Formulation of New Medium-Term Management Plan

The Kamigumi Group (the "Group") has formulated a new medium-term management plan with the fiscal term ending March 31, 2025 set as its final fiscal term in order to further improve its corporate value.

1. Review of the Former Medium-Term Management Plan (From the Fiscal Term Ended March 31, 2016 to the Fiscal Term Ended March 31, 2020)

In the former medium-term management plan with the fiscal term ended March 31, 2020 set as its final fiscal term, the Group established the business strategies of "Strengthening Business Foundations through Strengthening Core Business Platforms," "Boosting Sales & Marketing Capabilities through Personnel Development and Organizational Reform," "Expanding Businesses Using M&As, etc.," "Continuing its Growth Strategy through Creating New Businesses," "Bolstering Global Logistics," and "Strengthening Management Foundations through Social Contribution and Establishment of BCPs," and made efforts to achieve the final business performance goals.

(1) Strengthening Business Foundations Through Strengthening Core Business Platforms

In the port and harbor transportation business, we focused on opening new container terminals, enhancing facilities, etc., which improved our appeal to a shipping company and led to an expansion in the container trading volume. By establishing a joint holding company with Kawasaki Kisen Kaisha, Ltd. ("K" Line), we enjoyed technological and operational collaboration with port and harbor transportation companies operating under the "K" Line Group.

In the Import Division, encompassing import, export and warehouse businesses, we strengthened our storage capacity through dynamic capital investment in each region, and boosted our sales team and range of solutions to grow our trading volume. With our focus on gaining high value-added logistics center operations, we achieved a certain level of success, including the acquisition of the operation of a construction machinery manufacturer's parts center.

In the auto industry logistics business, we welcomed to the Group an operating company in the imported new vehicle preparation business, which recently we have focused on, and realized a large increase in trading volume.

In the heavy cargo, energy, and metal-related businesses, amid uncertainty in energy mix policies, including re-openings of nuclear power plants, our concerted sales efforts targeting construction projects for multiple types of power plants and heavy cargo transportation together with our securing of a base share in the metal-related business enabled us to maintain strong performance.

(2) Boosting Sales & Marketing Capabilities Through Personnel Development and Organizational Reform

Aiming to build a sales and marketing structure that performs efficiently and effectively, we have strengthened information sharing among our respective sales and marketing headquarters. As part of the reform of our human resource system, we revised our plan for personnel development.

(3) Expanding Businesses Using M&As, Etc.

As mentioned earlier, we are conducting M&As in the port and harbor transportation business and auto industry logistics business during the period of the medium-term management plan. Each of these moves has contributed to strengthening and expanding the Company's core businesses but the number of secured contracts did not reach the level that was initially targeted.

(4) Continuing Its Growth Strategy Through Creating New Businesses

As part of measures to effectively utilize business resources, we expanded utilization of solar power generation and undertook a wide range of growth strategies that leveraged the strengths of the entire Group.

(5) Bolstering Global Logistics Through Strengthening Overseas Operating Network and Launching Terminal and Third-Party Logistics (3PL) Businesses

We strengthened our operating network by opening overseas bases. While promoting participation in warehouse construction and terminal operation businesses mainly in Southeast Asia, we built a foundation overseas for terminal and logistics businesses.

(6) Strengthening Management Foundations Through Social Contribution and Establishment of BCPs

We worked on various social contribution activities during the period of the medium-term management plan. Through formulation of disaster BCPs, we constructed a system capable of ensuring business continuity in times of crisis.

(7) In Summary

As a result of the above efforts, while core businesses have grown steadily and overseas businesses have achieved successful outcomes to some extent in establishing bases, the Group failed to achieve the business performance goals, which were net sales of ¥300,000 million and recurring profit of ¥30,000 million, partly due to the severe economic environment. We identify the following as the major contributing factors: (i) the initial target level for exploring new cargos and customers in the core businesses was not achieved, (ii) Activity was low in both feasibility studies for new business and M&A, and (iii) more time than expected is required before overseas businesses contribute to the Group performance.

Responding to the need to clarify our corporate vision and build a path for further growth in light of the above results, we formulated a new five-year medium-term management plan with the aim to strengthen core businesses while creating a new growth base.

2. New Medium-Term Management Plan (From the Fiscal Term Ending March 31, 2021 to the Fiscal Term Ending March 31, 2025)

(1) Objectives of New Medium-Term Management Plan

The following key strategies were established for the new medium-term management plan: "Strengthening Core Businesses" and "Strengthening Profitability of Overseas Businesses" as part of efforts to establish and maintain steady corporate growth, and "exploration of new businesses" that are not constrained by the boundaries of the logistics business.

Excellent personnel, of course, will be essential in order to make strong headway in those strategies. During the period of this medium-term management plan, we plan to strengthen hiring and enhance personnel development.

Our management will also need to embrace the mindset of coexisting with society in order for the Group to operate on a sustainably continual basis as a logistics company. While taking a hard look at what it means to be a logistics company, the Group will strive to operate according to the principles of ESG (Environment, Society, and Governance).

(2) Goals of Business Performance

We have set the business performance goals for the fiscal term ending March 31, 2025 as follows:

Net sales: ¥310,000 million (up 11.2% from the fiscal term ended March 31, 2020)

Operating profit: ¥30,000 million (up 21.6% from the fiscal term ended March 31, 2020)

Recurring profit: ¥31,000 million (up 17.4% from the fiscal term ended March 31, 2020)

(3) Investment Plan

Capital investments are essential to expand capacities and improve the efficiency of cargo handling toward achieving the "Strengthening of Core Businesses." During the period of this medium-term management plan, the Company will actively implement capital investments focusing on logistics-related facilities at the same level as in past years.

(4) Shareholder Returns

For returns to shareholders during the period of this medium-term management plan, we will follow the existing policy set forth below while continuing to strive to enhance aggregate return of profit and improve capital efficiency.

(i) Implementation of stock dividends with a targeted consolidated payout ratio of 30%

(ii) Implementation of continued purchases and cancellations of treasury stocks

3. Key Strategies

(1) Strengthening Core Businesses

(i) Exploring new cargos

We will explore new cargos to become new revenue pillars on top of the Company's core cargos (vegetables and fruits, grain, feedstuffs, and energy-related cargos). For example, these efforts will leverage the Group's information and sales networks to carry out analysis and perform feasibility studies on cargos of future potential growth markets, including refrigerated and frozen cargo and e-commerce-related cargo inside cities.

(ii) Proposing proactive logistics innovations to customers

The increasing shortage of labor currently occurring in the logistics industry poses sizable risks of missed opportunities and overstocking for the cargo consignors wishing to secure stable supply chains. By coming up with proposals for logistics plans that leverage a nationwide network, the Group is able to dispel customer concerns by demonstrating its capability as 3PL and 4PL operators through offering optimization of lead times, reduction of logistics costs, efficient management of warehouse storage and retrieval, and therefore, reduced environmental burden.

The Group will work to fulfill customers' needs and gain their trust, thereby expanding its share and improving company recognition by focusing on the needs of logistics rationalization, which refers to the practices of logistics in-house manufacturing and sharing shipments, and providing simple, low-cost, quick and convenient services.

(iii) Proposing logistics strategies with the scope of the transition to new energies

Looking to reduce the environmental burden in the logistics field, we will actively consider the establishment of transport and storage technologies for new energy resources such as hydrogen and biomass and initiatives for logistics equipment and facilities that incorporate solar power, wind power, hydrogen fuel cells, etc.

(2) Strengthening Profitability of Overseas Businesses

Overseas, we will continue to carefully investigate the logistics demands of each region and proceed with investments in business fields for which the Group has a proven track record in Japan.

(i) We will seek further increases in profitability through initiatives to improve operation of a logistics center and efforts to acquire more orders for cargo handling services at container terminals in which the Group is an investment participant.

(ii) There is an expectation of an increase in infrastructure construction projects in developing countries as well as in heavy cargo transportation and installation projects in line with an accelerating trend to transfer production bases from China. We will focus on undertaking those projects.

(iii) Needs for temperature-controlled logistics facilities are increasing in tropical and subtropical regions such as the ASEAN region. Looking to capture this demand, we will conduct feasibility studies of business models that leverage the knowhow of the Group.

(iv) As part of the cross-border transportation within the ASEAN Economic Community (AEC), there is a burgeoning need for logistics centers and truck transportation. We will conduct feasibility studies to find the appropriate scope of business participation by the Group with the assumption of making capital investment.

(3) Exploration of New Businesses

While promoting the exploration of new customers and cargos in the logistics business, we will flexibly consider new ideas regarding the creation of profitable businesses with enthusiasm in a broad range of fields outside of logistics.

(4) Initiatives to Secure and Develop Human Resources

While pressing forward with the key strategies in Japan and overseas, we will give priority to developing and training personnel with general and broad perspectives. At the Company, we have been in the process of reforming the human resources system since the former medium-term management plan, with efforts focused on improving the working environment and revising the personnel development plan. In the period of this medium-term management plan, we will further improve our human resource policy, including strengthening hiring and improving training systems, with the objective of securing and training personnel with competencies in planning, proposals, and execution suitable for a general logistics company.

For inquiries on this matter, contact : Public Relations Dept.

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