NO.182
ALPS ALPINE
REPORT
Nov 30, 2024

TOP MESSAGE
BUISINESS OVERVIEW
Special Feature: Alps Alpine’s Integrated Report
News@ALPS ALPINE

TOP MESSAGE

We will work to improve our corporate value by directing an organization toward growth and promoting human capital management.

CEO
Hideo Izumi

To Everyone,

We would like to express our sincere gratitude to our shareholders for their continued support.

A half year has passed since the 2nd Mid-term Business Plan was suspended in FY2024 and we have focused on management structure reform. During this period, we reported the partial sale of our equity interest in Alps Logistics Co., Ltd., the transfer of the power inductor business, and the consolidation of production at ALPS ELECTRIC (MALAYSIA). As we aim to improve our corporate value, we have set targets of exceeding a PBR of over 1 and achieving an ROE of 10% by FY2027, and in second half of the fiscal year, we are working together as a company to complete preparations for the 3rd Mid-term Business Plan starting in FY2025.

Currently, we are in the process of consolidating non-core and unprofitable businesses, and at the same time we are concentrating on our core businesses and making strategic investments. In the sensing field, which is a growth driver, we will invest management resources to expand the market for passive sensors (contacts and resistors), which already have an extremely high market share, and active sensors (magnetic, high-frequency, and electrostatic), which are being adopted for a wider range of applications each year.

Although a company’s asset value has many facets, ultimately I believe with no doubt that a company is made up of human capital and that its greatest asset is its human capital. Through dialogue with over 1,600 employees including town hall meetings at 11 domestic and 19 overseas business locations, I've found that listening to the truth doesn't always make me feel comfortable, but it does make me aware of difficult issues that need to be resolved immediately. Furthermore, we have received feedback from stakeholders that the future direction is not clearly visible, so we decided from the last fiscal year that we need to create a new vision and action guidelines to guide the realization of that vision that can serve as a compass for the company. For this reason, we have launched the Vision Project involving our global employees to align with next fiscal year’s 3rd Mid-term Plan. I believe that this project is deeply connected to our human capital management policy for maximizing corporate value.

We have introduced the dividend on equity (DOE) ratio this fiscal years, and we will further strive for management mindful of our stock price from next fiscal year onward.

Thank you for your ongoing support and encouragement for our endeavors.

President‘s Column

My recent interests

Although it is not really a hobby, I have come to realize how important it is to refresh my mind and not let things get to me, and I find that creating time to clear my mind by soaking in a hot bath or sauna is the most effective. I am also building a sauna and balcony for outdoor relaxation at my home, and I'm looking forward to making gradual improvements to them.

BUSINESS OVERVIEW BUSINESS OVERVIEW

Net sales

Unit: ¥billion

Operating income

Unit: ¥billion

Operating income margin

Quarterly net income attributable to owners of parent

Unit: ¥billion

Quarterly net income per share

yen

Equity ratio

Outlook for the Entire Fiscal Year(Forecasts for the fiscal year ending March 31, 2025)

Net Sales940.0（Unit: ¥billion Y on Y-2.5%）

Operating Income23.0（Unit: ¥billion Y on Y+16.7%）

Ordinary income19.0（Unit: ¥billion Y on Y-23.4%）

Net income attributable to owners of parent30.0（Unit: ¥billion）

Assumed Exchange RateUSD/JPY=146.32yen、
EUR/JPY=157.97yen、
CNY/JPY=20.58yen

Dividend Per Share
(non-consolidated)30yen（Interim dividend）
30yen（Year-end dividend）

Dividend Trends

（Yen）

Interim Dividend
Year-end Dividend

Overview by Business Segment

Sales
composition
ratio
Unit: ¥billion

Component Segment

◆Sales and profits increased due to increased demand for products for the mobile market and consumer market and increased sales of products for the automotive market

In addition to the positive effect of the weak yen, sales of actuators for the mobile market, switches and tact switches for the automotive market, and encoders and tact switches for the consumer market were strong.

Net Sales 1,778
Operating Income 167

Changes in Net Sales

Unit: ¥billion

Sensor & Communication Segment

◆Net sales increased for products such as sensors for the mobile market and communication modules for the automotive market

In terms of net sales, although sales of products for the automotive market decreased due to the transitional period caused by the replacement of conventional keyless entry system products with digital key products, net sales increased overall as a result of the weak yen and increased demand for products for the mobile market. Operating income improved year on year, supported by the weak yen and increased net sales.

Net Sales 434
Operating Income 6

Changes in Net Sales

Unit: ¥billion

Module & System Segment

◆Although revenue and profit declined year on year, the benefits of reducing unprofitable products have begun to become apparent

Despite the positive effect of the weak yen, sales decreased due to the sluggish performance of our major Japanese, North American, and European automobile manufacturer customers in the Chinese market, as well as the end of system product models for Europe. Although operating income benefited from reduced depreciation expenses due to impairment losses in the previous fiscal year and improvements in variable costs, it ultimately declined due to factors including a decline in net sales and rising wages.

Net Sales 2,589
Operating Income 52

Changes in Net Sales

Unit: ¥billion

Special Feature: Alps Alpine’s Integrated Report SPECIAL FEATURE

What is an integrated report?

An integrated report is a report that integrates financial information on a company's performance and assets with non-financial information on matters such as environmental, social, and governance initiatives.
It is a document that communicates the company’s value creation story in order to foster expectations and empathy among all stakeholders, including investors, business partners, and employees.
We would like to introduce some key points from the 2024 Integrated Report issued by Alps Alpine in September.

Structure and highlights of the 2024 Integrated Report

■ Structure of the 2024 Integrated Report

CHAPTER1 Value Creation Story
CHAPTER2 Value Creation Activities

CHAPTER3 Business Activities
CHAPTER4 Data Section

■ Highlights of the 2024 Integrated Report

CHAPTER1 Value Creation Story
Vision of Alps Alpine
CEO Message
（P4～P7）
CHAPTER2 Value Creation Activities
How will this vision be achieved?
Three-way Discussion
Between Outside Directors
and the CEO
（P49～P53）
CHAPTER3 Business Activities
Current situation and future approach
Overview of Business Operations
（P56～P61）

As explained at our financial results briefing and on our website, the 2024 Integrated Report focuses on reporting the reasons for suspending the 2nd Mid-Term Business Plan while pursuing management structure reforms and the objectives and targets of the management structure reforms aimed at the 3rd Mid-Term Business Plan from FY2025, as well as the main initiatives being taken to achieve these objectives.

Representative Director Executive Vice President COO,CFO Satoshi Kodaira

CHAPTER1
Vision of Alps Alpine

CEO Message（P4～P7）

Aim of suspending the Mid-term Business Plan and starting structure reforms

・Background and aim of suspending the second medium-term plan
・What we are trying to achieve with management structure reforms
・CEO's view on the strengths of Alps Alpine
・Reasons for establishing a new corporate vision

Our key focus!

The Value of Alps Alpine as Taught by Our Customers

Withdrawal negotiations come with the risk of significantly impacting subsequent business relationships, such as terminating transactions relating to other products or losing bidding opportunities. I personally visited customers to explain the withdrawal or reduction strategy for the Company’s survival, and naturally, I was often faced with a strong reaction. The feedback I received, even from customers who were particularly inconvenienced, or where negotiations were especially complex, was surprisingly reassuring.
“You do not understand your own value. You may think you are the same as other companies in the same industry, but your technology is of incomparable value.”
These were not words received from just one company. Other executives and employees also received similar encouragement from several business partners. The unexpected recognition during extremely tough negotiations greatly encouraged us and reaffirmed that the ability to create innovative products is the essence of Alps Alpine. At the same time, we came to realize that we still do not fully understand our strengths and value

CHAPTER2
How will this vision be achieved?

Three-way Discussion Between Outside Directors and the CEO（P49-53）

Open discussion on the theme of management structure reforms

The Alps Alpine outside director roundtable discussion is a feature that has been highly evaluated by many stakeholders, particularly institutional investors, every year. The 2024 edition includes a discussion between Outside Director Date, Outside Director Fujie, and President Izumi.

Highlights of the roundtable discussion

Highlights of the roundtable discussion①

Comments by Outside Director Date
-Background of management structure reforms-（P50）

The management team has to recognizes impairment losses as a very serious issue, and it is necessary to review systems and take countermeasures.

Date

The trigger for serious discussions was the decision to record a significant impairment loss in the subsequent financial statements during the second quarter results for the fiscal year ending March 31, 2024.Manufacturers tend to view fixed asset impairment losses merely as accounting processes and not take them too seriously. Still, in simple terms, impairment processing is a “failure of capital investment,” resulting in losses because future cash flows do not exceed the book value of investments. In this case, the future value of the fixed assets had fallen below zero, leading to a total impairment.Still, we must first understand and accept that reality ourselves, and acknowledge that there were flaws in the decision-making mechanism. We need to review the system and take measures, but the starting point was to have the management understand and accept the situation the Company was in.

Highlights of the roundtable discussion②

Comments from Outside Director Fujie
-Issues as an organization-（P50）

There was a lack of internal sharing of business issues.

Fujie

I agree. The heads of the businesses naturally prioritize the output of their respective businesses and attempt to solve challenges independently. This is the right approach, but they may not have sufficiently shared the challenges of their business within the Company. There may have been a lack of awareness or environment to openly share and follow up on what challenges exist and what needs to be prioritized for resolution among the directors.For example, even when revenues were growing in the smartphone business in 2019, the automotive business was not generating sufficient profits. Ideally, the Company should have thoroughly improved the business structure during this period, but the good financial results overshadowed the negative aspects. It was necessary to translate all

Highlights of the roundtable discussion③

Comments from President Izumi
-Towards management structure reforms-（P51）

Many of our businesses have fallen into a slump simultaneously this time. We will clarify the areas where management resources will be concentrated through business portfolio reforms.

Izumi

A peculiarity of our Company is that the products we handle change drastically in a 10-year cycle. Looking back, the past decade involved actuators, and before that, game controllers, LCD panels, and magnetic heads.In the past, even if one business was in trouble, a savior always appeared. This reliance became ingrained. This time, many businesses fell into trouble simultaneously,probably a first for our Company.First, we must thoroughly focus on withdrawal and consolidation.It is necessary to convey, not just in words but in actions, that waiting for a savior will not bring one

Highlights of the roundtable discussion④

Comments from President Izumi
-Collaborating with outside directors-（P53）

We will advance management structure reforms and aim to enhance corporate value, with leveraging the presence of our outside directors.

Izumi

Thank you. As I mentioned at the beginning, in the approximately 40 IR meetings conducted so far, we have received evaluations from many investors that “our Company has excellent outside directors with talent and achievements.” Thanks to this discussion, I am reminded of being surrounded by strict yet reliable outside directors. On the other hand, our straightforward reflection as a company is that we have not been able to utilize the presence of such outside directors fully. The current Board of Directors is merely asking the outside directors to look into a small well called the Vice Presidents’ Meeting and say, “Please let us know if you see anything of concern.” As we advance, we aim to change the way the Board of Directors functions, expanding the well to better incorporate the diverse perspectives of the outside directors, societal changes, and global movements.We appreciate your continued cooperation in enhancing our corporate value

CHAPTER3
Current situation and future approach

Overview of Business Operations（P56-61）

The person responsible for each business at Alps Alpine explains the future direction.

【How to read the business pages】

①Business policy in management structure reforms
②What we will focus on over the short term
③What we will work on from a medium to long-term perspective
④Environment in which the business operates and our company's advantages
⑤Specific examples of our company's advantages

2024 Integrated Report

CHAPTER1 Value Creation Story
CHAPTER2 Value Creation Activities

CHAPTER3 Business Activities
CHAPTER4 Data Section

See here for the full text of the Integrated Report

News@ALPS ALPINE

News release pick up

Notice of Nikkei New Office Promotion Award

The Nikkei New Office Promotion Award is an award presented by Nikkei Inc. and the New Office Promotion Association to commend offices that have been designed with originality and creativity, with the aim of promoting and encouraging the creation of new offices. 16 offices were selected out of 153 entries, including our new R&D building. We also received The Chief of Tohoku Bureau of Economy, Trade and Industry Ministry Award in the Tohoku block.

Holding of the 91st Ordinary General Meeting of Shareholders

The 91st Ordinary General Meeting of Shareholders was held on June 26 at the hall at Headquarters. At this meeting, four proposals were put on the agenda, and all four were approved by a majority vote.

General Meeting of Shareholders | Investors | Alps Alpine