CFO Message

With efforts to optimize our capital strategies and reinforce our business fundamentals, we were able to achieve record-high sales and operating income for the second consecutive year in FY 2024.
This marks a good start to our latest medium-term management plan which began in the same year.

Understanding our business situation

As new US tariffs kick in and growth slumps in China, the global economy is slowing down and uncertainty is increasing. Multinationals like SATO continue to battle headwinds from escalating geopolitical tensions and other risks and must make business decisions with agility while considering a range of future possibilities.

SATO’s capital and financial strategies

We must improve capital efficiency and continuously generate cash flow with financial discipline. We will focus on KPIs such as ROIC (return on invested capital) and EBITDA (earnings before interest,taxes, depreciation and amortization) under our basic policy to:

1 Pursue an optimal capital structure;

2 Deliver stable and progressive dividend payouts by increasing corporate value on a medium- to long-term basis;

3 Conduct flexible share repurchases using surplus cash.

In terms of improving capital efficiency, we will work to make use of group financing on a global basis. We will seek diverse financing sources, considering options like liquidating our receivables or direct financing from the capital market. Although we will increase leverage with debt financing, our real aim is to use the increased leverage to make effective growth investments and reduce our cost of capital.

Capital allocation based on our medium-term plan (for realizing growth investments and higher ROIC) 

As for dividends, we will decide our dividend rate based on medium- to long-term earnings and cash flows. We will maintain orincrease dividends per share, which is our standard practice since the company’s public listing, and our future promise to shareholders as expressed in the dividend policy we updated last year.
Lastly, share buybacks are one of our options to return capital to shareholders. When buying back our own shares, we make it a point to cancel them promptly. 
We estimate our current WACC (weighted average cost of capital) value to be 7 percent and are using this benchmark as a hurdle rate for future investments while adjusting for different currencies.

Building on the first year of our medium-term plan

Our ROIC and EBITDA margin for FY 2024 increased year on year by 0.8 percentage points and 15.7 percent, respectively, to reach 9.3 percent and 17.9 billion yen. With such a robust showing, we are hoping to restart growth investments earlier than planned. 
In FY 2025, we will continue to grow our EBITDA margin but expect our ROIC to go flat as growth investments take place. Through a new project, we will also look at our procurement and purchasing activities to explore how we can use our operating expenses more productively and with stronger governance.

To our stakeholders

SATO and our auto-ID technologies have an increasingly important role to play in solving shared challenges in society. And by pursuing Perfect and Unique Tagging as envisioned in our medium-term plan, we can contribute to a better and more sustainable world in far more ways than ever before. Through our offerings and in combination with those of our business partners, we will strive to scale greater heights. Thank you for your continued support. 

Osamu Masuko
Vice President and CFO
SATO Corporation