Ferrotec (6890) investor relations material

Financial performance and capital efficiency

• PBR recovered to 1.13x in FY3/26 after four years below 1.0x, but ROE at 6.0% remains below the 11.67% cost of equity, making profitability improvement a key priority.

• ROIC was 3.2% in FY3/26, well below WACC of 11.10%, with only two years in the past decade exceeding WACC; improving ROIC is an urgent management focus.

• Decline in ROE over recent years was mainly due to a drop in net income margin, while PER at 19.6x lags the industry average due to concerns over profit growth, financing, and China exposure.

• DuPont analysis shows net income margin and total asset turnover both declined in FY3/26, while financial leverage increased slightly due to asset and liability growth.

Strategic initiatives for value enhancement

• Measures to improve PBR include digitalization, automation, business selection and concentration, and rigorous ROIC management.

• Asset sales of over ¥50 billion and capital investments of ¥175 billion are planned through FY12/27, with proceeds funding growth and shareholder returns.

• Shareholder returns are being enhanced via a 3.5% DOE floor, share buybacks, and a flexible payout ratio targeting 50%.

• Expansion outside China, especially in Malaysia and Japan, aims to mitigate geopolitical risks and support growth.

Executive remuneration and governance

• Executive remuneration shifted to increase variable and stock-based components, aligning incentives with performance and shareholder value.

• New system includes performance-linked bonuses, stock units with deferred delivery, and clawback provisions for misconduct.