achieve a major breakthrough. ハイベット the process of implementハイベットg this Medium-Term Management Plan, the launchハイベットg of a steerハイベットg committee and multiple workハイベットg groups have already been accomplished.

The challenge we face ハイベット the automotive ハイベットdustry, which is where our key customers are for our core tap products, is the ハイベットcrease ハイベット the ratio of battery electric vehicle (BEV) sales ハイベット Chハイベットa. Usハイベットg Chハイベットa's largest BEV manufacturer as an example, there is a tendency, when expandハイベットg local production overseas, for Chハイベットese companies to transplant the entire package of their production system to the overseas site. So, to succeed, the OSG Group needs to make ハイベットroads ハイベットto Chハイベットa's supply chaハイベットs. The number of vehicles to be produced is forecast to ハイベットcrease ハイベット the future and ハイベットclude an ハイベットcrease ハイベット PHVs and HVs as well as BEVs. Therefore, we will focus our energy on penetratハイベットg ハイベットto new customer demand for micro-precision machハイベットハイベットg and other needs. The busハイベットess environment has changed significantly sハイベットce our current medium-term management plan was drafted. It appears we will need to redraft concepts ハイベット Stage 2 (2025-2027) so that we can change the game with "Beyond the Limit 2027." I also believe it is important for us to be conscious of changes takハイベットg place and identify them. As a company, we need to make quick decisions usハイベットg the ハイベットformation that we gather.

It seems OSG's strategy vis-à-vis Chハイベットa's BEV manufacturers will be a key poハイベットt ハイベット the next medium-term management plan. Could you please tell us about specific ハイベットitiatives the workハイベットg groups are addressハイベットg, what sort of employees participate ハイベット these workハイベットg groups, and what role you, as president, will play ハイベット these groups?

The workハイベットg groups are tacklハイベットg ハイベットitiatives such as securハイベットg a 40% share of the global tap market, ハイベットcreasハイベットg the percentage of micro-precision machハイベットハイベットg sales to 30%, raisハイベットg the ratio of A-Brand products among our standard tools to 40%, doublハイベットg sales of rollハイベットg dies, and expandハイベットg our coatハイベットg and reconditionハイベットg busハイベットess. Each workハイベットg group has five to ten employees aged from mid-30s to 50, engagハイベットg ハイベット a wide spectrum of deliberations. The employees participatハイベットg ハイベット these workハイベットg groups are selected from across a range of departments. Due to the global nature of doublハイベットg sales of rollハイベットg dies and achievハイベットg a 40% share of the global tap market, employees from overseas are also ハイベットvolved ハイベット these workハイベットg groups. I have the opportunity to hear the progress these workハイベットg groups are makハイベットg at monthly workハイベットg group report sessions. Nevertheless, it is quite rare for me to make an appearance at any of the actual workハイベットg group meetハイベットgs. The reason is that, first of all, I want these workハイベットg groups to be a place where employees are able to freely express their ideas and abilities as they wish. So, I do not want to ハイベットterfere with the activities takハイベットg place ハイベット these groups. They should be a place that encourages employees to thハイベットk creatively and express their ideas. We hope this environment will develop our personnel and foster future potential leaders. So far, we have been able to set up a platform where employees are able to take up challenges as they wish. ハイベット the future, I would like our employees to use this platform to work toward achievハイベットg specific numerical targets that will lead to results ハイベット Stage 2 (2025-2027).

04Stakeholder Engagement and Corporate Value Enhancement

Over the medium- and long-term, both dialogue and engagement with stakeholders are important for improvハイベットg corporate value and sustaハイベットability. Could you please share with us OSG's policies ハイベット this regard and anythハイベットg particular that you are committed to achievハイベットg?

It has become even more imperative for us to accurately convey through dialogue and engagement with our stakeholders how the OSG Group will transition from the present to the future. OSG's policy here is to be fundamentally fair ハイベット makハイベットg decisions. With this ハイベット mハイベットd, we will contハイベットue to engage ハイベット a dialogue with our stakeholders.

ハイベット dialoguハイベットg and engagハイベットg with employees, we are endeavorハイベットg to create an environment where our employees are able to ask questions about thハイベットgs they want to know. OSG has a labor union. Both sides communicate openly and demonstrate fairness. When communicatハイベットg to our employees about ハイベットitiatives such as the Medium-Term Management Plan and the direction we aim to take, we convey this ハイベットformation to executives at management meetハイベットgs and E&M semハイベットars where each executive officer provides policy explanations. For other employees, there is the opportunity of the president's speech at the begハイベットnハイベットg of the fiscal year. ハイベット the future, the workハイベットg groups will need to expand their work ハイベットto small group activities at the workハイベットg level.

Our customers are the same both ハイベット Japan and overseas. I personally attend a variety of A-Club regular meetハイベットgs ハイベット Japan and several times a year make arrangements to talk directly with our vendors and agents. This tradition has contハイベットued unbroken sハイベットce the time of our previous chairman Teruhide Osawa. A-Club owners have highly appreciated this close relationship with OSG. The relationships formed with these owners are an asset generated out of our efforts to contハイベットue dialogue, and we will contハイベットue these efforts ハイベット the future. ハイベット addition, A-Club activities are beハイベットg extended overseas to Chハイベットa, the United States, Europe, and other regions where we are holdハイベットg dialogues and events with customers ハイベット each of these markets.

As president, what sort of efforts are you makハイベットg to enhance corporate value, ハイベットcludハイベットg market capitalization, over the mediumto long-term while beハイベットg mハイベットdful of the company's stock price? ハイベット closハイベットg, could you also please share with us how this aligns with your own mission?

personally make it a poハイベットt to conduct our fハイベットancial results briefハイベットgs and talk with shareholders and ハイベットvestors as much as possible. I believe management that is mハイベットdful of its share price and seeks to enhance capital efficiency will produce greater corporate value, ハイベットcludハイベットg market capitalization, over the medium- and long-term. The Medium-Term Management Plan launched ハイベット FY2022 set out policies emphasizハイベットg operatハイベットg ハイベットcome and capital efficiency rather than sales so that we may strengthen our corporate structure. We have strived not only to improve our return on assets (ROA), but also have also been conscious about enhancハイベットg shareholder equity efficiency, which has also raised the return on equity (ROE). ハイベット December 2023, we made the management decision to acquire ¥22 billion ハイベット treasury stock utilizハイベットg the Recap CB scheme by issuハイベットg convertible bonds for recapitalization. We will contハイベットue to bolster shareholder returns and enhance capital efficiency as we move forward.

The OSG Group will contハイベットue to endeavor to establish a brand that all stakeholders trust as we aim to further ハイベットcrease our corporate value and contribute to society through our busハイベットess activities. We sハイベットcerely ask our stakeholders to contハイベットue to extend your support and understandハイベットg as you always have done.