Nikkon Holdings Co., Ltd.TSE: 9072

Integrated Report 2024

Nov 22, 2024 at 5:22 AM UTC · MarketScreener

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[Headquarters] 6-17, Akashi-cho, Chuo-ku, Tokyo, Japan, 104-0044 https://www.nikkon-hd.co.jp/en/

SECTION 1

About NIKKON

The NIKKON Group is a pioneer in integrated logistics that can provide one-stop services for all logistics-related needs.

Our Value Creation Journey

Centered on the four core businesses of packaging, transportation, warehousing, and testing, we have expanded our

services, and progressed together with the development of the Japanese economy while building a solid customer base.

business, from automotive maintenance to import/export customs clearance, real estate, insurance agency, and consulting

We will continue to respond to the needs of customers and society and deliver high-quality, stable logistics services.

External Environment

1950

1960

1980

2000

2020

1950s -

1960s -

1980s -

2000s -

2020s -

From post-war reconstruction to mass

Infrastructure development progressed on the

Collapse of the bubble economy and shift to production

The e-commerce market expanded and

Market environment has changed

production and mass consumption

occasion of the Tokyo Olympics

of multiple types of products in small quantities

transportation demand increased

significantly since the COVID-19 pandemic

Development of logistics infrastructure

Transportation volume expanded in response to

Small-lot deliveries increased and logistics

Awareness of environmental conservation

Further business growth by promoting digital

nationwide

high economic growth

became more diversified

and measures against climate change spread

transformation (DX) in logistics

History of the NIKKON Group

Growing while providing services that satisfy our customers' needs Committed to both business feasibility and environmental friendliness

Starting point for social contribution

Toward a high-quality and stable

Expanding our network of bases

Realizing a prosperous future through

Founding

Development

Expansion

Growth

period

through valuable logistics

period

logistics service system

period

overseas and freight handled

period

logistics that meets expectations

In 1953, NIPPON KONPO UNPAN CO., LTD. was founded

In 1968, the company name was changed to NIPPON

Since the establishment of a US subsidiary in 1987,

Responding to changes of the times, we provide high

for the purpose of engaging in land parcel forwarding,

KONPO UNYU SOKO CO., LTD.

we have promoted our overseas business and built a

value-added logistics that contribute to safety and

freight forwarding, and rail freight forwarding, and we

In 1970, the Company was listed on the Second Section

global network that extends to nine countries. We have

environmental conservation. By capturing the needs of

began freight transportation with bicycle-drawn carts

of the Tokyo Stock Exchange. We developed high-quality

expanded freight handled, mainly for automotive parts

customers and society to meet their expectations, we

and three-wheelers. In 1959, we established an integrat-

and stable logistics services by opening business offices

and completed vehicles, to include housing equipment,

are realizing a more prosperous future through growth

ed system for transportation, storage, and packaging.

and establishing subsidiaries.

agricultural machinery, and general consumer goods.

strategies from a long-term perspective.

Initial car carrier trailer

Prachin Buri Sales Office (Thailand)

Double trailer truck

	222,324
	million yen
Three-wheeler	15,507

Consolidated net sales					2015/10	Transition to holdings company structure,	2015/11	220.0
							Establishment of
											(billion yen)
NIPPON KONPO UNYU SOKO CO., LTD.			49,916		and the company name changed to	Malaysian subsidiary
Other Group companies					NIKKON Holdings Co., Ltd.

Number of employees			1987/12	million yen	2002/7			2011/1		200.0

*The number of employees for				Establishment of	2,228	Establishment of		Establishment of Mexican subsidiary
the fiscal year ended March 31,	20	18,302	US subsidiary	Indonesian subsidiary	2006/3	Establishment of Indian subsidiary
2024 is the total number of						Establishment of
employees of NIPPON KONPO	million yen	million yen			2000/2		Vietnamese subsidiary
UNYU SOKO CO., LTD. and		48	1,310
other Group companies.			1994/3	Establishment of					150.0
			Establishment of	Philippine subsidiary
1953/8					Chinese subsidiary
				1994/11
Founding and establishment of
			Establishment of
NIPPON KONPO UNPAN CO., LTD.	1957			Thai subsidiary						100.0
Founder: Tsuneo Kuroiwa
	Introduction of double-decker vehicles (Mammoth);

		launch of special vehicle development
		1968/10
		Company name changed to									50.0

		NIPPON KONPO UNYU SOKO CO., LTD.
											0
1954	1960	1970	1980		1990	2000			2010	2020	2024 (year ended March 31)

About NIKKON

Growth StrategyFoundation for Value Creation

Data Section

Integrated Report 2024

SECTION 1	About NIKKON				Since its founding in 1953, the NIKKON Group has broadened the scope of value to offer, responding to changes of the

At a glance			times. In order to respond to a wide variety of needs, we have developed warehousing facilities and special vehicles
		networks. Looking ahead to the next era, we will create new solutions and contribute to the creation of a sustainable
						equipped with advanced functions, and have challenged the sophistication of distribution processing and logistics
						and affluent society.

	Net sales/CAGR		Overseas sales ratio			Number of Domestic and Overseas Business Locations		Number of vehicles owned

	Net sales 222.3billion yen			Japan 47companies	business		Business vehicles	4,633
					(including 791 tractors)
		Approx. 15%	291locations			700
	CAGR 3.4% (last 5 years)		Overseas 9countries	29companies		Car carrier trailers
				Full trailers	222sets
										(Double trailer trucks)
	Sales increased 4.8% from the previous fiscal year due to factors		Net sales in the North America segment increased 21.5% year			As a result of making MP CO., LTD. and KOGA KANKYO SERVICE		A total of 284 vehicles were purchased, including additional new
	such as a recovery in business volume in the automotive industry		on year due to the strong U.S economy. Going forward, we will			CO., LTD. subsidiaries, the number of business locations		vehicles and replacements for old ones. We have one of the
	and acquisition of new customers. In the most recent five years,		aim to increase the overseas sales ratio to approximately 30%,			increased by two companies and three sales offices in Japan. The		largest fleets of car carrier trailers in the industry. We are also
	sales have continued to increase from the previous fiscal year,		by focusing on the United States and India where growth is			number of overseas business locations is unchanged from the		striving to reduce CO2 emissions by introducing environmentally
	excluding FY2020, which was affected by the COVID-19 pandemic.		expected.			previous fiscal year.			friendly vehicles.

About NIKKONGrowth Strategy

Operating profit/Operating profit ratio

Operating	21.2billion yen
profit

Operating 9.6

profit ratio %

Operating profit increased 8.5% year on year due to the effect of increased sales, improved operational efficiency, and cost reduction efforts, despite pressure on profit from higher fuel prices and outsourcing costs. We have maintained one of the highest operating profit ratios in the industry.

Percentage of operating profit by business segment

Transportation 26% Warehousing 39%

Packaging 16% Testing 16%

Other3%

Profit increased in transportation, packaging, and testing businesses. In particular, the testing business achieved a profit growth of 49.8% year on year. We have maintained a well- balanced earnings structure by providing one-stop services.

Group-owned warehouses

2,644,605m2

Equivalent to 57 Tokyo Dome baseball stadiums

(Japan) Group-owned	% or more of the

accountwarehousesfor 70total owned area

Warehousing facilities are composed of in-house facilities that are optimal for handling cargo. As a result of establishment of two new warehouses in Japan and one overseas, as well as acquisition of two subsidiaries, the total area of the Group-owned warehouses continued to increase from the previous fiscal year.

CO2 emissions (Consolidated)
FY2023/3	180,048t-CO2
FY2024/3	177,732t-CO2
Medium-Term Business Plan Final Target
FY2026/3	173,340t-CO2

We have set our target to reduce CO2 emissions in FY2025 by 3.7% compared to the FY2022 level. Toward achieving this target, we will promote modal shift as well as introduction of environmentally friendly vehicles and solar power generation systems.

Foundation for Value Creation

ROE

ROE 7.0%

Target

8.0%

ROE was almost the same level as the previous fiscal year (7.1%). As part of its capital strategy to increase corporate value, setting a target ROE of 8.0% which is higher than capital cost (7-8%), we will work to further improve capital efficiency.

Growth Investments

23.0billion yen per year

In the 13th Medium-Term Business Plan, we plan to make capital investments of approx. 23.0 billion yen annually. In the first year of the plan, we invested 3.1 billion yen in business vehicles, 13.2 billion yen in land and buildings, and 6.8 billion yen in others.

Number of employees (consolidated)

[FY2024/3]15,507

(Japan: 11,526; Overseas: 3,981)

Percentage of women 8.5

in management positions %

(Japan: 2.0%; Overseas: 21.8%)

Targets by FY2026/3
Percentage of	Percentage of women in
female employees	management positions
26.5%	13.2%

Number of directly hired drivers (consolidated)

Male 3,394

Female 106

The Group secures a large number of drivers in the form of direct employment in an effort to maintain and stabilize transportation capacity. Moving forward, we will focus on creating an attractive work environment to increase the employment of female crew members.

Data Section

Integrated Report 2024

SECTION 1 About NIKKON

Value Creation Process

Input (Management Resources)

Capital invested in our businesses

resources	Group employees19,221
Human	Number of
					business
Network	Japan: 47companies: 291locations:
Overseas: 29companies in 9countries

Business	4,633
vehicles

Warehouse	Group-owned warehouses
area				2,640,000m2

Finances		Equity ratio 63.3%
			Long-term credit rating A

What makes us unique

Providing one-stop logistics services

Strong capabilities in the field

Self-Sufficiency and Hands-on Management

What sets the NIKKON Group apart from other companies is self-sufficiency, JIMAESHUGI, and hands-on management,

TENOUCHI KANRI, rooted in our customer-first approach. Each Group company owns the resources necessary for each

function of packaging, transportation, and warehousing, which enables the provision of agile and flexible services. In this way,

we realize the provision of one-stop facility management services to meet a wide variety of customer needs as a Group. We

will lead the logistics business of tomorrow as a true supply chain partner that supports the development of our customers.

About NIKKON

Business Model

Output

To provide a full range of

high-quality services in an

Self-Sufficiency

JIMAESHUGI

parts of our facilities,

agile manner, we own many

enabling us to respond

flexibly to our customers'

Our economic value

needs.

Modal shift

Automotive

Forwarding customs

maintenance

clearance

Growth

Design, manufacture

and sale of logistics

Moving

Consolidated net sales

equipment

and materials

Office relocation

net sales/

222,324 million yen

Strategy

Packaging

Hands-on Management

TENOUCHI KANRI

Consolidated

Realizing

Contract

Operating

Operating profit

manufacturing

One Stop Service,

Operating

21,235 million yen

Vendor managed

profit/

inventory

Distribution

Cross Selling

Transportation

profit ratio

Operating profit ratio 9.6%

processing

needs. We constitute a part of the

Transportation and

ROE

7.0%

our

Foundation

Providing one-stop services

installation of

machinery

Electric power

for all our customers' logistics

and equipment

sales

supply chain, including assembly

CDP score/

CDP score

BasicPhilosophy

for ValueCreationData

processes and just-in-time

delivery of parts in the

Real estate

MSCI rating

BBB

Collection and

Testing

manufacturing

industry.

(Year ended March 31, 2024)

transportation of

industrial waste

Warehousing

Used goods

dealings

Insurance agency

Petroleum

Value we provide

sales

Actual driving tests

To Customers

staffing

Temporary

Consulting

Design and analysis

Outsourcing

Information systems

Safe transport, quality control

Providing new value in response to societal changes

13th Medium-Term Business Plan:

To Employees

Section

Employee health and happiness

Fulfilling workplaces where diverse human resources can contribute actively in various ways

Sustainability management

Human resource development which utilizes the characteristics and strengths of each employee

To Society

Working together with local communities in Japan, for production areas

Corporate Governance

to consumption areas, so as to not interrupt the flow of the supply chain

Contributing to circular logistics and carbon neutrality

Creating diverse jobs in Japan and nine overseas countries

Enhancing capital

Integrated Report 2024

SECTION 1 About NIKKON

Business Model

Self-Sufficiency

Hands-on Management

We co-create high value-added logistics services with the power to create and connect

Group companies

Self-Sufficiency

The Group has adopted a policy of "self-sufficiency," in which about 70% of its warehousing assets in Japan and about 50% of the drivers and sales vehicles it operates are Group-owned. This allows the flexible control of facility operations and operation schedules according to customers' needs, 24 hours a day, 365 days a year. In particular, in the event of natural disasters and other problems, we have been able to recover quickly by operating our Group-owned facilities at full capacity without time constraints.

Another advantage of having Group-owned facilities is the ability to customize our warehouses and vehicles flexibly according to the cargo and goods being handled. In this way, we are working to improve the quality of our services by updating facilities according to the circumstances. This includes installing warehouse cranes, changing to automated warehouses, retrofitting air-conditioning equipment, and developing special-purpose vehicles for specific cargo.

We are working toward the company-wide reduction of costs associated with warehousing facilities and vehicles by appropriately allocating the timing of new capital investments and depreciation. As a result, in the medium to long term, we will be able to operate our Group-owned facilities at a lower cost than the use of leases.

About NIKKON

Growth Strategy

Customers

Many and varied needs

		Automotive	Forwarding
		customs
		maintenance
	Design, manufacture	clearance

	Four main businesses	Moving	Highvalue-added logisticsservices
	and sale of logistics
Distribution	Office relocation
equipment					installation of machinery
	and materials
Contract	Transportation		Vendor managed
manufacturing		inventory
						Transportation and
processing	Packaging	NIKKON	Warehousing	and equipment
	Holdings

Electric power						Real estate
sales
			Testing
Collection and transportation					Insurance agency
of industrial waste
Used goods dealings
	Petroleum				Design and analysis
	sales				Actual driving tests
	Temporary staffing			Information
	Consulting	systems
	Outsourcing

Group companies

Hands-on Management

Through "hands-on management," in which we manage the functions of our Group-owned facilities ourselves by identifying various changes on the ground and responding to them meticulously, we provide services that are tailored to customer needs. In the event of a problem, we investigate the cause in detail and take prompt and appropriate measures in a responsible manner. At the same time,

we also accumulate expertise to prevent similar problems from happening again. Through this "hands-on management," we will foster a corporate culture of self-reliance, self-motivation, and ingenuity and help to improve service quality, thereby further increasing customer satisfaction.

Cross-selling along the service axis

By leveraging the benefits of using Group-owned facilities and our strength in providing one-stop packaging, transportation, warehousing, customs and overseas services, we will deploy cross-selling strategies that involve expanding the range of services offered to each customer, such as providing distribution processing services to warehouse customers and storage functions to transportation customers.

Cross-selling along the Group company axis

We will strengthen collaboration among operating companies by sharing sales information and promote sales activities across Group company boundaries and the provision of services on a reciprocal basis. We will make efforts to optimize and maximize Group synergies and to expand opportunities.

Cross-selling along the regional axis

Through collaboration in our network of business locations in Japan and overseas and the provision of seamless services, we will cover areas with sales activity blank spots and implement cross-selling between regions. We will promote the development of new customers in growth industries.

Foundation for Value Creation

Data Section

Integrated Report 2024

SECTION 2 Growth Strategy

Message from the President

Together with the Group and our employees, we will contribute to society through the company and aim to be a company that has value in its existence.

Masakatsu Kuroiwa

President and

Representative Director

Could you tell us about the social mission and

long-termvision of the NIKKON Group and about your recognition of the underlying social issues?

We will anticipate changes in the world and address solutions to environmental issues and labor shortages

There is no need to think in terms of "for the sake of the company." The company is simply the means, not the objective. I want the NIKKON Group to be the means by which you contribute to society. This is what I tell employees whenever I have the opportunity. I say that I want them to first start with what they can do for the sake of the local communities closest to them. We have also incorporated this aim of solving society's issues through business in our Long-term Vision (2030 Vision).

Over the past several years, the logistics industry has been pressed to respond to a variety of social issues, including CO2 emissions and other environmental issues, and labor shortages resulting from the "2024 problem" of truck drivers' overtime hours being capped by law in 2024. On the other hand, the declining birth- rate, aging population and labor shortages have been issues for a long time, and I understand that, no matter what era we are in, companies have been urged to take action in anticipation of social change and to make changes themselves.

Since it was founded as a packaging and transportation business, NIPPON KONPO UNPAN CO., LTD., in 1953, the NIKKON Group has conducted its business by creating logistics that offer value of its own accord. In 2015, we transitioned to a holding company structure. Since then, through a network of 80 Group companies, and with the packaging and transportation businesses as our foundation, we have expanded our operations from warehousing and auto parts testing to automotive maintenance, customs clearance, real estate, and insurance agency operations. We now conduct business globally in nine countries.

The 70-plus years of our history since our foundation have been a time of continuous challenge in response to unremitting change. If we look at our original business of transportation, we began hauling freight by bicycle-drawn carts, then in three-wheelers, and later heavy-duty trucks. In 1957, we became the first company in Japan to introduce double-decker vehicles, which were loaded with motorcycles on two floors. This is an example of how we have developed special vehicles tailored to the characteristics and logistics of the freight. In 2018, in response to the issues of environmental considerations and driver shortages, in a first for the logistics industry, we introduced 21-meter double trailer trucks (21-meter full trailer trucks), which significantly improve transportation efficiency and reduce environmental impact. This is typical of the way in which we have grown with a frontier spirit.

On the other hand, in the years ahead, due to the declining birthrate, both the number of workers and the

number of people buying goods will decrease. Risks of supply chain disruptions, such as geopolitical risks and natural disasters, will also increase. As such, how do we change and build the structure of our business? It is crucial that we constantly think about this and correct our course accordingly.

As a means of resolving such issues, one of the Group's strengths is its policy of "self-sufficiency" and "hands-on management."

"Self-sufficiency" refers to each Group company owning the resources and peripheral functions that it needs for the business that it conducts. That is simply the means; the objective is the realization of "hands-on management" of providing integrated services that are tailored to all manner of logistics needs of our custom- ers. With the realization of proactive and flexible service provision, even in the event of sudden changes in the business environment, we will be able to make a swift recovery. In addition, that practice of hands-on management with self-sufficiency across all our services is precisely what enables us to accumulate expertise. This gives us a head start in engaging in various reforms, such as being able to make an immediate start on improving wasteful lines of flow, for example.

Of course, the form of that "self-sufficiency" will change with the changes in logistics (fluctuation of logistics volumes) and the times. For example, the "2024 problem" is exacerbating the problems of longer construction periods and higher costs in the construction industry. This will have an impact on the construction of warehouses and other facilities. In response to such changes in the business environment, we review our facility plans and business plans at each juncture.

Along with the progress of the 13th Medium-

Term Business Plan, what areas did you address in your business activities in FY2023?

Thorough efficiency improvements in the domestic business and acceleration of the overseas business with M&As

In the 13th Medium-Term Business Plan, which began in FY2023, we set out four policies, namely "streamlin- ing and review of existing businesses," "establishment of growth drivers," "enhancement of corporate value through ESG-oriented management," and "establish- ment of human resource foundations." As priority themes for our next core businesses that will be our growth drivers, we have selected "environment (circula- tion)," "food, clothing, and shelter (three-temperature- zone control)," and "overseas (United States/India).

In the future, in a country with a declining population and shrinking markets, we will thoroughly identify waste and improve efficiency in costs and processes in our existing businesses in Japan to improve profit- ability. At the same time, I believe that our mission to ensure the survival of the company is to accelerate our overseas expansion and contribute to corporate logistics by bringing new vitality to the global movement of

About NIKKON

Growth StrategyFoundation for Value Creation

Data Section

Integrated Report 2024

SECTION 2 Growth Strategy

TOP MESSAGE

goods. In our overseas business in particular, we have declared our aim to be a company that can compete on the global stage in our long-term vision toward 2030 and set a target of achieving an overseas sales ratio of 30% by FY2030.

As one initiative that we undertook in FY2023, in the area of "streamlining and review of existing businesses," we leveraged our logistics expertise to launch CIRRUS, a system developed in-house that expands our cloud- based warehouse management system, also developed in-house, to include three new modules of distribution processing, packaging, and procurement. This system centralizes data that had previously been managed

in separate systems in a cloud environment, enabling inventory management and other in-depth services to be understood in real-time on a tablet or other device. The additional functions have turned this system into a product that shippers outside the Group can also use, and we expect that the promotion of "visualization" in this manner will lead to further improvements in effi- ciency.

Other initiatives include the expansion and use of WMS at our locations all over Japan and cost-cutting measures such as the use of logistics robots and DX.

One measure implemented for the "establishment of growth drivers" was the execution of M&As in Japan and overseas. Overseas, where we are focusing these efforts, we made Supreme Auto Transport, LLC., a car carrier transport business based in Colorado, U.S.A., a consolidated subsidiary in May 2024. We operate a similar business in Japan, so we will pursue synergies with existing customers to expand the car carrier business globally. Going forward, positioning the United States, which is predicted to achieve solid economic growth with its growing population and the world's largest GDP, and India, which has high growth potential, as our priority regions, we will promote collaboration with companies with which we can expect synergies as part of our growth strategy of "buying time."

In the priority area of the circulation business, in De- cember 2023, we acquired KOGA KANKYO SERVICE CO., LTD., a business that collects and transports industrial and general waste. We have positioned this company as one that will play an important role in our aspirations to expand the circulation business in the future. In the area of food, clothing, and shelter, in anticipation of climate change, we plan to promote investment in facilities capable of three-temperature-zone control.

In addition to the food sector, this will include facilities for chemicals, precision instruments, and batteries, which require temperature control. We will also allocate resources and concentrate our efforts on the testing business, where we expect to see further growth in demand for EV development support for automakers.

Could you tell us about your guidelines,

initiatives, and outcomes regarding ESG in the Medium-Term Business Plan?

We will work to reduce CO2 reductions with "unmoving logistics," which eliminates unnecessary movement

For the reduction of CO2 emissions, we are accelerating our initiatives toward our target of a 30% reduction by FY2030. This includes the introduction of environment -friendly vehicles that I mentioned earlier and the installation of solar panels. In Japan, we are working toward a 2030 start for the introduction of EV vehicles into our heavy-duty truck fleet, but there are still many issues to resolve. They include the development of in- frastructure, load capacities, and the passing on of the costs of their introduction to our prices.

However, the need to change to an environmentally responsive style of logistics is established policy, and even if we are unable to drastically reduce CO2 emissions all at once, it is important that we pursue initiatives to ensure that we at least do not increase our emissions further and that we are reducing them toward our target. We are pursuing a range of mea- sures, including installing solar panels on the roofs of warehouses and trucks, eco-driving, eliminating unnecessary travel with flexible operational management, and transporting large loads through consolidated freight on full trailers and modal shift. This includes demonstration testing.

Our goal is "unmoving logistics." In other words, how do we operate logistics services that have eliminated unnecessary movement through visualization? The fact that we are able to embark on these kinds of initiatives flexibly and swiftly is due to our resolute pursuit of "self-sufficiency." While each individual effect may be small, by having all 80 Group companies engage in these efforts, we will fulfill our social responsibility as a logistics company.

Could you tell us about the HR Management Department,

which is under your direct control, and about the human capital management initiatives that you are pursuing?

We will offer many diverse opportunities for motivated people to contribute actively

We are in a period of transformation from existing logistics to new forms of logistics, which makes the development of human resources who will lead more advanced logistics in the future an urgent challenge. In our core operations that cannot be outsourced, how do we get our "own" human resources to make an active contribution? We have adopted a policy of "self-sufficien- cy" in our human resources development as well.

To encourage our people to actively engage in self- development, in addition to a range of education and

training programs, our Overseas Trainee Program, and the NIKKON Business School, which aims to develop the next generation of management executives, we are also promoting a range of measures at the individual Group companies.

Of course, as with M&As, bringing outstanding, front- line-ready talent into the company from outside is also effective. While identifying the aptitudes and wishes of each individual, we will develop them in-house, and if there is something that they want to do, we will provide them with places for them to learn and participate ac- tively. The capacity to offer many diverse opportunities to all employees, so that anybody who wants to work hard can contribute actively, regardless of their gender, is another of the distinctive features that comes from conducting so many different businesses in the Group.

In addition, to promote women's participation and ad- vancement, we have set a numerical target of 26.5% for the percentage of all employees who are women by 2025. Even the logistics industry, which has long had a strong image of a male-oriented society, is seeing more women working as forklift operators and in other positions who are more careful and have better skills. My view is that, as long as a person has a consciousness of wanting to contribute to society, it does not really matter what gender or age or nationality they are, and I am not concerned about percentages. We have many foreign nationals and seniors participating actively at the company.

I am personally involved in promotion interviews, final recruitment interviews, and the like, and I actively try to create opportunities for dialogue. On those occasions, I always ask the interviewees if they have any questions. The times have changed greatly, and with the company also being pressed to transform, I want our employees

to have an awareness of the issues and a sense of curiosity. I view being asked questions as a valuable opportunity to reflect objectively on myself and on the state of the company.

Could you conclude with a message

for stakeholders?

We will aim to enhance corporate value by cherishing the "substance" behind the numbers

Although our operating profit ratio is one of the highest in the industry, it is not a matter of gratuitously chasing high profits. Rather, profits follow from the contributions that we are making to society. In my view, it is the responsibility of top management, who lead our business activities, to strike a balance between the two. For the enhancement of corporate value as well, instead of only achieving quantitative figures, it is the qualitative "substance," such as consideration of the environment and employees' work styles, that are important. I would love it if our stakeholders would look carefully to determine whether the NIKKON Group is truly contributing to society and whether our existence has value for soci- ety, and to give us their opinions.

To that end, I look forward to opportunities to actively engage in dialogue with our many stakeholders, including our shareholders and investors. I hope that our stakeholders will hold high expectations of NIKKON Holdings in the future and extend their guidance and support.

About NIKKON

Growth StrategyFoundation for Value Creation

Data Section

Integrated Report 2024

SECTION 2 Growth Strategy

13th Medium-Term Business Plan

In the first year of the Medium-term Business Plan, both sales and profits increased due to factors such as a recovery in business volume in the automobile industry. Although sales, at 222.3 billion yen, fell short of the sales target of 230.0 billion yen due to the postponement of an initially planned M&A, ordinary profit and net profit exceeded 100% of the plan due

to factors such as foreign exchange gains resulting from the depreciation of the yen. With regard to the target of 250.0 billion yen for the fiscal year ending March 31, 2025, the path toward achieving that target is coming into view to a certain extent, as the sales and profits of the acquired companies will be included in the consolidated financial statements, and the operation rates of new warehouses will increase.

In the circulation business, which is a core part of these measures, we will accelerate initiatives in the circulation business, including the development of the industrial waste intermediate treatment business and the collection and transportation of lithium-ion batteries in cooperation with the Japan Auto Recycling Partnership (JARP+). In terms of three-temperature-zone control, we will expand the handling of goods that require temperature control beyond food to goods such as chemicals, precision machinery, and battery storage. In the overseas business, we will continue to make aggressive investments in regions where growth is expected, while also working to quickly demonstrate synergies with the American car carrier trailer business that we have acquired.

Medium-Term Business Plan Financial Targets

Our plan for net sales is to continue stable growth through new customer development and constant capital investment, aiming for a CAGR of 9.7%, or 280.0 billion yen. Given the uncertainty of future cost conditions, such as rising fuel and labor costs, as well as the cost of addressing social issues, we intend to aggressively reduce costs and pass on costs to customers as necessary to achieve an operating profit ratio of 10.0%. We recognize that our current cost of capital is 7-8%, and we aim to achieve an ROE of 8.0%, which exceeds the capital cost. At the same time, we will strive to lower the cost of capital by improving the market liquidity of shares and other means.

Net sales (billion yen)

Operating profit (billion yen) Operating profit ratio

212.1

198.2

182.5

10.0%9.8%

9.2%

280.0

250.0

222.3

9.6%9.6%10.0%

About NIKKONGrowth

Long-term Vision (2030 Vision)

- Becoming a Company	(billion yen)	500.0	(%)

	500.0			18.0
Needed by Society -					Operating profit
						Net sales

Aim to be a company that can	400.0					Operating profit ratio	16.0




compete on the global stage.

	FY2026/3
Net sales	280.0 billion yen
Operating profit	28.0 billion yen
Operating profit ratio	10.0%
ROE	8.0%

18.2	19.5	19.6	21.2	24.0	28.0

FY2021/3	FY2022/3	FY2023/3	FY2024/3	FY2025/3	FY2026/3
ROE
7.3%	6.9%	7.1%	7.0%	-	8.0%
	Results		Results	Medium-Term Business Plan

Strategy

13th Medium-Term Business Plan (ESG-based KPIs)

Solve the issues society faces through our business activities

Provide new value to people and

society through our traditional enterprising spirit

Place the company on a sustainable growth trajectory through a stable earnings structure

Share the joy of social contribution and create a rewarding and ethical workplace

300.0							280.0		14.0

						250.0
200.0	199.5		198.2	212.1	222.3
182.5						12.0

	10.5%	10.0%					10.0%	10.0%
100.0		9.8%		9.6%	9.6%	10.0
			9.2%

							50.0
						24.0	28.0
	20.9	18.2	19.5	19.6	21.2
0									8.0

FY2020/3 FY2021/3 FY2022/3 FY2023/3 FY2024/3 FY2025/3 FY2026/3 FY2027/3 FY2028/3 FY2029/3 FY2030/3 FY2031/3 FY2032/3

12thMedium-TermBusiness Plan

13thMedium-Term BusinessPlan

14th Medium-TermBusiness Plan

15th Medium-TermBusiness Plan

	CO₂ emissions
1
			FY2023/3	FY2024/3	FY2026/3
CO2 emissions reduction: Scope 1, 2	Targets					173,340


Results	180,048	177,732	-3.73%*




CO2 emissions reduction: Scope 3	Results				286,007

	Percentage of women
2

	(t-CO2)
FY2030	FY2050
126,034	0
-30%*	-100%*

*Reduction from the fiscal year ended March 31, 2023

Foundation for Value Creation

		FY2023/3 Results	FY2024/3 Results	FY2026/3 Plan
Percentage of women in	Japan	1.6%	2.0%	7.7%
Overseas	21.6%	21.8%	25.0%
management positions

Framework of the 13th Medium-Term Business Plan

Challenge 13

"Contribute through our business activities to the realization and sustainable growth of a prosperous society that enables people to feel truly happy"

Streamlining and review of existing businesses/	Enhancement of corporate value through ESG-oriented management/
Improvement of profitability	Continuation of efforts to remain a company needed by society
Establishment of growth drivers/	Establishment of human resource foundations/
Expansion of businesses while simultaneously creating the next core businesses	Development and securing of next-generation human resources to ensure sustainable growth

Strategy
Growth Strategy			Efciency
Establishment of growth drivers	Investment		Business Efficiency
Circulation/Three-temperature-zone/Overseas	Growth Investments	Sustainability	Improving labor productivity
Investments in warehouses,	Cost reductions
Customer-oriented	Sustainability
vehicles, and equipment
Cross-selling	Digital investments	Traffic safety/	Capital strategy/
Business model transformation	Investments in quality	Zero occupational accidents	Shareholder returns
Network expansion	improvements	Human resource development/	Cash flow management
Real estate business M&A		Capacity building
	Environmental investments

15 Integrated Report 2024

	Total	8.1%	8.5%	13.2%
Percentage of women in positions	Japan	10.0%	11.6%	17.2%
Overseas	39.8%	41.7%	41.3%
of responsibility
Total	19.4%	21.3%	25.5%	Data

	Japan	18.2%	18.3%	22.2%
Percentage of all employees	Section
Overseas	37.3%	38.3%	39.4%
who are women
Total	23.4%	23.5%	26.5%

3 Mercury lamp reduction

	FY2023/3 Results	FY2024/3 Results	FY2026/3 Plan
Number of mercury lamps	12,347	8,995	33
Reduction				-3,352	-6,008

Measures for CO2 emissions reduction
Ongoing	2022-	2027-
Modal shift	Passenger cars: Introduction of 120 EVs	Introduction of EV/FCV trucks
Two-car coupling and full trailer	Trial introduction of hybrid heavy trucks	Purchasing of green power
Fuel-efficiency and eco-driving	Solar panels for in-house use: Sequential introduction	Use of carbon credits
Energy saving and eco-friendly products	Complete abolition of mercury lamps and shift to LEDs
		Integrated Report 2024	16

SECTION 2 Growth Strategy

13th Medium-Term Business Plan

Shareholder Return (Dividend Payout Ratio/Share Buybacks)

From the fiscal year ended March 31, 2023, we raised our target dividend payout ratio from around 30% to around 40%. We also introduced a progressive dividend scheme from the fiscal year ended March 31, 2024.

We announced a policy of continuous share buybacks of approximately 10.0 billion yen over a period of three years from the fiscal year ended March 2023, consisting of approximately 3.0 billion yen in the fiscal year ended March 2023, approximately 4.0 billion yen in the fiscal year ended March 2024, and approximately 3.0 billion yen in the fiscal year ending March 2025.

Going forward, we will continue this practice of constant share buybacks. Our policy is to cancel, as a general rule, those treasury shares that we do not plan to use for stock-based compensation, M&As, and other activities, and not to hold treasury shares in excess of 5% of the total number of issued shares.

1st Quarter Dividend

Year-end dividend

Dividend payout ratio

								41%																40%	40%	40%

																									105	(108)
																								99
										31%					30%	30%	30%	30%	30%	30%	30%	30%	31%
														28%
																									(54)*
											26%										76				55
											25%	25%
																	67		67	69	51
	23%
								22%										65				27
				21%		22%										60

19%					19%										54	53			38
		17%	17%	17%											50					35
															35	35		34

																		33
														37
														30	35	29


					17	17	20	21	23	20	19	21	22	25										48	50	54
			15	15	12									38		34
12	12	13		11	9		11	14						30	32	33
	9	11	10					27
8	8	10		20	19	24
6	6	7
				11	11				12
				9	10	9	10	8
6	6	6	7	7	7	8
1999/3	2000/3	2001/3	2002/3	2003/3	2004/3	2005/3	2006/3	2007/3	2008/3	2009/3	2010/3	2011/3	2012/3	2013/3	2014/3	2015/3	2016/3	2017/3	2018/3	2019/3	2020/3	2021/3	2022/3	2023/3	2024/3 (2025/3)

*The dividend per share forecast has been revised due to the stock split on October 1, 2024.

Growth Strategy

As part of the key strategies of the Medium-Term Business Plan, we will focus our efforts on establishing growth drivers to expand our businesses, while simultaneously creating the next core businesses.

		About
	Expand Existing Businesses	NIKKON

1. Organic Growth Strategy

Provision of multifaceted services through cross- selling and expansion of business base

The Group provides all manner of logistics services in one
stop, including packaging, transportation,
warehousing, customs clearance, and overseas services,	Transportation
in Japan and nine other countries, and we support the key
functions of our customers' supply chains. By implementing
cross-selling across diverse service axes and providing
a wide range of added value not only to new customers
but also to existing customers, we have secured depth for	Growth
services.
our businesses and received high commendation for our

(2) Expansion of business base through constant capital	Testing		Warehousing	Strategy
We plan to make capital investments (excluding M&A) of
investment		Cross-selling

23.0 billion yen annually within the scope of operating cash flow. In FY2023, we made capital investments worth a total of 23.1 billion yen. In the previous Medium-Term Business

Plan, we planned capital investments of 20.0 billion yen per	Packaging
year, and actual investments exceeded 28.0 billion yen in
both FY2021 and FY2022. In a similar way, we will continue
to increase our investment amounts flexibly according to
customer needs. As the Group has been conducting capital
investments according to demand forecasts based on			Foundation
customers' business plans, our warehouse facilities have
high operating rates of 95% or more. As this shows, we
are achieving business expansion in line with our capital
investment.
		for Value
2. Inorganic Expansion Strategy: M&A Targets
[Supplementation of areas with blank spots]	[Upstream and downstream logistics businesses]	Creation
Business enterprises that own land for sales offices and	Packaging businesses, packing materials, and distribution processing companies
warehouses (5,000 tsubo/approx. 16,500 m2)	Driving schools (must offer truck training; 7,000 tsubo (approx. 23,100 m2) or more,
Kansai Region (Osaka Senshu Area, Higashi Osaka),	Kanto Region)
Chugoku Region (Hiroshima, Mihara, Fukuyama, Asaguchi),	Industrial waste treatment (intermediate treatment), recycling businesses
Chubu Region (Suzuka Area, Aichi, Gifu)	Automotive R&D and testing businesses
[Development of new shippers]	Temporary staffing agencies for industrial work
[Overseas projects]
Logistics, warehousing and distribution processing
companies whose major shippers (direct contractors) are	Companies that provide comprehensive logistics support to Japanese manufacturers
manufacturers	that have already expanded overseas or are planning overseas expansion
Logistics subsidiaries of manufacturers	(any country or region)

Circulation business

- Realize circulation businesses -

Acquisition of business of KOGA KANKYO SERVICE CO., LTD.

Expand into the intermediate treatment business of industrial waste

Sales results and plans

222.3 billion yen

+10.3 billion yen (+4.8%)

Enhance transportation and storage under three- temperature-zone management

Promote initiatives that cover three temperature zones for, as well as food, other goods that require temperature control, such as chemicals, precision machinery, and battery storage

250.0 billion yen

+16.6 billion yen

+27.7 billion yen (New initiatives)

+11.1 billion yen

(+5.0%)

Overseas businesses

- Expand overseas businesses -

Acquire U.S. car carrier trailer business and pursue synergies with existing businesses Expand investments in growing and emerging regions

280.0 billion yen

+17.5 billion yen

+30.0 billion yen (New initiatives)

+12.5 billion yen

(+5.0%)

Logistics companies whose major customers handle	Priority on the United States and India, which have high growth potential
pharmaceuticals, precision equipment, and food products	Businesses with potential for cross-selling, including export/import, customs
(frozen and refrigerated warehouses)	clearance, warehousing, transportation, and distribution processing
		(excluding warehousing specialists and transportation specialists)	Data

	Initiatives to Improve Efficiency		Section

Labor saving and automation initiatives

In the warehousing business, we are working to improve work efficiency by introducing labor saving and automation equipment, such as vertical conveyors, warehouse robotics, automated guided vehicles, and mobile racks, resulting in more efficient use of warehouse space, while working to ensure worker safety and reduce workloads. In the transportation business, we will expand the introduction of our fleet of double trailer trucks, which can handle about twice the volume of cargo compared to regular heavy-duty trucks.

Systemization initiatives (building a digital platform)

We will build a proprietary development environment and self-develop a totally optimized platform to have our own in- house business management system. During the period of the previous Medium-Term Business Plan, we developed a new warehouse management system, WMS, and began using it. In the 13th Medium-Term Business Plan, we intend to develop a transportation and delivery management system, TMS, and a logistics management system, LMS, among others.

FY2024/3

17 Integrated Report 2024

FY2025/3

FY2026/3

Integrated Report 2024

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