Daiwa House Industry : Nov. 19, 2024 Presentation Summary

FUTURE LANDSCAPE –

CELEBRATING THE JOYS OF LIFE.

Creating the fundamental societal infrastructure and lifestyle culture rooted in regeneration, ensuring a world where we live together in harmony embracing the Joys of Life

FY2024 2Q

Presentation on Management Policies

November 13, 2024

Daiwa House Industry Co., Ltd. Code No: 1925 (Prime market of the Tokyo Stock Exchange)

© Daiwa House Industry Co., Ltd. All rights reserved.

*Only the pages covered in the meeting are included in this document. Please click hereto view the entire materials.

(Transcription)

I am Yoshii, President and CEO of Daiwa House Industry. Thank you all for taking time out of your busy schedules to join us today. I will explain our management policy, including the details of our financial results.

1

Changes in net sales and major companies that have joined the

Group （billion yen）

Major companies that have joined the Group

History of Growth

Achieving the Daiwa House Model, a business portfolio that balances business expansion

with steady growth through aggressive M&A and business investment

Ratio of housing/non-residential	Single-Family	Logistics, Business &
Houses	Corporate Facilities
to net sales				Rental Housing	Environment and Energy
				Condominiums	Other Businesses
Non-	15%			Commercial Facilities	Net sales
	Housing
residential	25%			¥5 trillion
60%	60%
25%
		Net sales
			¥1 trillion	202.9 billion
	FY2004	365.9 billion

Non-

residential

49%

3% 1%

18%

24%

24%

22%

8%

FY2023

Housing

50%

		Non-residential						4,143.5		4,439.5	4,908.1		5,202.9
									440.2
		Housing
										465.3
		Other Businesses				3,192.9	372.1	383.2
			OP incme		1,709.2	1,690.1	2,007.9	243.1
1,365.9
			128.0
Net	67.8	89.1	87.6
sales
				FY2004		FY2007	FY2010	FY2012	FY2015	FY2018		FY2021	FY2022		FY2023
						1st plan	2nd plan	3rd plan	4th plan	5th plan	6th plan	7th medium-term plan

4

This is our growth history. From the start of the first medium-term management plan to last year's sales of 5,202.9 billion yen, the Company has grown in this way.

2

Enhancing Corporate Value

In addition to growth on a non-consolidated basis, the Company has expanded its business performance

through aggressive M&A and synergy creation. Market cap is reaching approx. ¥2.9 trillion

Comparison to 20 years ago

	FY2004	FY2023
Net sales	¥1 trillion	¥5trillion
365.9 billion	202.9 billion
OP	¥67.8 billion	¥440.2 billion
income
Net	¥40.2 billion	¥298.7 billion
income
Market	¥672.9 billion	¥2 trillion
cap	897.1 billion
Stock	¥1,232	¥4,528
price	Mar.31, 2005 closing price	Mar.29, 2024 closing price
Annual	¥17	¥143
dividend

Growth of the Company (Non-consolidated net sales)

Increase

3.8

times

6.5

times

7.4

times

4.3

times

3.7

times

8.4

times

（Billion yen）

Changes of net sales of major companies joined the Group

Effective PMI for Group companies to generate synergies, resulting in a significant increase in business performance

Net sales

（Billion yen）

*

Daiwa LifeNext

FY2010

32.4

Joined the Group

FY2023

127.1

in Sep. 2009

Fujita

FY2013

300.6

Joined the Group

FY2023

591.1

in Jan. 2013

Stanley Martin

FY2018

84.7

Joined the Group

FY2023

285.6

in Feb. 2017

Trumark

FY2021

39.2

Joined the Group

FY2023

107.1

in Jan. 2020

Daiwa House	FY2004
Industry	FY2023
（Non-consolidated）

	1,092.3		CastleRock	FY2022
		2,149.7	Joined the Group	FY2023
		in Sep. 2021

64.3

79.3

*The figure of FY2010 is non-consolidated, FY2023 is consolidate.	5
© Daiwa House Industry Co., Ltd. All rights reserved.

One thing I would like to explain to you is that we believe that all of the major subsidiaries that we have acquired through M&A have grown significantly and are doing well. First of all, Daiwa LifeNext has increased its sales by approximately 95 billion yen since joining our Group. Fujita also joined our Group in 2013 and has increased its sales by almost 300 billion yen. Then there is Stanley Martin, one of our three U.S. subsidiaries, which we are often asked about these days, has increased its sales by about 200 billion yen since joining our Group in 2017. Trumark has also increased its sales by about 67 billion yen since joining the Group in 2020, and CastleRock has increased its sales by about 15 billion yen since joining the Group in 2021. In both cases, I believe that the M&A team and the employees involved have been pursuing growth, which has helped drive the Group's current sales figures.

3

The Progress of the 7th Medium-Term Management Plan

Performance is progressing steadily toward achieving the 7th Plan. Following the upward

revision in Aug. 2024, the Company has further revised its full-year forecast.

Net sales		5,500.0
OP income	5,370.0
Net income before income taxes and non-controlling interests

Actuarial differences	5,202.9

（Billion yen）								Initial
		4,908.1						plan
								5,250.0
ROE		ROE						ROE
						13%
14.3%		12.7%
					or higher
	465.3			440.2
	96.6
			46.5			440.0
308.3			298.7
					Initial plan
68.1			32.1
		393.6			400.0			500.0
	368.7				267.0
240.2		266.5			340.0
				Initial plan
						237.0
2022	2022 営業利益	2022 売上⾼	2023	2023 営業利益	2023 売上⾼	2024	2024 営業利益	2024 売上⾼	2026	2026 営業利益	2026 売上⾼

FY2022 (Results)	FY2023(Results)	FY2024(Forecasts)	FY2026 (Targets)
1st year of the 7th Plan	2nd year of the 7th Plan	3rd year of the 7th Plan	Final year of the 7th Plan
			© Daiwa House Industry Co., Ltd. All rights reserved.	6

The revised plan for FY2024, which we have just announced, calls for net sales of 5,370 billion yen and operating income of 440 billion yen. After that, there are the targets of the 7th medium-term management plan: net sales of 5,500 billion yen and operating income of 500 billion yen. If there is a barrier to achieving these goals, I believe that the only obstacle at this point is carelessness or delays in judgment. We are certainly striving to achieve the target for the final year of the medium-term management plan, while considering the possibility of accelerating the timing of the achievement of the target.

4

Results for the First Half of FY2024

In the first half of FY2024, net sales were 2 trillion 652.6 billion yen (YOY+4.2%) and

operating income was 234.6 billion yen (YOY+22.8%), reached a record high

TOPICS

• Steady progress in the sale of development properties
• Strong performance in the US business

	• Improved profit margins at Commercial Facilities	2,652.6
	Business and Logistics, Business & Corporate
	Facilities Business due to price pass-through, etc.
2,544.8
		Net sales
		OP income
		Net income
（billion yen）	234.6

191.1156.3

154.4

FY2023 1st half

FY2024 1st half

Results for the 1st half of FY2024

	Net sales	OP income
(Billion yen)	(YOY)	(YOY)
Single-Family	501.7	(+13.3%)	22.0	（+55.0%)
Houses
Rental Housing	661.1	(+8.5%)	65.8	(+9.4%)
Condominiums	132.8	(-39.0%)	13.5	(-18.6%)
Commercial	613.6	(+5.4%)	78.6	(+9.4%)
Facilities
Logistics, Business	717.7	(+11.6%)	83.6	(+46.1%)
Facilities
& Corporate
Environment	62.9	（-14.4%)	7.1	(+12.9%)
and Energy
Other	25.4	(-34.2%)	2.0	(+139.1%)
Businesses
Total	2,652.6	(+4.2%)	234.6	(+22.8%)
			7
		© Daiwa House Industry Co., Ltd. All rights reserved.

This page is a highlight of the current interim financial results. I am satisfied that we were able to achieve these results in the face of about 60 billion yen in net sales and 2.3 billion yen in operating income, which were reduced from the previous year due to the transfer of Daiwa Resort and Cosmos Initia shares. However, I also believe that we could have done more.

5

Capital Policy / Shareholder Return

Return on equity (ROE) consistently above the cost of shareholdersʼ equity.

Flexible shareholder returns suit circumstances via changes to minimum DPS, share buybacks

Balancing investment for growth and shareholder return

Investment for growth

（Reinvestment with appropriate financial

leverage）

Profit growth	Stable dividend growth
Secure CF

Flexible acquisition of

treasury stock

	Acquired 26.0
	billion yen
Annual dividend	of treasury stock
Per share (Yen)	*2
		126*1
Dividend payout ratio	116

51.5%

39.0% 36.6%

Acquired 87.1	Announced share
billion yen of	buyback of up to
treasury stock	100 billion yen

130	143	147
35.6%	35.1%	35.1%

ROE

13% or higher

D/E ratio

Around 0.6

times

After taking the equity

credit attributes of hybrid

14.3%

11.7% 12.7% 13% or higher

Around		Around 7%	Recognized cost of
	shareholdersʼ equity
6.5%
FY2021	FY2022	FY2023	FY2026
			(Target)
	0.72	0.77	Around
0.61	0.6 times
FY2021	FY2022	FY2023	FY2026

FY2009	FY2020	FY2021	FY2022	FY2023	FY2024
					(Forecasts)

financing into account

(Target)

*1 FY2021︓Includes 10 yen for a commemorative dividend for the 100th anniversary of the birth of Nobuo Ishibashi, our founder *2 Results for 2022 and beyond: The dividend payout ratio is calculated excluding the effect of actuarial differences

© Daiwa House Industry Co., Ltd. All rights reserved.

8

We have also revised upward our annual dividend plan to 147 yen per share. As reported in our monthly release, we are also in the process of implementing a share buyback.

6

Portfolio Management

Increase capital efficiency and accelerate aggressive investment in growth areas by improving turnover and thorough management of investment and return

Business Portfolio（Image）

︵			Commercial
Market
		Facilities
Marketassessment growthrate,Competitiveadvantage,
Create new		Logistics, Business &
	businesses		Corporate Facilities
	Prepare for
	new business	Single-Family
		Houses	Rental
	Environment		Housing
	and Energy
	Businesses
etc.	in need of
restructuring		Each dotted cercle ︓Business direction
		Each thick arrow︓Cash flow

• Internal quantitative assessment

（Capital profitability, growth of sales, etc.）

The progress of investment and return

Investment

Logistics, Business &

Commercial

Others

（Billion yen）

real estate

Corporate Facilities

Facilities

Total

th

投

1,500

500

200

The 7

Plan

Invest ment

2,200

資

(Five-year plan)

Return

1,150

200 150

Total

1,500

資mentInvest

485.6

248.365.1

Progress rate

FY2022-

36.3%

FY2024

投

売

(Results)

611.9

108.7 31.8

Net sales

Real estate

上

（Billion yen）

Single-Family

Rental

Commercial

Condominiums

Logistics, Business &

for sale

Houses

Housing

Facilities

Corporate Facilities

FY2021

428.8

129.3 479.7 196.7 239.5

Total*1

*1 Include Other

(Balance at end

1,479.1

of period)

Businesses

Total*1

FY2024 2Q

860.8

313.1

393.4 363.6

379.3

(Balance at end

2,314.1

of period)

Future investment direction

• Continue active investment activities while increasing turnover
• Japan: To invest actively in logistics facilities, data centers and built-for-sale business
• The US: To strengthen the Rental Housing Business in addition to the Single-Family Houses Business
• New Businesses: To invest up to 30 billion yen each in CVC fund and in-house entrepreneurship system

© Daiwa House Industry Co., Ltd. All rights reserved.

9

While we plan to invest 2.2 trillion yen in real estate during the 7th medium- term management plan period, the investment progress at the end of this second quarter, which is just at the turn of the five-year plan, was 36.3%, which I consider to be a good progress.

7

New Business Challenges - CVC and In-House Entrepreneurship System

Plan to invest up to ¥30 billion each in the Daiwa Future Fund and the Daiwa Future100 in-house startup system

Preparation for new businesses and creating business groups that will be the pillars of the future

CVC Fund started in January 2024, aiming at synergies in existing businesses and solutions to social issues

• Invested in 9 companies by the end of Sep. 2024, and commenced consideration of cooperative projects with 5 of them

Themes under consideration （Examples）

	CVC	Under consideration	CVC and	Sales and provision of SAR
	Investment	For in-house	in-house
	results	start-up system	start-up system	data and solution services
New and	New areas	Security・	Synspective Inc.
Testing on-site monitoring of river
products services		New technology	channel restoration works in wake	Space-related
			of Noto Peninsula earthquake
Ancillary	Environmental
	Technology/
	areas	New energy			Developing
	Real estate	Food	country
		and finance	and finance
			industrialization

Disaster prevention

and response

The program was launched in June 2024 with a plan to invest up to 30 billion yen for human resources development and new business development.

• Total number of applications in the first year: 896 57 projects that passed the first round of selection are in progress

Existingproducts andservices	Existing	Infrastructure
areas	maintenance
	Construction	Child-rearing
	DX		support

Existing Market

Development of infrastructure maintenance products

TOYOKOH Inc.

＜Example of collaboration: Fujita, Daiwa

House Reform＞

Benefit of using resin to repair aging roofs

New Market

© Daiwa House Industry Co., Ltd. All rights reserved.

10

I believe that the Daiwa Future100 program is one of the answers to the question of what human capital management is. Under this program, employees build a new business or company on their own and take on the challenge for three years outside of their regular work. When we put out the call for applications, management was hoping to receive 400 applications at most, but we received as many as 900. And now, there are 60 groups left to be selected, so the outside directors will take a look at them and the final decision will be made by the representative directors, excluding myself. They will be setting up their own companies and taking on challenges over the next three years, so I believe that such a process will be a major axis in the development of future managers.

8

Overseas Business - Business Expansion and Portfolio Management

Further overseas growth under “region & business” portfolio strategy

To raise the ratio of overseas sales, currently about 15%, to 30-40% in the future

	Single-	Rental Condomin	Commerci	Logistics,
	Family	al		Business &
	Housing	iums		Corporate
	Houses	Facilities
				Facilities
Americas
Europe・	-			-
Others
Oceania				-		-
East Asia	-	-
ASEAN・	-
South Asia
Daiwa	Daiwa	Group	Group	445.1
House	House	+companies	companies

The USA

Europe/Others

Australia

China

ASEAN

(Billion yen) Upper︓Net sales Lower︓OP income

673.9

（52.9）

Enhanced area

1,000.0

877.0（100.0）

(57.5)

705.9

（30.4）

730.0

651.1

（26.1）

434.1 500.1

277.3	301.8
（19.5）	267.8
（6.2）
116.9	176.8		66.1		99.9
42.6	24.4	48.9	41.5	88.9
41.2	111.2	30.4	53.1
57.2	36.9	60.5
22.2	26.6	47.5		33.4
38.2	36.9	39.5	20.9	25.7	40.1		Future
FY2019	FY2020	FY2021	FY2022	FY2023	FY2024	FY2026
					(Forecasts)	(Targets)	*Total figures and results by area are
The 6th Plan (3-year)			The 7th Plan (5-year)		after consolidated adjustment
						© Daiwa House Industry Co., Ltd. All rights reserved.	13

Next, I would like to talk a little about our overseas business. In the final year of the 7th medium-term business plan, we are aiming for sales of 1 trillion yen overseas. For the future, I believe that we can aim for sales of about 3 trillion yen in the U.S., 1 trillion yen in Europe, and 1 trillion yen in Asia.

9

Overseas Business - The US area

Further strengthen the Daiwa House model, which promotes a variety of businesses

centered on the three Single-Family Houses builders

Expansion into growing markets and

Business Diversification

Pursuing synergies among Group

acquisition of market share

(Daiwa House Model)

companies

Commercial Facilities︓

Rental

Condomini

Commercial

Logistics

Hotel

Synergies among companies

Regular top management meetings of

Facilities

Facilities

Village Center

Housing

ums

six companies in Japan, US, Europe, and

*Properties in progress

Australia

Location︓ Fountain

as of end of Sep. 2024

Valley

Virginia

Total lots︓24 lots

Trumark

Stanley Martin Maryland

California

Synergy with Alliance

Colorado

West Virginia

Tennessee

＜ Group purchasing ＞

Residential Company

North Carolina

Cost reduction through joint purchasing

agreements

19 locations in 39 metropolitan areas in 16

with suppliers

South Carolina

＜ Shortening of construction period ＞

states, with a focus on the Smile Zone

Arizona

Georgia

Shortening of construction period by sharing

information and promoting industrialization among 6

Florida

companies

Texas

Construction periods of Stanley Martin

CastleRock

145

162

Multi-Tenant type logistics facility:

97

85

71

＜To Strengthen the Rental Housing

Blue Ridge Commerce Center

Target︓75 days

Business in US ＞

• Expanding Real Estate Development Platforms

Location ︓Houston

*Image

FY2020 FY2021 FY2022 FY2023 FY2024

in the US

Floor space︓125,471㎡

Location ︓Orlando

• Strengthening networks and proposals in the

(5 buildings, one-story)

Story

︓7 stories

2Q

Hotel︓EVEN Hotel and Staybridge

Smile Zone

Completion︓Aug. 2025

Room

︓288 rooms

• Pursuing synergies with other businesses such

*Image

Completion: Aug. 2026 Suites Orlando Universal Boulevard

as the Single-Family Houses Business

14

© Daiwa House Industry Co., Ltd. All rights reserved.

This is the area covered by our three U.S. subsidiaries: Stanley Martin on the East Coast, CastleRock in Texas, and Trumark on the West Coast. These three companies are leading our growth strategy in overseas.

10