GS Yuasa Corporation GS Yuasa Report 2025 For the fiscal year ended March 31, 2025

Over the year since I assumed the role of President, I have worked tirelessly to carry the baton passed on by my predecessor, Mr. Murao, and to steadily carry out the policies set forth in our long-term vision, Vision 2035, and the Sixth Mid-Term Management Plan (FY2023–FY2025). To be honest, my unvarnished impression is that it has been a year of continually addressing the challenges right in front of us. It may seem self-evident, but as a corporate executive, my responsibility is ultimately to continuously enhance corporate value, and all decision-making criteria must converge on that single point.

People gravitate toward companies with high corporate value. The same holds true for technologies, partners, and business opportunities. Only by becoming a company that is chosen by all stakeholders can we create a virtuous cycle of sustained corporate value enhancement. I recognize that the visible form of stakeholder evaluation for such corporate value is our stock price. However, despite recording record-high profits for three consecutive years, our PBR has remained below 1. As indicated by our PER and a key indicator of expectations for a company's future—one of the elements of PBR and a key indicator of expectations for a company’s future—languishing in the eight-times range, the market unfortunately is not valuing our future scenario, and this is clearly reflected in our stock price. As long as expectations for the future are represented directly in the stock price, we must take this situation seriously.

With the strengthened management foundation we have built under the current Sixth Mid-Term Management Plan, we will move forward in FY2026 to launch the Seventh Mid-Term Management Plan. During the period of the Seventh Plan, we will respond flexibly to changes in the trajectory of the BEV battery business while preparing for the Eighth Plan. We intend to present stakeholders with an offense-focused Mid-Term Management Plan based on a convincing, highly transparent growth story that embodies our corporate philosophy, “Innovation and Growth.” Even within the Company, I have consistently communicated to management that enhancing corporate value is essential under the Seventh Mid-Term Management Plan and have been advancing discussions on specific directions for corporate value enhancement, as well as improving management indicators. In order to build the inherent strength to sustain strong performance, we will continuously update our growth story to reflect the prevailing environment and steadily execute it, thereby creating a virtuous cycle that links results to shareholder returns. To that end, we will see the Sixth Mid-Term Management Plan through to completion at all costs.

●Action to Implement Management that is Conscious of Cost of Capital and Stock Price P. 52–53

Looking back from the super-long-term future through 2050, when global demand for storage batteries is projected to expand, we formulated our long-term vision, Vision 2035, in FY2023 as a roadmap for enhancing corporate value through 2035. Since our founding, we have walked a long path with lead-acid batteries as our core business. Based on this history, we will thoroughly enhance profitability in our existing businesses while leveraging our strength as a dedicated storage battery manufacturer with an exceptionally broad product lineup to capture expanding demand in all directions. While generating stable cash in these areas, we will invest that cash into the growth domains of Mobility and Public Infrastructure to build a highly profitable business portfolio and address social issues. This growth scenario remains unchanged.

At the same time, considering the current market environment since the announcement of Vision 2035, we believe there is room to review the pace of business structure reforms.Specifically, we expect demand for lead-acid batteries is expected to remain strong at least through 2040, continuing to provide a solid foundation for our business performance. Though growth in demand for batteries for BEVs may slow relative to initial expectations, demand for HEV and PHEV batteries is projected to continue. In specialized batteries, our defense-related business is expanding in line with the policy of fundamentally strengthening defense capabilities, and demand is expected to remain firm going forward. Accordingly, we will continue to closely monitor developments in each business and recognize the need to make prudent judgments regarding the outlook for business structure reforms.

●Vision 2035 P. 26–29

U.S. tariff policies are currently shaking the global economy, prompting companies worldwide to review production sites and supply chains. Our business centers on local production for local consumption, so we believe the impact of tariffs will be limited. However, there is some risk of volume decline for exports from Japan and Southeast Asia to the U.S. We also recognize that economic slowdowns in ASEAN countries, affected by U.S. tariff policies and economic deceleration, pose an indirect downside risk to earnings, and we have factored this into our FY2025 earnings forecast to some extent.

Shifts in battery demand trends in the Mobility Field are also increasing uncertainty in the business environment. Global warming is an issue that must be addressed regardless of short-term political and economic changes, so demand for BEV lithium-ion batteries is expected to expand steadily over the long term. However, the situation has changed dramatically from several years ago, when BEVs, buoyed by preferential measures in various countries, dominated the market. Now, BEV momentum is slowing worldwide, and demand for HEVs and PHEVs is rising once again. We are proceeding with capacity expansion at Blue Energy, which produces HEV batteries, as initially planned, and we expect demand for HEV batteries to continue growing for some time. We see room to consider further capacity increases as demand expands further. While there is no change at present in our policy to advance R&D and production preparation for BEV lithium-ion batteries, demand growth for BEV batteries may progress more moderately than initially expected, and we believe it is necessary to closely monitor future demand trends.

Even in such an uncertain environment, we can rely on the strength of our multi-battery solutions. In addition to lead-acid batteries for ICE vehicles and electric vehicles, our lineup includes lithium-ion batteries for HEVs, PHEVs, BEVs, 12 V auxiliary equipment, and ESS. Our BEV lithium-ion battery factory, now under construction, will also be capable of producing lithium-ion batteries for PHEVs and ESS, thanks to its flexible production lines. Leveraging this strength, we can flexibly respond to customer and market movements regardless of the direction electrification trends take, ensuring business stability.

●Vision 2035 P. 26–29

In Japan, which is relatively poor in energy resources, expanding the introduction of renewable energy is recognized as an extremely important issue from the perspective of energy security. Renewable energy is affected by weather and other factors, but ESS devices are the key to resolving this instability, and demand for both is expanding significantly.

Against the backdrop of recent fragmentation of global supply chains, demand for domestically produced batteries is growing. We have been receiving inquiries about our ESS lithium-ion batteries that exceed our production capacity, and while we are responding to demand by increasing production capacity, we expect the tight supply-demand situation to continue for the time being. While our basic approach is in-house battery production, we will respond to demand by exploring various possibilities.

Demand for ESS lithium-ion batteries is expected to continue expanding steadily in the medium- to long-term, with annual demand projected at 4.5 to 5 GWh by 2030. As noted above, the BEV lithium-ion battery factory currently under construction is also planned to produce ESS lithium-ion batteries, and we aim to differentiate ourselves through cost competitiveness achieved by mass production effects.Business operators introducing renewable energy calculate business profitability on the assumption of using facilities for 15 to 20 years. For ESS as well, it is essential to provide maintenance and support to ensure stable operation, in addition to high construction quality. The Group has built a nationwide service network in Japan—including construction agents and authorized distributors—developed over many years in the emergency battery and power supply business. This 24/7/365 response capability anywhere in the country is a powerful differentiating factor for our ESS offerings. In addition to further strengthening this service structure, we will enhance differentiation through the use of advanced technologies, including the STARELINK Service, which enables constant monitoring of battery deterioration status and storage battery system operating conditions.

●[Feature 1] Initiatives in the Regular Field to Achieve Carbon Neutrality P. 36–40

As part of our efforts to strengthen human capital to achieve Vision 2035, we will advance initiatives for recruitment, development, and appropriate placement of personnel in closer alignment with our management strategy. To put our corporate philosophy of “Innovation and Growth” into practice, we are developing an environment that fosters autonomous-minded human resources who learn and take on challenges independently. We are continuing to implement the “Biz-Challenge” program, which solicits new business ideas from employees, and the “Job Challenge” internal application program to promote personnel mobility. From April 2025, we incorporated elements of an occupation-specific system into the managerial personnel system to advance business strategies more dynamically, creating an environment where important roles can be assigned regardless of age or years of experience. We will be expanding this system to all employees in the future. Through these initiatives, we will break away from the seniority-based system and continue to enhance our framework that enables employees to choose their careers proactively.
Improving employee engagement is an essential part of enhancing corporate value. We aim to foster a culture that accepts diverse values and work styles, increases job satisfaction, and ensures employees take pride in being members of the Group by presenting and sharing a clear vision for the future. Through such initiatives, we intend to become a company with autonomous-minded personnel that are eager to grow and who feel that their growth is part of the Company’s growth.

●Society P. 84–91

In Vision 2035, our long-term vision, we have designated Mobility and Public Infrastructure as our key focus areas toward 2035 and adopted a policy of transforming our business structure around high-capacity, high-output lithium-ion batteries for BEVs and ESS batteries in the regular field. Our aim is to capture the expected expansion of demand for batteries through 2050 and sustainably enhance corporate value. The Sixth Mid-Term Management Plan (FY2023–FY2025) is positioned as the time to build that foundation. In FY2024, consolidated net sales increased 3.1% year on year to 580.3 billion yen, a new record high. Operating profit before amortization of goodwill increased by 20.2% year-on-year to 50.7 billion yen, setting a new record high and also exceeding the upwardly revised final-year target of 46.0 billion yen. Net profit for the period was 31.1 billion yen, compared with 32.6 billion yen in the previous fiscal year, due to factors including higher income taxes and the recording of impairment losses at Blue Energy. However, taking into account the impact of tax effect accounting included in the prior year’s figure, we recognize that this is effectively a record-high level.

By segment, automotive batteries, industrial batteries and power supplies, and specialized batteries and others all recorded higher sales and profits, while automotive lithium-ion batteries saw lower sales and profits. The latter was mainly due to decreased sales volume of PHEV batteries and the resulting impact of lower operating rates, as well as lower selling prices for HEV batteries reflecting declines in lithium market prices.

Looking back over the two years of the Sixth Mid-Term Management Plan, I feel that steady progress has been made in strengthening our earning power. In FY2024, despite struggling in automotive lithium-ion batteries, other business results offset this, and we achieved our plan targets. Our improved pricing power in specialized batteries —along with automotive batteries/industrial batteries and power supplies —further enhanced our earning power. FY2024 was a year in which I clearly felt the overall portfolio’s profitability improve.

●Sixth Mid-Term Management Plan P. 32–35

During FY2025, the final year of the plan, we must steer the Company through a business environment of extreme uncertainty. For FY2025, we plan net sales of 600.0 billion yen, operating profit of 51.0 billion yen (+1.9% year-on-year), and operating profit before amortization of goodwill of 52.0 billion yen (+2.5% year-on-year), aiming to set new record highs in net sales and all profit levels. This reflects our confidence that our earning power has taken root, and our intent to further strengthen it.

We are closely monitoring developments regarding the implementation of U.S. tariff policies. While there is some impact on sales through our U.S. sales company, we expect the overall direct impact on the Company to be limited. The risk of economic slowdown in ASEAN countries, where our sales ratio is high, has been factored in to some extent as an indirect impact.

In our portfolio, expected risks in automotive batteries (overseas) and automotive lithium-ion batteries will be offset by strong businesses such as industrial batteries and power supplies. For automotive lithium-ion batteries, although we expect higher volumes for HEV and PHEV batteries, profitability will remain low due to factors such as the impact of falling lithium prices on selling prices and increased depreciation burden from the Blue Energy No. 2 plant. On a more positive note, the position of industrial batteries and power supplies as a growth driver for the Company is increasing. Thanks to improved profitability in existing businesses, we are able to cover businesses where risks are expected and, as a result, are forecasting record-high profits.

In the overall business portfolio, the automotive battery business (Japan) and industrial batteries and power supplies business will maintain high ROIC, and the cash generated there will be invested in growth areas. The automotive lithium-ion battery business will work to expand profits from HEV, PHEV, and 12 V lithium-ion batteries. As mentioned earlier, we will inevitably see a decline in ROIC during the process of executing large-scale investments in BEV batteries. For these growth businesses, we will evaluate not only ROIC but also their future growth potential. In the automotive battery business (overseas), we aim to improve capital efficiency through resource concentration on key bases and profit maximization. Profitability of the specialized battery business is improving, and further growth is expected.

To promote understanding of ROIC, we regularly hold director training, as well as study sessions for managers and on-site employees. Through reverse tree deployment, we link management indicators with on-site operations, incorporating this into company-wide TQM activities. In this way, we are building a more effective system where each department employee, by engaging in their day-to-day work, improves ROIC.

When we are considering securing investment funds, we aim to generate stable cash by strengthening the profitability of existing businesses, maintaining financial soundness with a target equity ratio of at least 40%, and selecting optimal financing methods, including debt. Combined with our target for shareholder returns—a total payout ratio of at least 30%—our basic capital policy is to pursue an optimal capital structure with a balance between investment and shareholder returns.

To develop and produce BEV lithium-ion batteries, we raised approximately 40.0 billion yen through a public offering and third-party allotment in December 2023, thereby strengthening our financial base. In FY2024, we secured 39.3 billion yen in operating cash flow and raised funds through bonds and borrowings. We invested 58.8 billion yen in capital expenditures, including the acquisition of land for a BEV lithium-ion battery plant and additional investment in Blue Energy’s No. 2 plant to increase HEV lithium-ion battery production. Meanwhile, the improved earning power of existing businesses has led to better operating cash flow, and we will also consider further investments to enhance their profitability. Interest-bearing debt exceeded 100.0 billion yen at the end of FY2024, but our equity ratio remained at 50%, indicating our financial soundness.

In FY2025, we plan to invest 65.0 billion yen in production for automotive lithium-ion batteries and other areas and will continue to choose optimal financing methods. We will steadily sell cross-shareholdings and other financial assets that do not directly generate profit, reallocating the funds to optimize overall capital allocation.

The dividend per share for FY2024 was set at 75 yen per share, an increase of 5 yen from the previous fiscal year. The total payout ratio was 24.3%, falling short of our 30% target, but we will continue to pay dividends while balancing growth investments and shareholder returns. For FY2025, we expect an annual dividend per share of 80 yen, an increase of 5 yen from the previous fiscal year.

President Abe has consistently stated that “the ultimate goal is to increase corporate value—i.e., stock price.” I have consistently communicated the necessity of enhancing corporate value but have felt the difficulty of spreading this awareness across the various departments within the Company. The President’s repeated messages have begun to permeate this message throughout the management team and each business division. As we formulate the Seventh Mid-Term Management Plan, enthusiasm is rising to an unprecedented level across each division.

Our PBR remains around 0.7. Through extensive dialogue with investors, the most frequent reason we hear for this low valuation is that “in the lithium-ion battery business, including BEV batteries, there are powerful global competitors and GS Yuasa’s path to success is unclear.” In addition, we are aware of the fact that we have not sufficiently highlighted the potential of growth drivers such as the regular field in industrial batteries and power supplies, or the specialized batteries that have seen greatly increased profitability, not only BEV lithium-ion batteries, in which we continue to invest for the future. Our historically conservative performance forecasts have also been a constant point of criticism, and through dialogue with investors, we feel that the management team’s mindset has transformed, leading to the disclosure of this positive earnings forecast. First, we will achieve the targets of the Sixth Mid-Term Management Plan and maintain this stance.

In the Seventh Mid-Term Management Plan, we intend to present a clear story for pursuing enhanced corporate value while taking a stronger offensive stance. As CFO, I will continue to fulfill my role as the Company’s compass and a bridge to stakeholders, enhancing corporate value while maintaining financial soundness and linking it to growth. We ask for your continued anticipation and support of GS Yuasa’s future growth.