The 2024 Tsubaki Integrated Report (Annual Report) is now available

Introduction

CONTENTS

Introduction

Medium- to Long-Term Growth Story

• 4 Message from the CEO
• 6 Interview with the COO

10 Interview with an Outside Director

1. Message from the Officer Overseeing Financial Affairs
2. Message from the Officer Overseeing Sustainability Promotion

Tsubaki's Value Creation

14 Value Creation History

16 CSV Products and New Businesses by Customer Segment and Industry

18 Track Record in Value Creation (Financial and Non-Financial Highlights)

20 Tsubaki's Value Creation Process

22 Risks and Opportunities Arising from Changes in the External Environment and ESG Issues Being Addressed

24 Special Feature: Technology and Human Resources Will Drive Our Transformation Accelerating Tsubaki's Value Creation

Tsubaki's Business Strategy

28 Tsubaki's Competitive Advantages and Market Position

30 Power Transmission Operations

(Chain Operations and Motion Control Operations)

32 Mobility Operations

34 Materials Handling Operations

36 Global Network: Tsubaki's Globalization

Tsubaki's ESG-Focused Management

38 Working to Achieve Sustainability

1. Sustainability Priority Matters and Progress to Date

1. Communications with Stakeholders
2. Environmental Management

1. Human Resource Management

1. Supply Chain Management
2. Quality Management
3. Corporate Governance

1. Compliance and Risk Management

60 Board of Directors, Audit & Supervisory Board Members, and Executive Officers

Supplementary Information (Financial and Non- Financial Data and Corporate Information)

62 Eleven-Year Selected Financial and Non-Financial Data

1. Performance by Segment and Region

1. Principal Tsubaki Group Companies
2. Corporate Data and Stock Information

Corporate

Philosophy

As the Tsubaki Group's corporate philosophy,TSUBAKI SPIRIT is a representation and systematization of the "Tsubaki DNA" inherited from our forebears, and an expression of what the Tsubaki Group can offer to the world as well as the foundation for our values and what we must do going forward as part of our mission, aspiration, code of conduct, and founding philosophy.

Target sales:

¥500 billion

New growth

Expansion of business

domains through development of new technologies, M&A, alliances, etc.

Innovative

growth

Expansion of conventional business through innovative methods, including M&A

Organic growth

Growth that can be expected

from existing initiatives

FY2030

(plan)

Long-Term Vision 2030

Vision for Fiscal 2030 (Where We Want to Be)

We aim to become a corporate group that contributes to solving the following three social issues through Linked Automation technology.

Linked Automation

(A technology domain that is highly functional and highly automated)

Next-generation businesses that will enable

sustainable growth

Human Assistance

Introduce automation and support equipment businesses for general consumers

Maintenance

Strengthen maintenance service structure for systems (things that move) to contribute to stable operation of customer facilities

Agriculture Business

Expand agriculture business

Life Science

Participate in the field of regenerative medicine

Energy Infrastructure

Expand into carbon-neutral-related markets

Mobility

Transition from internal combustion engine parts to mobility parts

Three Consecutive Years of Increased Revenue and Profits-but Rapidly Executing Strategies is an Issue

Three years have passed since the start of our Mid-Term Management Plan 2025, which began in fiscal 2021. Consolidated results in fiscal 2020 were down significantly as the external environment changed due to factors such as the COVID-19 pandemic and geopolitical conflicts. However, we have had three straight years of recovery starting from fiscal 2021. In fiscal 2023, we recorded our highest ever consolidated net sales and our highest operating income since fiscal 2019. At the same time, our operating income ratio of 8.0% and ROE of 7.7% show that we are still on the road to full recovery. We are aware that we need to work even more rapidly to execute strategies such as strengthening profitability of existing businesses and planting seeds for new fields if we are to achieve our Long-Term Vision 2030.

Work to be Done in the RemainingTwoYears of the Mid-Term Management Plan 2025

The Tsubaki Group has four main operations: Chain, Motion Control, Mobility and Materials Handling.

In the three years starting from fiscal 2021, both Chain Operations and Mobility Operations improved results beyond expectations, compensating for the slump experienced in the other two businesses.

While they are performing well, even our Chain Operations and Mobility Operations are not completely immune to issues. With Chain Operations, there is an

imbalance in market share in different countries and regions. It is essential that we resolve this while also continuing to further advance our manufacturing reforms. For Mobility Operations, we need to further expand our market share in timing chain systems for automobile engines, in which we are currently the global leader, while proceeding to launch a parts business for next-generation automobiles in parallel.

With Motion Control Operations, it is crucial that we enhance our resilience to economic fluctuations through measures such as accelerating the market introduction of new innovative product groups. In Materials Handling Operations, the launch of Nexa Ware Co. Ltd. in collaboration with KDDI Corporation is a trigger requiring an urgent shift to selling "ideas."

All management personnel are aware of these numerous challenges, and we will take ownership as we engage in thorough discussions from the perspective of optimization across the entire Group, then formulate and implement measures.

On that basis, in the remaining two years of the Mid-Term Management Plan, we will implement expansion through measures such as establishing bases

Kenji Kose

Chairman and CEO,

Representative Director

to further bolster strong businesses and rationalizing investment to enhance profitability. At the same time, we will strategically enhance shareholder returns in consideration of capital efficiency. Specifically, we will increase our base consolidated dividend payout ratio from 30% to 35% or more while also being agile in buying back our shares. In parallel with these measures and with a shared sense of urgency, management has identified remaining management issues to consider as we formulate and refine our next Mid-Term Management Plan starting in fiscal 2026, on our way to realizing our Long-Term Vision 2030.

Becoming a Company Valued by

Stakeholders

Under the Tsubaki Group's Long-Term Vision 2030, we aim to be a corporate group that contributes to solving the following three social issues: creating a people-friendly society, building a safe and secure infrastructure for living, and creating an Earth-friendly society.

To achieve this, we cannot be satisfied with where we are now. It is essential that we advance innovative growth and new fields. To that end, we must reform our

corporate culture through means such as strengthening our human capital as the basis for creating innovation and promoting further diversity. In terms of technical talent, in addition to working to expand mid-career hiring, we will actively strengthen cultivation of human resources through exchanges with external parties, including by dispatching employees to universities and companies.

We also intend to increase the ratio of employees with disabilities beyond the levels required by law. In addition to increasing employment opportunities for people with disabilities, by creating environments where people with disabilities can work with peace of mind, we are aiming to create workplaces where all employees can feel safe and secure, enabling them to leverage their full potential and help the Company grow.

The Tsubaki Group promotes the co-creation of value with all stakeholders, including customers, employees, shareholders, business partners and communities. By distributing the profits and other benefits born from this value creation appropriately, we strive to be a company that is valued by a wide range of stakeholders.

I hope that our stakeholders will continue to support and encourage us in future.

Medium- to Long-Term Growth Story

Tsubaki's Value Creation

Tsubaki's Business Strategy

Tsubaki's ESG-Focused ManagementSupplementary Information (Financial and Non-Financial Data and Corporate Information)

results of each business, what issues do you perceive?

Chain Operations

Chain Operations continued to grow in terms of both sales and profitability, achieving a high operating income ratio of 17.4% in fiscal 2023. Alongside Mobility Operations, Chain Operations is firmly fulfilling its role as a core business for the Tsubaki Group in terms of turning

our overall excellence in areas such as technical, product development and customization capabilities into competitiveness.

One issue faced by Chain Operations is supply capabilities. While several of our competitors have withdrawn from the business or reduced production, we have continued to receive numerous inquiries in the

last three years. However, our analysis shows that delivery schedules prevented us from keeping up with demand and we could not fully capitalize on these opportunities. While we have resolved immediate supply issues partly due to stabilizing demand, we must also ensure that we do not follow the same path during the next cycle of demand increases.

The second issue to be faced is the discrepancies in market share between countries and regions. While we are the clear leader in the Japanese and North American markets, we have not yet fully established ourselves in new markets such as Europe and India.

With the aim of resolving the two aforementioned issues, we have started exploring possibilities for establishing new chain manufacturing bases in India after Europe. We are also accelerating automation and implementation of DX at all manufacturing bases with the aim of further improving productivity. At the same time, in addition to enhancing product appeal (including our core products) through measures such as developing next-generation roller chains, we will work to develop new environmentally-friendly products using recycled and biomass materials.

Motion Control Operations

In Motion Control Operations (hereinafter referred to as "MC Operations"), while results underwent notable improvement from fiscal 2021 to fiscal 2022, the operating income significantly declined to 2.9% in fiscal 2023. The reason for this was sluggish demand from the domestic Japanese industries that comprise our main customer base, including the machine tool and LCD/semiconductor industries, and escaping from this dependency on the domestic market and economic conditions is an urgent issue.

In MC Operations, speedy product development adapted to the unique needs of each market is needed. Our work to strengthen product appeal is starting to bear fruit, such as the adoption of our Arc Chain Actuator using zip chains developed in-house for equipment to open and close wing truck cargo compartments, and we will continue further efforts in this area. At the same time, we will also urgently expand into new overseas markets and grow our after-sales service business, reforming MC Operations to be a strong business that can respond to economic fluctuations.

Mobility Operations

Results for Mobility Operations have shown strong growth in the three years since fiscal 2021. In addition to the continued recovery of automobile manufacturing, our increased market share in timing chain systems for engines was one reason behind this.

In the automobile engine-oriented business, which is an existing business domain, demand to develop higher-performance systems for hybrid and plug-in vehicles is growing. With significant room for growth in sales, we are devoting energy to meeting this need and adding value through our products. In addition, while continuing to pass on increases in the cost of material and labor through prices, we will accelerate the use of DX to improve productivity and ensure reliable profits.

In parallel with the continued expansion of our existing business domains, we will accelerate efforts to obtain contracts in the next-generation automobile parts domain and move to mass production. Development of clutches and units for use in parking locks and switching between two-wheel drive and four-wheel drive is in the final stages, and we are nurturing them to become a second key pillar after timing chain systems.

Materials Handling Operations

Materials Handling Operations has seen two consecutive years of operating losses, starting in fiscal 2022. This is because, while our Bulk and Mayfran businesses were steady, our American subsidiary incurred losses due to management issues on a major project (an automobile conveyor system), and profitability for the Materials Handling Division in Japan was low.

At our American subsidiary, a new management

structure has been put in place, and the disposition of losses relating to the unprofitable project has subsequently been completed. Under this new structure, we are focusing on profitability in our sales activities and successfully expanding our order intake.

In Japan, meanwhile, we are working to expand our system integration business from customers' perspectives. Specifically, we have established Nexa Ware Co. Ltd. as a new joint venture with KDDI Corporation with the aim of collaborating on new DX solutions for logistics. With this as a trigger, we will accelerate efforts to increase net sales and profitability in the Materials Handling Division. At the same time, we will also strengthen the overall structure of Materials Handling Operations by expanding our after-sales service business.

Medium- to Long-Term Growth Story

Tsubaki's Value Creation

Tsubaki's Business Strategy

Tsubaki's ESG-Focused ManagementSupplementary Information (Financial and Non-Financial Data and Corporate Information)

Accelerating Development of Sustainable Products and Endeavors to Launch New Businesses

Through our main businesses, we are accelerating development of products that can contribute to the resolution of three social issues. In addition to the efforts of each division, we are also taking on new businesses in various fields, such as agriculture, human assistance, regenerative medicine and power control systems. As part of the expansion of our agriculture business, we launched the fully-owned subsidiary Tsubaki VegyMove Co. in July 2024 and acquired the agriculture business of our business partner Kidaya Shoten Co., Ltd. Kidaya Shoten's plant factories have industry leading know-how relating to cultivation and a track record of sales. We will combine this with the automation system technology development functions of our agriculture business to rapidly create synergies.

While it will take time before these new businesses contribute to increasing Tsubaki's economic value, taking on these new frontiers is essential for our growth into an innovative collective that helps to resolve social issues. Above all, we see this as an effective way to activate the "Tsubaki DNA" of innovating and taking on challenges.

Accelerating Our Response to Climate Change

Reducing CO2 emissions is an urgent issue. Tsubaki received SBT certification in 2023 and has raised its Scope 1 and Scope 2 CO2 reduction targets to a 42% reduction by fiscal 2030 (from fiscal 2021). We are currently making strong progress, and are also actively investing in reforms to our industrial processes, including heat treatment processing, with the aim of reaching carbon neutrality in the future.

Increasing Investment in Human Capital and Enhancing Employee Engagement

Increasing investment in human capital and enhancing employee engagement are essential if we are to integrate and speed up our sustainability and growth strategies. We have advanced personnel system reforms, health and productivity management, working environment improvements and diversity promotion, and will focus on further investment in human capital under the next Mid-Term Management Plan.

Actively promoting investment in three areas for sustainable growth

New products / new businesses

Environment (carbon neutrality)

Human capital (human resource development and employee engagement)