Tdk Corporation · TSE:6762
Tdk — Investor Day (May 2024)
55 slides from Tdk's investor day presentation, May 22, 2024
Slide 1: TDK Transformation: Long-term Vision & New Medium-term Plan
TDK Transformation to enhancement of enterprise value Long-term Vision & New Medium-term Plan TDK Corporation IR&SR Group May 22, 2024
Slide 2: Index
目次 Index 1 Long-term Vision 2 Review of Previous Medium-term Plan 3 New Medium-term Plan 4 Pre-Financial Capital Supporting Transformation 5 Strategy by Segment TDK Investor Day 2024 Copyright © TDK Corporation, 2024. 2
Slide 3: Long-term Vision
1 e Long-term Vision
Slide 4: My commitment as President & CEO
My commitment as President & CEO • We have formulated our vision of what we want to be 10 years from now (long-term vision). We have back-casted from our vision for 10 years to identify the path to enhancing our enterprise value. • Based on our materials x processes x software technologies, we will
Slide 5: TDK Value Structure
TDK Value Structure Contribute to culture and industry through creativity “Vision” “Courage” “Trust” TDK Transformation ~ Accelerating transformation for a sustainable future ~ Key Issues (Materiality) which should be addressed toward the realization of Long-term Vision Action plan for the next 3 ye
Slide 6: TDK Transformation
TDK Transformation contains two of our wishes Long-term vision TDK Transformation Accelerating transformation for a sustainable future • Contribute to the transition towards a sustainable future by accelerating the transformation of society and advancements in technology enabled by electronic device
Slide 7: Contribute to Social Transformation
Contribute to Social Transformation Medical/Health Care Beyond 5G Renewable Energy Robotics IoT AR/VR Mobility ADAS/EV Industrial robots helping labor-saving Ultra-high accuracy Wearable Transformation Realize a circular economy sensors that back safety devices operation Social Improve efficiency in
Slide 8: Acceleration of TDK Transformation
Acceleration of TDK Transformation • Contribute to the transition towards a sustainable society as the No.1 partner based on establishing leading position by electronic devices developed through leveraging cutting-edge innovation in materials, processes and software technology in organic growth and
Slide 9: Defining key issues (Materiality)
Defining key issues (Materiality) • Key issues is set to realize long-term vision and enhance enterprise value through verbalization of sources of competitive advantage which have supported long-term growth. ▍Basic policy of key issues (Materiality) Value creation and establishment of competitive ad
Slide 10: Review of Previous Medium-term Plan
Review of Previous 2 Medium-term Plan
Slide 11: Review of the previous medium-term plan – Value Creation 2023
Review of the previous medium-term plan – Value Creation 2023 • Achieved positive FCF after shareholder returns as a result of optimizing capital allocation in line with change of business environment. • Several revenue sources following small capacity batteries have progressed to a certain level: P
Slide 12: Improvement of capital efficiency remain challenges
Improvement of capital efficiency remain challenges ▍Capital allocation in VC2023 FY3/22 to FY3/24 Financial guidance in VC2023 Initial plan Result (¥ bn) FCF after Disposal of shareholders returns • Accelerate growth through inclined capital equipment +52.9 allocations in the rechargeable batteries
Slide 13: New Medium-term Plan
New Medium-term 3 Plan
Slide 14: Position of the new medium-term plan
Position of the new medium-term plan • The new medium-term plan is positioned as the plan to strengthen fundamental business to realize the Long-term Vision. Enhancement of Enterprise Value Contribute to the transition towards a sustainable future by accelerating the transformation of society and Lo
Slide 15: New medium-term plan: Key points
New medium-term plan: Key points • To achieve what we want to be in the next decade, we are committed to strengthening management focusing on cash flows, enhancing business portfolio management, increasing pre-financial capital and engaging with investors. Maximize FCF generation Enterprise value =
Slide 16: Financial/Pre-financial KPIs
Financial/Pre-financial KPIs • Through enhancement of proactive business portfolio management, we aim to achieve KPIs that exceed plans. How we want to be in the FY3/24 FY3/27 medium-to long-term Net sales [¥ bn] 2,500.0 Growth (CAGR) 2,103.9 (10% or more) (approx. 5%) Financial indices ROE 7.9% 10%
Slide 17: Aiming for operating cash flow growth
Aiming for operating cash flow growth • We will improve cash flows over the medium- to long-term by enhancing our earning capability through organic growth, M&A, and proactive business portfolio transformation. ▍Operating cash flow (OCF) history on a three-year moving average (¥ bn) ¥340 bn Level 30
Slide 18: Enhancing business portfolio management
Enhancing business portfolio management • Have evolved from the previous double-axis investment allocation map to a double-axis business portfolio map. • Appropriately address businesses that fall below the minimum hurdle rate and prioritize allocating capital into growth areas. ▍Business portfolio
Slide 19: Examples of business portfolio management
(Reference) Examples of business portfolio management ▍Audio tape business ▍Passive components(SAW devices) business ▍Sensor application products business Divested at an appropriate time in line Increased added value and achieved turnaround by Applied magnetic and thin film technologies with the ind
Slide 20: Business portfolio strategies
Business portfolio strategies • We will strengthen businesses with high profitability and capital efficiency to achieve higher operating profit margins and BizROA (ROIC). ▍Chart for growth and capital efficiency by segment ▍Net sales/BizROA by segment FY3/21 FY3/24 FY3/27 30.0% FY3/24 FY3/27 Energy
Slide 21: Growth strategies for priority growth businesses
Growth strategies for priority growth businesses Opportunities and trends Products Measures/drivers for growth MLCCs, • Continuous improvement in supply capacity of high- Passive reliability products • Continued launch of high value-added products High components Automobile • Progress in xEVs and •
Slide 22: Financial strategies to enhance capital efficiency
Financial strategies to enhance capital efficiency Three directions Priority measures Enhance business portfolio • Improve BizROA (ROIC) of businesses that fall short of the 10% minimum hurdle rate and management determine the direction of the business. and BizROA (ROIC) • Determine areas for growth
Slide 23: Capital allocation plan (FY3/25 to FY3/27 accumulated)
Capital allocation plan (FY3/25 to FY3/27 accumulated) • We will strengthen sustained cash flow generation and achieve an optimal balance sheet structure by allocating FCF after shareholder returns to growth investments. (¥ bn) (¥ bn) Strengthen dialogue Contribute to society through Shareholder ret
Slide 24: Strengthen shareholder returns still more
Strengthen shareholder returns still more • We have changed our payout ratio target from 30% to 35% in our dividend policy. • We will enhance shareholder returns through flexible share buybacks, taking into account the situation of strategic investments. ▍Annual dividends and dividend payout ratio 3
Slide 25: Pre-Financial Assets Supporting Transformation
4 Pre-Financial Assets Supporting Transformation
Slide 26: Evolving the Ferrite Tree for further growth
Evolving the Ferrite Tree for further growth • The Ferrite Tree has continued to grow in response to changes in society. We will continue to evolve the tree ahead of social changes, such as green transformation and digital transformation. What is the Ferrite Tree ? • We have gained competitive advan
Slide 27: Pre-financial capital that backs TDK's value creation
Pre-financial capital that backs TDK’s value creation • TDK considers the following as capital capable of generating future cash flows and refers to them as “pre-financial capital” rather than “non-financial capital”. Technological capability Customer base • Deep connections to the world’s • Continu
Slide 28: Responding to market potential/needs in a cross-sectional manner
Responding to market potential/needs in a cross-sectional manner • Strengthening marketing, innovation, and incubation capabilities across the Group. Market-in Capture needs of market/customer to realize First-to-Market Customers TDK First-to-Market Concept-out Provide solution from conceptual base
Slide 29: Open innovation activities
Open innovation activities • Continuous exploring cutting-edge areas and future business investment possibilities through CVC activities. • TDK ventures has invested in 37 companies. • Fund size is US$ 350M as of 2024. Energy Clean Tech Next-Gen Materials Fund 1 Recycling to $50M battery materials G
Slide 30: Examples of new businesses: Data center-related components
Examples of new businesses 1. Data center-related components New businesses and products contributing to Eco-friendly data centers society Power saving, high-speed, high-capacity New Photoelectric high-performance Immersion technologies Storages in demand conversion servers liquid cooling Spin photo
Slide 31: Examples of new businesses: Human Machine Interface
Examples of new businesses 2. Human Machine Interface New businesses and products contributing to HMI society Ultra-compact and ultralight New Telecommunica- technologies Optics Operations Energy in demand tions FCLM Passive components Metalens Batteries Chip Antennas (Full Color Laser Module) MLCCs
Slide 32: Examples of new businesses: Solution business
Examples of new businesses 3. Solution business New businesses and products contributing to Sensors + Software society Predictive maintenance New technologies Not only detects motion but also predicts anomalies and in demand issues alerts. Automated machine learning Magnetic Current Temperature Batt
Slide 33: Group's culture focusing on diversity
Group’s culture focusing on diversity • German Executive Officer leads the global HR function and other team members have been also appointed to important positions from acquired companies around the world. ▍Acquired companies in the world Original TDK’s culture and HR capital • Traditionally, the c
Slide 34: Group governance
Group governance ▍Delegation of authority for agile, efficient decision-making ▍Global, open and flat culture • Separating supervision from execution since before. • TDK’s corporate culture is our stance of delivering value to customers through • An independent outside director serves as the chair o
Slide 35: Evolving corporate governance
Evolving corporate governance • Strengthen our board into a monitoring-oriented board • Introduction of an executive remuneration system linked to medium- to long-term enterprise value growth ▍Board composition ▍Structure of remuneration for executives and KPIs Outside: 3 Inside: 4 Outside: 4 Inside
Slide 36: Risk management
Risk management • Improve continuously a series of risk management activities from dentification of risks to implementation. ▍Potential risks over the term of new medium term plan Category Potential risks Slowdown of global economy, changes in social trends, soaring prices and personnel costs, hikes
Slide 37: Enhancing enterprise value through the pursuit of Quality
Enhancing enterprise value through the pursuit of “Quality” • We are instilling a concept of “Quality First” throughout the Group. This applies not only to product quality but also to a wide range of Quality improvements, such as improving production efficiency, improving yield rate, strengthening m
Slide 38: Strategy by Segment
5 Strategy by Segment Passive Components Sensor Application Products Energy Application Products Magnetic Application Products
Slide 39: Passive Components business strategy
Passive Components business strategy • Pursue continuous growth by providing timely products to the growing markets with leveraging materials, processes technology and quality capability. ▍ Targets for net sales and BizROA(ROIC) • Further strengthen high-reliability products for powertrains (¥ bn) C
Slide 40: Capacity expansion of passive components for automobiles
Capacity expansion of passive components for automobiles • Continuous capacity expansion of high value-added passive components by seizing the electrification demand. ▍ Estimated market demand for automotive passive ▍ MLCC production capacity ▍ Film capacitor production capacity components 12% 2 HVC
Slide 41: Sensor Application Products business strategy
Sensor Application Products business strategy • Based on the strategic concept of “Create different and Connect,” we have created new solution and achieved large market shares in focus markets. ▍ Targets for net sales and BizROA(ROIC) • Establish a “market-in” business approach, which captures marke
Slide 42: Sensor application products Positioning and capex
Sensor application products Positioning and capex • Strengthen investments in key products and high quality products, by capturing DX and EX trends. ▍ Sensor demand estimate by industry Strategic position Our sales target CAGR 8-11% Demand CAGR 6% Market-in Ind&HA ICT System Auto FY3/23 FY3/24 FY3/2
Slide 43: Magnetic Application Products business strategy
Magnetic Application Products business strategy ▍ Targets for net sales and BizROA(ROIC) (¥ bn) • Maintain MAMR technology leadership, accelerate development of CAGR 8-11% Strategies 248.4 HAMR technology, and prepare for mass production: BizROA 3.3% 200.6 4.0% • Optimize production capacity and ope
Slide 44: Launch of next generation head technology
Launch of next generation head technology • Pursue profitability turn around by continuous launch of next generation value added technologies, e.g.MAMR, HAMR and Tri-SA in the back of increasing demand trend of nearline HDD. ▍ Demand forecast of generated data and storage volume ▍ HGA Demand forecas
Slide 45: Energy Application Products business strategy
Energy Application Products business strategy • Pursue excellence in energy products and technologies through relentless technological innovation and empower people in their daily lives. ▍ Targets for net sales and BizROA(ROIC) • Maintain and enhance top position in the market for small capacity bat
Slide 46: Small capacity batteries Growth strategy
Small capacity batteries Growth strategy • We will support the evolution of small electronic devices, such as smartphones, through advanced and innovative technologies. ▍Increase in energy density with silicon anode • Offer new value through innovative technologies • Improve energy density by 30-40
Slide 47: Medium capacity batteries Growth strategy
Medium capacity batteries Growth strategy • Provide the optimal technologies according to the characteristics of the device and contribute to the acceleration of Energy Transformation (EX). ▍Medium capacity battery market demand growth • Superior Customer Service Propose and deliver products and tec
Slide 48: Evolving the Ferrite Tree
Evolving the Ferrite Tree Photo electronics Healthtech Technology area New Business RF devices for quantum computer Analog Computing LN thin-film FCLM Photo acoustic glucose SAW filter SpinPD monitoring Multilayer RF Thin-film RF Agritech InCellSense component Neuromorphic device Cardio- component T
Slide 49: Ending
Ending • We will accelerate the transformation within TDK through capabilities to envision the future, to execute the envisioned future, and capability of human resources transformation so that we can continue to contribute to social transformation. • We will deepen existing core technology strength
Slide 50: Appendix
Appendix Beyond 5
Slide 51: The history of TDK
The history of TDK Our venture spirit 1930: Dr. Yogoro Kato and Dr. Takeshi Takei invented “Ferrite,” a magnetic ceramic compound containing oxides of iron and other materials. Dr. Yogoro Kato (left) Dr. Takeshi Takei (right) 1935: Dr. Kato’s statement that “innovative work is the source of true ind
Slide 52: About TDK
About TDK TDK Corporation is a manufacturing company that produces worldwide cutting-edge electronic components, contributing to cultures and industries in the world through creativity. Other Passive Components ▍TDK at a glance ▍Sales by segment ¥51.8 bn ¥565.6 bn Energy Application Products Foundat
Slide 53: Something we have been passed on
Something we have been passed on • We have grown up with evolving the electronic material technology originated from ferrite and optimizing business portfolio Something Something we have changed we should not change Inductors Magnets Capacitors Magnetic tapes ⚫ Product & business portfolios ⚫ Unique
Slide 54: The path to realize the new medium-term plan
The path to realize the new medium-term plan Priority Measures Achieve organic growth of core businesses Strengthen business portfolio management Medium- to long-term Reinforce investments in core businesses FCF generation Acquire new technologies through M&A Address turnaround businesses Achieve th
Slide 55: Cautionary statements with respect to forward-looking statements
Cautionary statements with respect to forward-looking statements This material contains forward-looking statements, including projections, plans, policies, management strategies, targets, schedules, understandings, and evaluations about TDK, or its group companies (TDK Group). These forward-looking