Message from the President

In fiscal 2025, which ended December 31, the Nisshinbo Group recorded net sales of ¥502.3 billion, an increase of ¥7.5 billion year on year, while operating income rose ¥9.8 billion year on year to ¥26.4 billion. Ordinary income increased 20.2% to ¥29.3 billion, and net income attributable to owners of the Company increased 35.4% to ¥13.9 billion.

The primary driver of this increase in both sales and profits was expanding demand in the Wireless and Communications business, where an increase in high margin projects led directly to profit growth alongside higher sales. In the Micro Devices business, we announced a policy to implement structural reform similar to that undertaken at Japan Radio Co., Ltd. (JRC), with the effects expected to begin appearing from the second half of fiscal 2026.

In addition, from the perspective of building a foundation for future growth, in 2025 we thoroughly prioritized investment expenditures and restrained spending we considered less important. In this way, fiscal 2025 marked a vital first step toward strengthening our earnings structure while laying the groundwork for the next stage of growth.

The purpose of the Blueprint for Transformation is not to improve performance for a single fiscal year, but to transform our business structure into one capable of generating sustainable profits over the medium to long term.

The benchmark is clear: whether we can consistently achieve an operating margin of 10% and a return on invested capital (ROIC) of 7%.

These criteria do not necessarily align with investor perspectives. Investors tend to place primary emphasis on maximizing capital efficiency and investment returns, and to expect increases in corporate value, dividends, and share prices. In contrast, the Nisshinbo Group’s criteria place emphasis on sustainable business growth and strengthening earning power, with a focus on building a stable management foundation for the Group as a whole.

Based on the premise that ROIC must exceed the weighted average cost of capital (WACC) (ROIC ≥ 7%), we determined this as a key financial condition.

In addition, to improve earning power while reducing interest-bearing debt and improving capital efficiency, we established a consolidated operating margin of at least 10% as our earnings target.

How will we achieve an operating margin of 10%? First, I instructed each business to organize the assumptions and measures necessary to generate profits and present a reproducible path toward achieving them.This is because capital should be allocated to businesses with a clear path to sustainable profitability and growth.

Based on this thinking, in October 2025 we decided to withdraw from the nonwoven textile business. Even if we expand high-value-added products in the high-price range, we determined that it would be difficult to maintain sustainable competitiveness against competitors, including overseas manufacturers, unless we could secure high-volume products. I also believed that making this decision early would help ensure future opportunities for employees involved in the business.

In assessing whether a business can generate an operating margin of 10%, we will carefully evaluate each technology and market based on product categories and the growth potential of their global markets.Decisions such as withdrawals and transfers are difficult, but we cannot execute this blueprint if we hesitate.

While reassessing the materials and production technologies we have cultivated over many years and conducting a thorough inventory of technologies, we will also redeploy and better utilize talent associated with high-potential technologies.

Note: In parallel, we are also formulating the Blueprint for Transformation (financial strategy), which organizes capital allocation and financial policies.

The business transformations outlined in our Blueprint for Transformation fall broadly into three areas:

1. (1) Accelerating growth in the Wireless and Communications business
2. (2) Achieving structural reform of the Micro Devices business
3. (3) Addressing the Materials business

R&D at Nisshinbo Holdings has historically focused on the chemical field. We have reorganized this approach and shifted toward wireless and communications technologies, and in April we launched the Future Innovation Division to create new business models that will become the next pillar of growth, centered on wireless and communications technologies.
Let me explain each of these initiatives.

• ● Accelerating Growth in the Wireless and Communications Business / Creating New Business Models

  Within our Blueprint for Transformation, we regard the Wireless and Communications business as the business with the greatest potential to strengthen “earning power.”

  In 2025, Japan Radio Co., Ltd., moved quickly to carry out structural reform and improve its profitability, and the structural reform project is progressing steadily. While advancing organizational restructuring from July 2025, we implemented an early retirement incentive program at the end of November 2025, which helped reduce fixed costs. In 2026, as Phase 2 of the structural reform project, we will further advance organizational restructuring and other initiatives, with Japan Radio Co., Ltd., and KOKUSAI DENKI Electric Inc. (KDE) acting as the two core drivers of our transformation into Wireless Communications Total Engineering Company. Through organic growth in the Wireless and Communications business, we are targeting net sales of ¥300.0 billion and operating income of ¥30.0 billion in 2030. Demand for defense-related special equipment, public-sector, and marine businesses remains extremely strong, and we see strong business opportunities. For this reason, I am confident in achieving these targets. We also aim to achieve them ahead of fiscal 2030.

  At the same time, net sales of ¥300.0 billion and operating income of ¥30.0 billion are not the end goal. To achieve further growth, we must also accelerate research and development in new fields. To grow the Nisshinbo Group as a whole to an operating margin of 10%, research and development in new fields will be critical. We therefore established the Future Innovation Division as an R&D organization responsible for creating new businesses. Details regarding our priority fields and related areas are provided on the Research and Development section on page 30.

  

• ● Achieving Structural Reform of the Micro Devices Business

  In the Micro Devices business, we will first prioritize improving profitability and advance structural reform at Nisshinbo Micro Devices Inc. As Phase 1, we implemented an early retirement incentive program. As we reduce fixed costs through this initiative, we will also move forward with a fundamental review of business operations and structures as Phase 2. At the same time, regarding the future vision for the semiconductor business, we will reset our previous policies and start from a blank slate and redraw the blueprint from scratch.Looking broadly at the global semiconductor industry, Japanese companies are relatively weak in chip manufacturing, while demonstrating strengths in materials. The Nisshinbo Group’s Micro Devices business is centered on analog semiconductors.Unlike digital semiconductors, which require enormous capital investment in cutting-edge processes, the source of competitiveness in analog semiconductors lies in the quality of development talent with expertise in circuit design and systems knowledge. Leveraging the strengths of the Nisshinbo Group’s human resources, we will redesign this business into one with higher value.

• ● Addressing the Materials Business

  We have redefined the Materials business under the concept of “Sustainable Smart Materials—Materials Industry Supporting a Sustainable Society.” While the Automobile Brakes business is not large in terms of market size, its operating margin is already approaching the 10% target. The Textiles and Chemicals businesses are leveraging their core technologies while focusing on expanding the use of chemical materials in electronics applications related to growth areas such as decarbonization, electrification, communications, and renewable energy. We have also continued materials research, accumulating technologies and expertise in these areas. Globally, chemical materials are a field in which Japanese companies demonstrate strengths, and the Nisshinbo Group also has highly experienced chemists. While monitoring market trends, we will consider redesigning these businesses to connect them with new business opportunities. At the same time, we will take steps to restructure or exit businesses that do not achieve an operating margin of 10%, as well as businesses that do not align with the Materials business policies outlined in the blueprint.

Rather than focusing on what lies 10 years ahead, which is difficult to predict, we need to identify business opportunities over the next five years and formulate the growth and talent strategies needed to support them.

In the current medium-term management plan, we have identified “reduce management risk by further strengthening the management base” as one of our key measures. I believe initiatives related to respect for human rights, business operations that take environmental impact into consideration, the recruitment and development of diverse human resources, the creation of an environment in which diverse employees can thrive, the establishment of responsible supply chains, and the enhancement of the effectiveness of corporate governance are generally progressing according to plan.

At the same time, looking ahead to medium- to long-term changes in Japanese society, the decline in the working population associated with population decline is becoming an unavoidable reality, and this issue is expected to become even more severe around 2040. In manufacturing workplaces, securing talent will become increasingly difficult. While AI-driven automation is certainly advancing, people are still the ones designing, operating, and improving those automated systems, and there remain many areas in society and at workplaces where human involvement is indispensable.

The same is true of the Blueprint for Transformation discussed earlier. Without the talent capable of realizing the initiatives described in the blueprint, nothing can be accomplished. The driving force behind transformation is empowered people and organizational culture, and I regard my vision as president, the Blueprint for Transformation, and the people and organizational culture needed to realize it as the three core elements driving reform at the Nisshinbo Group.

At the Nisshinbo Group, in addition to securing talent, we are placing emphasis on enhancing education and training opportunities so that employees with both motivation and capability can continue to grow. Regarding the engagement survey that we conduct every year, I also recognize that our scores need to improve. Employee engagement is closely linked to business performance, and creating strong businesses, achieving high profit margins, and improving employee engagement are inseparable.These efforts could take time, but by continuing to address them persistently, we will strengthen our talent foundation and improve our organizational culture.

With respect to workforce diversity, I no longer view it as a special initiative, but rather as a prerequisite for corporate management. At the same time, looking at the Nisshinbo Group’s current situation, I recognize that there remains substantial room for improvement in areas such as the percentage of female managers and the rate of childcare leave taken by male employees, even compared to industry averages, making these important issues. In particular, the Wireless and Communications business tends to lag other Group businesses in these areas, and one possible reason might be the nature of the business, which involves a significant amount of on-site work. Taking these business characteristics into account, we will pursue more in-depth improvements to achieve sustainable growth. 

 Regarding supply chain risks, one geopolitical risk that is currently becoming increasingly apparent is the procurement of materials that depend heavily on specific regions. Various international concerns, including human rights issues, have been raised regarding supply chains involving rare metal mining, and we clearly recognize the importance of procurement in this area. Accordingly, we intend to reduce supply chain risks by diversifying procurement sources for raw materials used in a wide range of industrial products, including magnets.With respect to governance, I have been advancing various reforms regarding the operation of the Board of Directors since before becoming president. Because Board of Directors meetings had previously required significant time for reporting matters, such matters are now organized in Board of Management by the day before Board meetings, and we have revised operations so that strategic themes—including growth strategies for the Wireless and Communications business and policies for evaluating underperforming businesses—can be discussed at the Board meeting itself based on advance materials. There are also many difficult issues and time-intensive themes that cannot be fully discussed within the framework of the Board of Directors meetings, which are generally held once a month.Accordingly, in 2026 we intend to again review the management issue list discussed previously and establish a cycle for ongoing strategic discussions rather than one-time discussions. In addition, regarding the sharing of information with the Nomination Committee and Remuneration Committee, because these committees are chaired by outside directors, I would like to place particular emphasis on enhancing the information provided to them.

I would like to express my sincere gratitude to all stakeholders who support our company on a daily basis, including employees of the Nisshinbo Group.

Three years have passed since March 2023, when the Tokyo Stock Exchange began asking companies to maintain “management awareness of capital cost and share price.” Many investors call for measures such as share buybacks and dividend increases in order to improve capital efficiency and share prices. However, I believe that the first thing the Nisshinbo Group must do is reorganize its business portfolio, improve capital efficiency, and demonstrate a recovery in business performance to shareholders and investors through actual results. Based on this approach, regarding shareholder returns, we will set the annual dividend per share at a minimum of ¥36 and aim for a dividend payout ratio of 40% by fiscal 2026. While prioritizing growth investments, there is no change to our policy of share buybacks in a flexible and timely manner.

Regarding operational sites, I am reminded that the Japanese economy is supported not only by large corporations but also by a great many small and medium-sized enterprises. Neither the Nisshinbo Group’s manufacturing operations nor its supply chains could be sustained by our efforts alone; they are made possible by the support of our many partner companies and business associates. Going forward, together with all stakeholders, we will continue advancing our management by staying closely grounded in on-site realities.

I sincerely appreciate your continued understanding and support for the Nisshinbo Group’s initiatives.