Medium- to Long-Term Strategy
The Alfresa Group's Medium- to Long-Term Vision
To further increase the corporate value of the Alfresa Group, we formulated our business strategy and financial and capital strategies in the Alfresa Group's Medium- to Long-Term Vision ahead of the three-year22-24Mid-term Management Plan and up to the fiscal year ending March 31, 2033.
The Road Map to Achieving Our Long-Term Vision
Overview of the Alfresa Group's Medium- to Long-Term Vision
In May of 2022, we announced our three-year22-24Mid-term Management Plan. We also created the Medium- to Long- Term Vision to more clearly communicate our growth story and our aspirations for corporate value improvement. To achieve the goals set forth in the plan, we have outlined the
Taking into account the balance between owners' equity derived relative to profit to achieve the target ROE of 8.0% and financial soundness that should be maintained as a company supporting social infrastructure, we have set our target for the owners' equity ratio in the low- to mid-30% range.
At the top of the Alfresa Group's sustainability management (long-term strategy) is its corporate principles, which serve as the foundation of its business. Underpinning that is the Group's Basic Sustainability Policy, which is based on the Group's principles. Our aspirations have been formulated on this basis.
The Alfresa Group's Medium- to Long-Term Vision is positioned within its aspiration, "We aim to become a Healthcare Consortium that provides products and services in every health-related field." This vision is an extension of our 22-24Mid-term Management Plan, which we announced last year.
We have formulated strategies for realizing the targets outlined by the Alfresa Group's Medium- to Long-Term Vision: a business strategy, financial and capital strategies, and a strategy for non-financial indicators (ESG issues).
The business strategy calls on us to secure profit growth by enhancing the profitability of core businesses and expanding the revenue of growth and new businesses to stimulate higher profits. The financial and capital strategies, mean- while, target a dividend on equity (DOE) ratio of 2.4% or higher, which we seek to increase gradually following the period of the 22-24Mid-term Management Plan. These strategies also set the goal of acquiring treasury stock amounting to a historic high of ¥35.0 billion in fiscal 2023, and then continuing to acquire treasury stock flexibly in subsequent years.
Finally, the ESG strategy urges us to reduce CO2 emissions and promote the efficient use of energy (environmental), invest actively in human resources (social), and promote thorough compliance (governance).
road map going forward as shown in the figures below.
Our targets are to achieve net sales and operating income of ¥4.0 trillion and ¥70.0 billion or more, respectively, by the fiscal year ending March 31, 2033. To do so, we will strengthen core businesses, cultivate growth businesses, and develop new businesses. We have established target figures by reinforcing the revenue structure of our underlying ethical pharmaceuticals business, using an assumed profit margin for our growth businesses, and taking into account the future business plans of our new businesses. Given the current business environment, while these targets will not be easy to achieve, we do not believe they are unrealistically high. We believe they are challenging yet attainable goals, and we will actively strive to realize them.
We intend to achieve ROE that exceeds the cost of capital by increasing the operating income margin and improving total asset turnover, making steady increases each fiscal year and reaching 8.0% by the fiscal year ending March 31, 2033.
In the fiscal year ending March 31, 2024, we anticipate DOE of 2.8%, reflecting a ¥10.0 dividend to commemorate the 20th anniversary of our founding. We also plan to spend ¥35.0 billion to acquire treasury stock. During the period of the current plan, we aim to bring the total shareholder return ratio to 100%. After that, we will increase DOE gradually. We will continue to acquire treasury stock in a flexible manner when the timing is appropriate, taking into consideration the overall balance among an optimal capital structure, capital efficiency, dividends, and investments.
In drawing up a 10-year plan for total investment in core, growth, and new businesses, our calculations considered assumptions for specific businesses and scale of certain Group companies. During the three years of 22-24Mid-term Management Plan, we plan to invest a total of ¥120.0 billion, followed by an additional ¥320.0 billion in the eight years from 2025.
Improve corporate value over the medium to long term by pursuing the Healthcare
Consortium and improving capital efficiency by controlling the balance sheet
We feel our target owners' equity ratio should be set in conjunction with the level of return and the scale of equity.
Medium- to Long-Term Main Goals (Up to the Fiscal Year Ending March 31, 2033)
Net Sales | ¥4.0 trillion |
Operating Income | ¥70.0 billion or higher |
ROE | 8.0% or higher |
Period of the 22-24Mid-term Management Plan
Fiscal year ending | ||
Fiscal year ended | Fiscal year ending | March 31, 2025 |
March 31, 2023 | March 31, 2024 plan | 22-24Mid-term Management |
The Alfresa Group's Medium- to Long-Term Vision
Medium- to long-term goals
(fiscal year ending
Business Strategy
Financial and Capital Strategy
Plan (announced in May 2022) |
March 31, 2033)
Secure profit growth by enhancing the profitability of core businesses and expanding the revenue of growth and new businesses to encourage higher profits
1. Core businesses: | Become a leading wholesaler and the choice of |
suppliers and customers alike | |
2. Growth businesses: | Expand medical goods (medical devices, diagnostic |
reagents, nutritional foods, etc.); Promote self- | |
prevention products* in the Self-Medication Products | |
Wholesaling Business; Expand consignment and | |
promote development of pharmaceuticals for new | |
businesses in the Manufacturing Business | |
3. New businesses: | Promote business related to regenerative medicine |
products; Promote activities to connect people using | |
digital tools; Promote entry into treatment-adjacent | |
businesses |
Achieve dividend on equity (DOE) of 2.4% or higher (increase gradually following the period of the 22-24Mid-term Management Plan)
Acquire treasury stock amounting to ¥35.0 billion in fiscal 2023, then continue to acquire flexibly in subsequent years
- Achieve capital efficiency and work as a social infrastructure company to establish a stable financial base, and establish an optimal medium- to long long-term capital structure (owners' equity ratio in the low to mid 30% range)
- Realize optimal cash allocation to facilitate the sustainable improvement of corporate value by making a balanced consideration of continued invest- ment, optimizing capital structure, and providing stable shareholder returns
-
Increase DOE gradually, with an emphasis on sustainable and stable increases to dividends
Acquire treasury stock in a flexible manner with a view toward optimizing capital structure
Net sales | ¥2,696.0 billion | ¥2,740.0 billion |
Operating | ¥30.1 billion | ¥32.0 billion |
income | ||
Operating | 1.1% | 1.2% |
income margin | ||
ROE | 5.4% | - |
Owners' equity | 36.4% | - |
ratio | ||
¥2,700.0 billion or higher
¥40.5 billion
1.5%
Achieve ROE that exceeds the cost of
capital by increasing the operating income margin and improving total asset turnover (increase gradually every fiscal year)
-
¥4.0 trillion
¥70.0 billion or higher
Increase gradually
8.0% or higher
Low-mid 30% range
Non-Financial (ESG) Strategy | ||
Environmental | Social | Governance |
Reduce CO2 emissions and promote | ||
Invest actively in human capital | Promote thorough compliance | |
efficient use of energy | ||
* Self-prevention (SP) products: Products that help individuals prevent or protect themselves from illness
DOE | 2.4% | 2.8% |
Acquisition of | Commemorative dividend (¥10.0) | |
- | ¥35.0 billion | |
treasury stock | ||
Total investment | ||
amount |
2.4% or higher
Three-year cumulative total
shareholder return ratio of 100%
Three-year cumulative
total ¥120.0 billion
Increase gradually
Continue acquisition in a
flexible manner
Cumulative total (fiscal 2025 to fiscal 2032): ¥320.0 billion
18 | Alfresa Group Integrated Report 2023 | Alfresa Group Integrated Report 2023 | 19 |
Medium- to Long-Term Strategy
The Alfresa Group's Medium- to Long-Term Vision
Business Strategy: Expand and Transform the Business Portfolio
With regard to the dispensing center business, further | dispensing center business. We will develop dispensing |
deregulation in the dispensing and delivery center industry | center functions in the dominant areas of our subsidiary, |
would be desirable for us as a wholesaler developing a total | APOCREAT Corporation, and contribute by providing the func- |
We will strive to create value by enhancing and expanding our total supply chain services, as well as enlarging and transforming our business portfolio. By leveraging the strengths of each segment and utilizing the Alfresa Group's supply chain in a comprehensive manner, we will create new value that goes beyond individual segments.
growth businesses as the wholesaling of medical and self- prevention (SP) products, and develop new businesses.
During the period of the Alfresa Group's Medium- to Long- Term Vision, we aim to leverage our strengths in the Ethical Pharmaceuticals Wholesaling Business to boost our domestic market share to 27.5%. We also seek to increase sales from
supply chain, since it would allow us to engage in the | tions we have built thus far to our pharmacy customers. |
Financial and Capital Strategies: Optimal Capital Structure over the Medium to Long Term
The 22-24Mid-term Management Plan calls on us to strengthen core businesses, such as the Ethical Pharmaceuticals Wholesaling Business, cultivate such
core businesses from ¥2,450.0 billion to ¥3.0 trillion, raise sales via growth businesses from ¥250.0 billion to ¥850.0 bil- lion, and generate ¥150.0 billion in sales from new businesses.
We will manage the balance sheet to create an optimal capital structure over the medium to long term that places equal emphasis on capital efficiency and stability. We have identi-
We have decided to maintain on-hand liquidity at current levels, given the Company's social mission of ensuring a reliable supply of pharmaceuticals. At the same time, we will
Business Strategy: Expansions and Reforms to the Business Portfolio (Net Sales)
Note: Including inorganic growth
22-24Mid-term Management Plan | The Alfresa Group's Medium- to Long-Term Vision |
fied ROE and owners' equity ratio targets for an optimal capital structure and clearly communicated our cash flow allocation strategy during the 22-24Mid-term Management Plan period. By doing so, we aim to improve capital efficiency
continue our efforts to reduce cross-shareholdings. In doing so, we will maintain dialogue with our investees and quantitatively assess the benefits and risks associated with each investment in relation to the cost of capital. We will also make
Growth
Existing Businesses
Growth businesses (approx. ¥250.0 billion)
• Medical goods
New Businesses
New businesses (-)
• Regenerative medicine supply chain
(Cell Resources Corporation)
Growth
Existing Businesses
Growth businesses (¥850.0 billion)
• Medical goods
(medical devices, diagnostic reagents, nutritional foods, etc.)
- Self-preventionproducts
- New channels
New Businesses
New businesses (¥150.0 billion)
• Regenerative medicine supply chain |
• Health technology, data-driven |
business |
• Treatment-adjacent business |
by moving closer to the stated optimal capital structure, rather than by focusing on one-time shareholder returns. Thus, we will manage the balance sheet with an awareness of improving capital efficiency.
qualitative assessments on the long-term significance of holding these investments.
While considering debt-based funding, we will curtail the accumulation of net assets, aiming for ROE of 8.0% or more.
(medical devices, diagnostic reagents, nutritional foods, etc.)
• Self-prevention products
• New channels
(Self-Medication Products Wholesaling Business)
Core businesses (approx. ¥2,450.0 billion)
• Health technology, data-driven business
(GEKKA WORKS Co., Ltd., and coordination with health technology companies)
(Self-Medication Products Wholesaling Business)
- Consigned manufacturing of pharmaceuticals (formulations with high pharmaco- logical activity)
- Newly developed pharmaceuticals
- Post-marketingsurveillance, etc.
Core businesses (¥3,000.0 billion)
(beauty, animal-related) |
• Dispensing center business, etc. |
Controlling the balance sheet toward an optimal capital structure with capital efficiency and stability
Results for Fiscal Year | Target Balance Sheet |
Ended March 31, 2023 |
Enhancement
- Ethical Pharmaceuticals Wholesaling Business (23.4% of the Japanese market)
- Self-MedicationProducts Wholesaling Business
- Manufacturing Business
- Dispensing pharmacy business
Enhancement | • Ethical Pharmaceuticals | Streamline delivery, implement |
Wholesaling Business | digital transformation, etc. | |
(27.5% of the Japanese market) | • Self-Medication Products | |
Expand share of territory | Wholesaling Business | |
and suppliers | • Manufacturing Business |
External | Consider incurring debt to | ||
procure funds while | |||
Borrowing | |||
Maintain current level | On-Hand Liquidity | remaining mindful of | |
of on-hand liquidity | financial soundness | ||
Fiscal year ended March 31, 2023
(actual results)
Net Sales | ¥2,696.0 billion |
Operating Income | ¥30.1 billion |
ROE | 5.4% |
Expand specialty | • Dispensing pharmacy |
pharmaceuticals | business |
Fiscal year ending March 31, 2033 | |
Enhance and Expand Total Supply Chain Services | (target results) |
¥4.0 trillion | |
¥70.0 billion or higher | |
8.0% or higher |
On-Hand Liquidity | |
Approx. ¥160.1 | |
billion | |
Cross-Shareholdings | Total Liabilities |
¥56.1 billion | |
¥851.5 billion | |
Cross-Shareholdings
Decrease
Total Assets
Liabilities
Control
In total supply chain services, we will reliably, safely, and sincerely distribute ethical pharmaceuticals, medical products, self-prevention (SP) products, and regenerative medicines, performing consigned manufacturing of pharmaceuticals including formulations with high pharmacological activity and
In the supply chain for regenerative medicines, we will support pharmaceutical companies involved in drug discovery by providing and banking master cells. As well as ensuring a stable supply of regenerative medicines, our objective is to offer comprehensive services, spanning manufacturing, stor-
Total Assets | Total Net Assets |
¥1,339.8 billion | ¥488.3 billion |
Acquire treasury stock in a flexible manner to control the owners' equity ratio while maintaining financial soundness (criteria: external credit rating of A+)
Net Assets
Gradually increase DOE and acquire treasury stock in a flexible manner in anticipation of an optimal capital structure
clinical trials being handled on a consignment basis in Japan. We will engage in contract manufacturing from R&D-based companies in Japan and overseas, bioventures, and other manufacturers. Furthermore, we will engage in post-marketing surveillance, health technology, and data-driven businesses.
We will continue to provide social value to patients, health- care professionals, and manufacturers by covering everything from pharmaceutical development to manufacturing, distri- bution, sales, post-market surveillance, and digital business.
age, transportation, and data management.
We are considering a number of ways to monetize the health technology and data-driven businesses, thereby contributing to the profitability of existing businesses. Said ways include selling health technology products and charging fees for services or the secondary use of data.
We will take advantage of our distribution function and expertise in the Ethical Pharmaceuticals Wholesaling Business to provide value in the beauty and animal-related domain.
Owners' Equity Ratio | 36.4% |
ROE | 5.4% |
Owners' Equity Ratio | Low-mid 30% range |
ROE | 8.0% or higher |
20 | Alfresa Group Integrated Report 2023 | Alfresa Group Integrated Report 2023 | 21 |
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Alfresa Holdings Corporation published this content on 24 October 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 24 October 2023 08:19:35 UTC.