CFO Message

Enhancing Management Quality from the Financial Perspective as CFO

Since its founding, Shimadzu has pursued its mission of delivering new value to society through science and technology. Even as times change and society’s expectations and challenges evolve, our commitment to confronting the essence of those issues and solving them through technology remains unchanged. As CFO, I believe my responsibility is to support sustainable value creation from a financial perspective, so that we can carry these principles and strengths forward to the next generation.
The business environment surrounding the Shimadzu Group is becoming increasingly uncertain due to rising geopolitical risks, fluctuations in foreign exchange rates and interest rates, and accelerating technological innovation. At the same time, as social challenges in areas such as life sciences, the environment, and safety become more acute, growth opportunities for the Shimadzu Group’s technologies and solutions to demonstrate their full value are steadily expanding. In this environment, our financial strategy must support growth investment while maintaining both capital efficiency and financial discipline. As CFO, I will contribute to the sustainable enhancement of corporate value in line with stakeholder expectations by enhancing management quality from a financial perspective by maximizing cash generation, business portfolio management centered on ROIC, strategy-driven capital allocation, and shareholder returns linked to earnings growth.

Review of the Previous Medium-Term Management Plan

Under the previous Medium-Term Management Plan, we aimed to achieve both growth and profitability under the basic policy of “Becoming an Innovative Company That Solves Social Issues with Global Partners” by strengthening both technology development and social implementation capabilities to achieve sustainable growth. In terms of performance, consolidated net sales in FY2025 were ¥560.7 billion. We achieved the level envisioned in the plan and posted record-high net sales for the sixth consecutive year, supported by overseas demand, stronger product competitiveness in core businesses, and expansion of the recurring revenue business.
Operating profit was ¥73.7 billion, and the operating profit margin was 13.1%, falling short of the levels set in the plan. ROE was 11.4% and ROIC was 9.6%. Although both exceeded the cost of capital of 6%-7%, we recognize it as a significant challenge that net sales growth did not translate sufficiently into improved capital efficiency and earnings growth. This reflected increased growth investments for the future, mainly in R&D and human capital, as well as weak market conditions in China and higher costs due to tariffs and inflation. These factors highlighted the need to make our earnings structure more resilient to changes in the external environment.
During the previous Medium-Term Management Plan, we worked to shift toward ROIC-based management. We visualized the relationship between invested capital and profitability by business, and established a framework for evaluating businesses from the perspective of medium- to long-term capital efficiency, rather than focusing only on single-year profit and loss. We also used ROIC as a common language in discussions on investment projects and the business portfolio, encouraging decision-making that takes into account business profitability and investment efficiency. Although there is still room for improvement, we believe the foundation for ROIC-based management is steadily being established.
We also pursued the planned acquisition of Tescan as a strategic initiative to expand the value we provide in the Analytical & Measuring Instruments Business. In entering the high-growth field of electron microscopy, we made the decision after comprehensively assessing its complementarity with the Shimadzu Group’s existing businesses, future growth potential and profitability, and the impact on capital efficiency. As CFO, I was involved in the management decision while maintaining financial discipline, with a focus on the appropriateness of the acquisition price, the likelihood of investment recovery, synergy creation through post-merger integration, and the medium- to long-term enhancement of corporate value.
Based on the achievements and challenges identified under the previous Medium-Term Management Plan, the new Medium-Term Management Plan will focus not only on increasing the scale of growth but also on improving its quality, with the aim of achieving sustainable growth that balances profitability and capital efficiency.

Financial Strategy Under the New Medium-Term Management Plan

As a customer-centric end-to-end solutions partner grounded in technology, the Shimadzu Group will continue to pursue Planetary Health and is targeting net sales of ¥1 trillion under Shimadzu 2035, our vision for 2035. To realize this vision, the basic policy of the financial strategy under the new Medium-Term Management Plan is to maximize corporate value by achieving both sustained expansion of earning power and higher capital efficiency.
In terms of profitability, we aim to achieve net sales of ¥680.0 billion, operating profit of ¥100.0 billion, and an operating profit margin of approximately 15% in FY2028 by concentrating investment in high-value-added areas, primarily in core businesses, improving the product mix, optimizing pricing, and increasing productivity through the use of AI and DX. We have also set targets of EBITDA of ¥135.0 billion and an EBITDA margin of 20%, and will strengthen cash generation.
From the perspective of capital efficiency, we will rigorously manage working capital, including inventories and trade receivables, and improve invested capital turnover. Through these initiatives, we aim to consistently secure ROE of at least 11.5% and ROIC of at least 10% in FY2028. For investment projects, we will make decisions after clarifying not only strategic significance but also the certainty and timeline of investment recovery. We will continue to evaluate outcomes with an awareness of the cost of capital to improve capital efficiency. We have also expanded the global use of our cash management system (CMS) and established a framework under which approximately 80% of Group funds are managed through the CMS, including funds in Japan, the United States, Europe, Asia, and China. Going forward, we will further centralize funds at headquarters to enhance visibility over Group funds and enable agile capital allocation, increasing our ability to respond quickly to growth investments and M&A opportunities, and further improving capital efficiency.
We will also adopt IFRS from the final year of the new Medium-Term Management Plan. The purpose is to gain a more accurate understanding of business conditions and capital efficiency and apply that understanding to management practices. We view IFRS adoption not simply as a change in accounting standards, but as an opportunity to evolve management practices themselves. By using management indicators centered on EBITDA and ROIC, we will visualize the relationship between investment and outcomes, and improve management transparency and the quality of decision-making.
Backed by a strong financial foundation and robust cash generation, the Shimadzu Group will maintain financial resilience in the face of changes in the external environment, execute sustained growth investments, and pursue the medium- to long-term enhancement of corporate value.

Capital Allocation

Under the new Medium-Term Management Plan, the Shimadzu Group will pursue a capital allocation policy that prioritizes growth investment while balancing shareholder returns and financial soundness, based on stable cash generation and a sound financial foundation. Under the previous Medium-Term Management Plan, we achieved net sales growth, but returns on invested capital did not improve sufficiently. Under the new Medium-Term Management Plan, we will allocate resources with a stronger focus on capital efficiency. For growth investment, we plan approximately ¥220.0 billion in R&D investments, capital expenditures, and strategic investments over three years, primarily to expand core businesses, strengthen business foundations mainly in North America and India, and invest in growth fields such as semiconductor and clinical markets. In addition, we regard M&A as a key growth lever and have earmarked approximately ¥200.0 billion to M&A aimed at growth fields and enhancing the quality of the business portfolio. By combining organic and inorganic growth, we will pursue sustainable growth and the evolution of our business structure. In investment decisions, our basic criteria are strategic significance and the ability to generate returns exceeding the cost of capital, or WACC, over the medium- to long term. After investment execution, we will evaluate results based on ROIC and maintain disciplined capital allocation. For financing growth investments, including M&A, we will consider the optimal capital structure, including the use of interest-bearing debt, based on our strong financial foundation with an equity ratio of more than 70%. Rather than relying excessively on equity, we will make appropriate use of financial leverage after comprehensively considering the cash generation of the businesses in which we invest, the prospects for recovering the investment, and the impact of financial leverage on capital efficiency and financial resilience, with the aim of maximizing corporate value. Our basic policy is to allocate cash generated by the business first to growth investment, and then to shareholder returns. For shareholder returns, since FY2023 we have maintained a policy of sustaining a payout ratio of at least 30% and providing sustained shareholder returns, while comprehensively considering earnings and cash flows. We will continue this policy under the new Medium-Term Management Plan. We plan cumulative shareholder returns of at least ¥61.0 billion over the three years and will provide stable returns centered on progressive dividends. We will also conduct share repurchases flexibly, taking into account capital efficiency, market conditions, share price levels, and other factors. However, share repurchases will be considered in light of their priority relative to growth investment, and only when they contribute to the effective use of financial flexibility or improved capital efficiency.
The Shimadzu Group will pursue the optimal balance among growth investment, financial soundness, and shareholder returns, and regards improving total shareholder return (TSR) through stable returns via dividends and share price appreciation as an important management priority.

To Shareholders and Investors

Uncertainty in the business environment is increasing further due to persistent inflation, greater foreign exchange volatility, technological advances, and prolonged geopolitical risks. In this environment, companies must be able to respond to short-term fluctuations while making strategic decisions with a view to medium- to long-term growth.
As CFO, I believe my role is to balance disciplined capital allocation with effective risk management, while keeping multiple future scenarios in view, in order to maximize the results of our business activities.
The Shimadzu Group has built a strong financial foundation and has managed its finances with an emphasis on stability and discipline. Under the new Medium-Term Management Plan, we will leverage that foundation to actively pursue strategic investments in growth fields and strengthen our business foundation. Through these initiatives, I am confident that we will be able to demonstrate the next stage of the Shimadzu Group’s growth. We invite you to look forward to our progress.