The goal of the Company's financial policy is to maintain a strong consolidated financial position resulting in appropriate credit ratings. Financing through borrowings is utilized as necessary, to achieve the goals of this policy.
The Company believes it is important to maintain a sufficient level of shareholders' equity in order to be able to respond flexibly to investment opportunities for future growth, while at the same time enhancing its ability to address possible risks relating to its business operations and assets. Equity attributable to owners of the parent was 988.4 billion yen and the ratio of equity attributable to owners of the parent to total assets was 49.4% as of March 31, 2020.
The Company focuses on achieving capital efficiency above the cost of shareholders' equity on a consolidated basis and sets its Return on Equity (ROE) target at approximately 15%. In order to achieve this target, a hurdle rate exceeding the cost of capital is applied when evaluating each investment opportunity.
The Company aims to provide stable and sustainable dividends by comprehensively evaluating both earnings and shareholders' equity. The Company has set a consolidated dividend payout ratio target of approximately 30% of profit attributable to owners of the parent excluding non-recurring income/losses. The Company may consider implementing share repurchase programs, depending on the capital markets environment and outlook of its financial position.
Use of Capital
The Company allocates its capital mainly to working capital, corporate taxes, mergers and acquisitions, asset acquisitions and capital expenditures by each segment as well as repayments of borrowings, payment of interest, payment of dividends, and share repurchases.
The Company's primary source of liquidity for working capital and investments are cash flows from operating activities. However, the Company may consider and execute external financing when various conditions are deemed favorable, such as demand for funds, interest rate trends, repayment amount, redemption period of existing interest-bearing debt, amount to be raised, and financing structure.
For short-term working capital, the Company primarily utilizes borrowings from financial institutions and/or commercial paper. For mid- to long-term needs, the Company raises funds mainly through borrowings from financial institutions and/or the bond market. To maintain flexible financing capabilities, the Company has registered a maximum 200 billion yen worth of corporate bonds for potential issuances, the full amount of which is unused as of March 31, 2020.
The Company has also entered into overdraft agreements with four financial institutions to secure liquidity and raise working capital funds efficiently. The maximum amount of borrowings under these overdraft agreements is 113 billion yen as of March 31, 2020, and the entire amount remains unused. In addition, the Company entered into a committed credit facility agreement providing for committed credit facilities with a total maximum borrowing amount of 399.9 billion yen on April 30, 2020. The entire amount available under these credit facilities remains unused as of May 27, 2020. The Company maintains agreements with the aim of ensuring sufficient liquidity in the event of significant changes in the business environment.
The table below sets forth a breakdown of the book value of bonds and borrowings by payment due period as of March 31, 2020. Each amount shown is the required cash outflow by payment due period excluding discounts and including interest payments.
（In millions of yen）
|Book value||Payment due period|
|1 year or less||Over 1 year through 5 years||Over 5 years|
In order to maximize overall capital efficiency, the Company prioritizes internal lending and borrowing within the Company over external financing, mainly through a cash management system, when it is legally permissible and economically reasonable to do so.
The Company maintains internal liquidity of cash and cash equivalents by consolidating the cash management operations of all currencies to the Holding Company and its subsidiaries, which provide internal treasury management services. The Company seeks to maintain a sufficient cash position to maintain financial stability through potential changes in the economic environment including financial crises, and to create flexibility for investment opportunities that enable future growth. The amount of cash and cash equivalents is 421.2 billion yen and the amount of net cash *1 is 284.5 billion yen as of March 31, 2020.
*1 Net cash = cash and cash equivalents - interest-bearing debt
*2 Interest-bearing debt includes bonds and borrowings, excluding lease liabilities.
The Company invests only in principal-guaranteed financial instruments that are deemed safe and efficient, and does not engage in such investments for speculative purposes.
- Investor Relations