Makita : Report 2024 (Single-page view) (for printing)

Table of Contents

Management for Sustainable Growth

3 President's Message

Makita's Value Creation

9 Value Creation History

11 Value Creation Process

13 Makita's Strengths

15 Evolving into a Supplier of a Comprehensive Range of Cordless Products

1. Contributions to Solving Social Challenges

1. Financial & Non-financial Highlights

23 Message from the Director of the Administration Department

27 Business Overview

Makita's Sustainability Management

1. Progress of Sustainability Management
2. Society (Disclosure of Human Capital, etc.)

1. Environment
   39 Initiatives in Line with the TCFD Recommendations

1. Corporate Governance 49 List of Directors
   51 Messages from Outside Directors

Corporate Data

1. 10-YearSummary

1. Stock Information
2. Corporate Data

About This Report

Editorial Policy

The Makita Report is published with the objective of presenting the Company's initiatives for creating value over the medium- to long-term in a way that integrates both financial and non-financial information. In preparing the report, information that is particularly important for the Company's value creation was compiled concisely,

referencing­ international frameworks such as those of the International Financial Reporting Standards Foundation (IFRS). Please see the Company website (https://www.makita.biz/) for more information. Also, financial ­information, environmental information, and governance information is presented in detail in the Additional Information, Earnings Release, and Fact Sheet in the Investor Relations section of the Company's website, Environmental Report, and the Corporate Governance Report, respectively.

• This report covers 54 companies, including Makita Corporation and its 53 consolidated subsidiaries (as of March 31, 2024), but some of the information reported only covers Makita Corporation.

Reporting Period FYE 2024

(April 1, 2023 to March 31, 2024) However, information from outside of this period is reported when it is appropriate to the presentation of past circumstances and data as well as recent examples.

Issued: August 2024

Main Content

Financial Information

Non-financial Information

Periodic Report

• Annual Securities Report
• Financial Results
• Fact Sheet
• Environmental Report
• Corporate Governance Report

Makita Report

Latest Information

Makita's website

The Makita Group's FYE 2024 performance was impacted by decreased production and inventory reductions in

reaction­ to stagnant housing investment due to fiscal tightening policies around the world as governments scrambled to curb inflation. Nevertheless, operating profit recovered to ¥66.2 billion, about 70% of our peak performance. During the COVID-19 pandemic- which had driven the adoption of stay-at-home­lifestyles-higher demand drove production. A sudden decline in demand as the market returned to normal resulted in inventory growing to a record high in September 2022. However, we then cut back production in response to market changes and reduced inventory to appropriate levels by the end of FYE 2024. Cash flows from operating activities were ¥237 billion, enabling us to pay back increased borrowings.

• We expect that the market for cordless power tools and cordless OPE will remain flat as the trend of stagnant housing investment due to high interest rates continues in Europe and North America, and FYE 2025 will be somewhat unpredictable. On the other hand, we believe that demand will remain strong and resilient for tools

that help address social ­challenges like environmental issues and labor shortages. Over the medium term, we will increase returns on invested capital by expanding our lineup with such ­products as the 40Vmax battery series, high-power,high-voltage models, and by investing to strengthen our brand and improve efficiency.

Focus on Supporting Our Customers Even in Hard Times Makita has a history of turning adversity into strength by harnessing its employees' talents during difficult times in the market, as shown in our recent inventory optimization. Whenever disasters like earthquakes or floods occur, one of the Group's deeply rooted strengths is that we are always ready to provide support. Makita began its journey as a power tool manufacturer in 1958 offering portable electric planers, and in 1959 its work to help to address reconstruction demand in the wake of "Ise Bay Typhoon" marked a major ­turning point for the Company. Cordless power tools are crucial for building infrastructure and are used

by essential workers-our customers­ -making them essential in times of disaster. We have built strong relationships of trust with our ­customers by providing stable service

President,

Representative Director

Munetoshi Goto

and quick responses to restoration and reconstruction efforts. In addition, we have established an internal first response system to be used in the event of a disaster.

• While our factories furnish products, our sales
  department­is responsible for providing swift customer service at our bases. We place the utmost importance on our customers and the market, and when society faces difficulties, Makita's mission is to help solve them.

Emphasize Persistance, Coexistence, and Mutual Prosperity with Our Stakeholders

A strong feature of our business model is that we have established roots in communities all over the world and provide complete services in every region where we work. Our corporate culture prioritizes permanence rather than radical change and we have long maintained

a business model that enables us to work with our

­customers and give them peace of mind. This aligns with

the origin of the Makita brand, which centers on

­achieving coexistence and prosperity together with all our stakeholders, especially our customers.

• The corporate culture we have cultivated comes from the philosophy of Jujiro Goto, who transformed Makita into a power tools manufacturer, and our code of conduct for employees. Grounded in Mr. Goto's philosophy, "Don't be angry, arrogant, panic, mope, or give up," we strive to provide every Makita employee with the opportunity to exercise his or her talents. As a leader, I will guide Makita toward achieving its long-term goal of being a "Strong Company." To achieve this goal, I always value the Company's Management Policy/Quality Policy: 1. Makita strives to exist in harmony with society; 2. Makita values its customers; 3. Makita is managed in a consistent and proactive manner; and 4. valuing a stalwart corporate
  culture,­ Makita encourages each individual to perform to his or her highest level.

PRESIDENT'S MESSAGE

The Makita Group's growth is driven by the shift to

cordless­ power tools and, furthermore, by the expansion of range of cordless products, including OPE and cleaning equipment, utilizing its proprietary charging system and motor technology. Our cordless product batteries handle different voltages depending on the application, meaning that one battery can be used with multiple products. In 2005, Makita was the first in the industry to launch a professional-use ­cordless impact driver, TD130D using a lithium-ion battery, and since then we have

continued­ to expand our lineup of cordless products every year.

• Cordless products accounted for only 29% of revenue in FYE 2014, but this figure had risen to 54% as of FYE 2024. At the same time, the proportion of sales revenue attributable to OPE and equipment other than cordless power tools grew steadily, demonstrating our progress towards becoming "a Supplier of a Comprehensive Range of Cordless Products."

Reason Behind Strong Growth in High-powered 40Vmax Products

Over the past few years, we have been working to strengthen the lineup of products in the high-powered 40Vmax battery series launched in 2019 and have achieved solid results. After we launched this series, we realized that it was a good fit for the current market environment. On-site labor shortages have led to rising labor costs, driving up demand for efficiency, and Makita's high-powered technology offers a perfect answer for this issue. With 40Vmax products, it is now possible to tackle heavy-duty tasks that were previously impossible with conventional cordless tools due to ­insufficient power. We have discovered a new market for highly efficient, high-powered cordless tools and so we

are focusing on product development with a healthy optimism that this range will drive our growth for the future.

• We are planning to develop 40Vmax products for the resource and energy industries as well as for disaster recovery and preparedness. The market for the resource and energy industries is particularly large, and our 40Vmax products are already being used for installing and maintaining solar panels as well as in many other applications. To differentiate ourselves from our compet- itors, we must add new technologies to further enhance our customer-­oriented services. At this time, 40Vmax
  batteries can be used with more than 200 models­ (in Japan, as of April 2024), but we plan to expand into new markets going forward.

Continue Reinforcing Development and Design Capacity

Our product development and design processes

are characterized by the responsibility that individuals are entrusted with. During development, the designer is responsible for a given product from design to launch, so that the designers can gain insight and get ­motivated to make a better product by responding to customer feedback.

• Fulfilling the market needs and selling the products also leads to their job satisfaction and happiness. Our
  designers continuously­develop and design products

within certain categories which enable them to develop specializations and gain knowledge within their category.

• One of our challenges going forward is the recruitment of even more competent technology development
  engineers­ . Our development department in Japan
  currently­ employs around 1,000 people, up from around 700 six or seven years ago, and there has been a particular increase in designers in OPE development with electronic control expertise. We have established development centers in both Korea and Tokyo that specialize in
  electronic­ control to help us secure skilled personnel and strengthen Makita's development.

We expect our existing cordless power tools business to mature, and our strategy for the future is to increase returns by improving efficiency and expanding cordless OPE. OPE made up over 10% of our total sales revenue in FYE 2024, while growth has accelerated in recent years thanks to cordless OPE. As with the shift to electric

vehicles,­ the shift to cordless OPE may take some time, but society as a whole is steadily progressing toward decarbonization, so we will work to solve environment problems when we can. To effectively meet our customers' needs for efficient labor and improved productivity, we will take a steady approach by streamlining our business model to generate cash so that we can invest both time and capital. Cordless OPE is still in ongoing development, and it is our intention to take the time needed to ­continuously pioneer new businesses, just like we did with cordless power tools.

Past and Present OPE Business

We first entered the OPE business in January1991 with the acquisition of Sachs Dolmar GmbH in Germany, and we later strengthened operations through a business partnership with Fuji Robin Industries Ltd. (which was made into a wholly owned subsidiary in August 2007), but our market share was stagnant. In 2009, when our performance worsened during the financial crisis, we expanded our OPE product lineup to create a second pillar of business in addition to cordless power tools. However, our engine-powered OPE products were not able to get an edge over their competitors, and the profit margin was relatively low. Since the COVID-19 pandem- ic, we have taken advantage of the opportunities

presented­ by stay-at-home demand and the benefits of cordless OPE, and have ­significantly expanded our cord- less OPE lineup, focusing on our high-powered 40Vmax

battery series. In this way, we have been working to identify further customer needs. In 2022, we decided to end production of engine-powered products, and we are now focusing our management resources on cord- less OPE.

• The OPE market is several times bigger than the one for cordless power tools. The largest proportion of the
  professional­market consists of engine-powered tools, but we expect a widespread shift to cordless due to envi- ronmental and other concerns. The market for cordless OPE is currently thought to mainly comprise DIY users, but the market for professionals is anticipated to grow in the future as well. Also, when new customers such as young
  craftspeople and women purchase­ OPE, they tend to prefer cordless tools over engine-powered, and Makita is highly regarded in this area.
• Thus far, our cordless OPE demand has mostly been supported by DIY users. Going forward, we intend to expand sales to professionals. However, simply making equipment rechargeable is not enough to increase a product's appeal to professional customers. We need to launch cordless OPE with specifications superior to those
  of engine-powered products and utilize­ our global ser- vice network rather than just waiting around for the shift to cordless to happen on its own. In addition, we will work to enhance the brand power of our cordless OPE. We are slowly expanding our market with an eye on
  professionals,­but our immediate challenge is a limited product lineup, so we plan to further increase sales in this area by expanding the product lineup for professionals.
  In addition,­ we have invested in production and logistics facilities for cordless OPE and have already ensured
  sufficient­ capacity, so I believe we are ready to handle a ramp-up in production.

Makita has never been a company that dramatically changes its business style. Rather, it has always focused on providing practical services that are closely aligned with our customers' needs. However, it is also true that a pioneering, innovative image could help attract new customers. It is my conviction that once a customer becomes aware of how good Makita's products are, they become a lifelong supporter. To achieve that, we need to be creative to attract younger customers in the first place.

• I believe one way to attract new customers is to develop products that employ new technologies, but improving our technology is not enough; we need to invest in branding and other areas as well to increase our appeal for customers. Because of our deep roots in each region we operate in, there are some risks. To reduce such risks, we intend to invest in our business infrastructure. Recent capital expenditure includes increasing our overall
  service­ capacity by expanding our logistics facilities and bases, but I believe that the most effective way of maxi- mizing our returns is investing in our IT infrastructure to improve efficiency. To sum up the above, I believe we should focus on investing in new technologies, creating­ systems that improve efficiency, and accelerating­
  customer acquisition.

• In good market conditions, it is obvious that higher production capacity contributes to higher returns. We need to establish a unique system that increases returns through efficiency even in less favorable conditions. I believe that Makita's durability is most evident when the market is in a trough.

Top Management's Role

My role is to identify areas for future investment and

create­ a corporate culture in which employees think ­strategically about what we should be investing in. Across Makita, we work every day to improve and streamline various processes, from development to

production­ and sales, even if it is only shaving one

­second off from a process. Although it is important to build up improvements incrementally through frugality and resourcefulness, if significant improvements in

efficiency­ can be realized quickly and deliver a proportionate return on investment, we should invest accordingly. Thus, I would like to foster a corporate culture in which employees, including managers, think strategically about what they should do to increase management speed in view of efficiency and returns and proactively ­support the necessary investments.

Three years have passed since the establishment of the Sustainability Committee in 2021. One of the greatest resulting impacts was making data on our GHG emissions from our business activities transparent. This has helped us to better understand where to begin our efforts to reduce GHG emissions to net zero by FYE 2040 and across the entire supply chain by FYE 2050. Every ­relevant department has a representative who participates in the Sustainability Committee, ensuring that the importance of reducing GHGs is commonly understood by employees, and that everyone works to do so in their own area of responsibility. Although we are currently working to fully comprehend the figures and discussing internally how to proceed, we are already starting to see potential

for energy conservation and the use of renewable

­energy. We are also installing solar panels at our bases around the world, which is in line with our BCP.

Environmental Initiatives to Strengthen Makita in the Medium to Long Term

Since 2022 when we set "reducing environmental impact" and "contribution to affluent communities and daily lives" as material issues for the Company, we have positioned the active development of cordless products, including cordless OPE, as a priority initiative. I believe that Makita can demonstrate its strengths through

a wide range of environmental responses, including ­promoting the elimination of plastic and increasing

battery recycling. I view these efforts as effectively promoting the Company in the medium to long term. By promoting our environmental sustainability, including active development of cordless products, we will both contribute to the realization of decarbonization as well as increase Makita's corporate value.

• We have also set "strengthening the management base" as a material issue. As part of this, we strive to boost our human capital, and I believe we need to pro- mote human resource development that can support operations globally. To realize global sustainable growth, we have set the percentage of employees comprising those who have joined Makita within the past five years

and have been sent to work overseas (or for training) as a KPI for our human resources. My role as the top executive is to create an environment in which each individual can utilize their talents, and to ensure that compensation is proportional to performance. It is important to give our employees responsibilities and create a culture in which they can thrive. To achieve that, we need to have fair, equitable evaluation systems in place and imple- ment. Furthermore, I believe that good governance

relates to human capital,­ and I will strive to maintain this awareness. Any governance failure harms stakeholders, and it takes time to regain trust. Good governance is ­crucial to the long-term sustainability of the Company.

Recently, we summarized the Makita Group's policy on implementing management that is conscious of cost of capital and stock price, in line with the directive of the Tokyo Stock Exchange for companies listed on the Prime Market. Makita's stock price is currently above a PBR of

1.0 times, but it has declined from its previous peak. To raise the PBR, we need to improve capital efficiency and reduce the cost of equity.

  Our cordless products will help resolve our

material­ issues and increase our corporate value while the focus of our growth strategy will be on expanding professional-usehigh-added-value products range

centered­ on 40Vmax batteries and differentiating ourselves from our competitors with our strong sales and service network around the world. To improve capital efficiency, we believe it is important to improve returns by investing in efficiency. We will work to improve capital efficiency, including ROE, through such measures.

  To reduce the cost of equity, we must reduce

performance­fluctuations by formulating and executing

strategies­ that enable us to quickly adapt to changes in the business environment. In the medium to long term, we expect a globally growing call for sustainability

disclosure,­ including from the European Corporate Sustainability Reporting Directive (CSRD). We will respond to these requests promptly in line with human capital management. These efforts must be fully under- stood through dialogue with shareholders and investors, and we view this as a priority issue going forward.

• The Makita Group's continued success is thanks to the coexistence and prosperity gained through the support of our stakeholders and how we have grown together, which will never change in the future. Meeting the expectations of all our stakeholders, including
  shareholders,­will further strengthen our operations. We would appreciate your continued support
  and encouragement.

Highlights of Makita's Evolution

1958-59

Overcoming Adversity, Becoming a Power Tool Manufacturer

The recession following the Korean War caused a slump in sales, and developing original products became an ­important management issue. After much trial and error, in 1958, the first Japanese-made portable electric planers were launched with the catchphrase "20 times more

efficient­ than a human." The electrification of this product was well received, and perfectly met the needs of ­carpenters nationwide amid a boom in construction demand. On the tailwind of the planers' popularity, in 1959, the Company decided to withdraw from the electric motor business and become a power tool manufacturer.

1970

Taking the First Step toward

Overseas Expansion

As Japan began to see a slowing of the rapid pace of postwar economic growth, Makita established its first overseas subsidiary, Makita U.S.A. Inc. in the U.S., with the goal of expanding exports. In a fierce market crowded with competitors, including major power tool manufacturers, we had some difficulties at first. However, we developed a finely tuned sales strategy that reflected the value we place on being close to customers, and our products' excellent cost performance along with our high quality after-sales service earned high evaluations. As a result, we were able to successfully penetrate the North American market.

Social

Changes

Makita's History

of Evolution

Japan's modernization

• Increased demand for electric power

Began repairing and selling­ lighting equipment, electric motors, transformers, and other products

1915 Mosaburo Makita founded Makita Electric Works (proprietorship) in Nagoya, Japan

1938 Incorporated the proprietorship and established Makita Electric Works, Inc.

1945 Moved to the present location in Sumiyoshi-cho, Anjo City, to ­accommodate World War II related evacuations

Japan's rapid postwar economic growth

• Arrival of the construction boom

Released Japan's first portable­ electric planer

1958 Released the 1000 portable electric planer, Japan's first such domestically produced tool

1959 • Decided to convert to a power tool manufacturer

• Shipped the 1300 hand-held electric planer to Australia, our first export of power tools

1962 Changed company name to Makita Electric Works, Ltd.

Globalization of the economy triggered by two oil shocks

• Companies expanded overseas

Began building a finely-tuned sales and ­service network that

spans the globe

1970 Established Makita U.S.A. Inc., our first overseas subsidiary

1980 Started production of power tools

in Canada,* our first overseas production site

• Production terminated in January 2009 1991 Changed company name to
  Makita Corporation