Nippon Electric Glass : Measures to Achieve Sustainable Growth and Corporate Value Enhancement

Measures to Achieve Sustainable Growth

and Corporate Value Enhancement

October 30, 2023

Nippon Electric Glass Co., Ltd

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Background

Major changes in the business environment since the formulation of the

current medium-term business plan "EGP2026"

• Business environment
• • Supply chain disruptions caused by the COVID-19 pandemic, rapid fluctuations in supply and demand following the subsequent resumption of economic activities, the impact of the situation in Russia and Ukraine, etc.
  • Simultaneous progress of global inflation and economic deterioration
• Status of the Group
• • Costs have increased due to changes in the business environment.
  • Lower capacity utilization due to weak market conditions has had a significant impact on soaring costs.
  • The outlook of the situation in the Middle East is uncertain.
  • Competition with Chinese companies is also intensifying.

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Future Initiatives

Enhancement of corporate value and improvement of PBR

• Improve profit structure through structural reform of businesses
• • Display business (May): Dissolution of South Korean subsidiaries
  • Glass fiber business (September): Bankruptcy proceedings of a Dutch subsidiary
• Formulate a new medium-term business plan "EGP2028"
• • Develop and execute new growth strategies
  • Five-yearplan starting from FY2024
  • • The details of the plan will be announced together with full-year financial results for the fiscal year ending December 2023 (scheduled for early February 2024).

We will work to enhance our corporate value and improve PBR.

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Outline of EGP2028

• Period

January 1, 2024 to December 31, 2028 (5 years)

• Management targets

In addition to net sales, operating profit, and operating margin targets that we have been setting, we will set a new ROE target of 8%.

• We will work to enhance our corporate value and improve PBR.
• • Target values of net sales, operating profit, and operating margin are currently being finalized.

• Business strategy
• 1. Expansion of strategic businesses
  2. Creation of future businesses through research and development
  3. Strategic investment
  4. Structural reform of existing businesses
  5. Strengthen our supply chain
• Financial strategy
• 1. Reduction of cross-shareholdings
  2. Asset reduction
  3. Balance sheet management and enhancement of shareholder returns
• Sustainability strategy
• 1. Promotion of carbon neutrality
  2. Human resource strategy
  3. Supply chain management

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Business Strategy

1. Expansion of strategic businesses
2. • Focusing mainly on the fields of energy, medical care, environment, and food, we will leverage our strengths in special glass and allocate resources aggressively to business with promising growth opportunities to expand strategic businesses.
   • We will expand device businesses that will increase the added value of glass products.
3. Creation of future businesses through research and development
4. • We will bolster research and development resources particularly in the fields of energy, medical care, environment, and food.
   • We will actively collaborate with universities, research institutes, venture companies, etc.
5. Strategic investment
6. • We will establish a budget for strategic investment and actively undertake M&A, strategic alliances, business investments, etc.

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Business Strategy

1. Structural reform of existing businesses
2. • Develop high value added products and strengthen commercialization.
   • Leverage all-electric melting technology to increase productivity.
   • Reduce cost to build a strong business foundation.

(efficient operation of resources, utilization of digital transformation, review of procurement, operational/manufacturing process reform, etc.)

1. • Thoroughly evaluate business profitability to determine whether to continue to invest in, downsize, or withdraw from existing businesses.
2. Strengthen our supply chain
3. • Take measures against procurement risks arising from economic conditions, logistics disruptions, etc.

(Procure from multiple suppliers, prepare multiple distribution routes, and forming strategic alliances with business partners)

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Financial Strategy

(1) Reduction of cross-shareholdings

In consideration of changes in the business environment, we will evaluate the appropriateness of shareholdings both quantitatively based on cost of capital and qualitatively based on holding purposes to further reduce cross-shareholdings and their proportion in consolidated net assets.

		Changes in Cross-shareholdings
(Millions of JPY)				(Number of stocks)
		Amount on the
				Number of
			balance sheet			stocks

Ratio to net assets: 8.0%

Continue reduction

2023
(end of
September)	7
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Financial Strategy

(2) Asset reduction

We will dispose of any non-core assets arising in the course of "EGP2028," structural reform of businesses, etc., as appropriate in order to increase asset efficiency.

(3) Balance sheet management and enhancement of shareholder returns

We will work to enhance shareholder returns while managing our balance sheet in consideration of financial stability and capital efficiency and securing retained earnings to prepare for future growth.

Share repurchases

(We will carry out share repurchases of 50 billion yen in total by the end of December 2026.)

Stable dividend

(Dividend on equity ratio (DOE) of 2% or above)

Enhance dividends based on performance, financial condition, growth investment, etc.

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Share Repurchases

• We will carry out share repurchases of 50 billion yen in total by the end of December 2026.
• As Phase 1, we will carry out share repurchases of 20 billion yen in total during the period from

November 1, 2023 to February 29, 2024.

(*Refer to the "Notice of Share Repurchased" announced today.)

(Millions of JPY)		Changes in Dividend and Share Repurchases

Dividend Share repurchases

2023 to 2026:

50 billion yen in total

Phase 1

November 2023 to February 2024

20 billion yen

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Share Repurchases

【Phase 1】

1. Reason for the share repurchases

To improve capital efficiency and to enhance shareholder returns

2. Details of the share repurchase program

(1) Type of shares to be repurchased	Common shares of the Company
(2)	Total number of shares to be repurchased	Up to 8 million shares
		(This number represents 8.60% of total
		outstanding shares excluding treasury stock)
(3)	Total repurchase amount	Up to 20 billion yen
(4)	Repurchase period	From November 1, 2023 to February 29, 2024
(5)	Repurchase method	Repurchase by means of market trades on the
		Tokyo Stock Exchange

(Reference)

Treasury stock held by the Company as of September 30, 2023

Total number of outstanding shares (excluding treasury stock): 93,054,725 shares

Total number of treasury stock:

6,468,521 shares

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