Key Questions and Answers at 123rd Ordinary General Meeting of Shareholders

Questions before meeting

Question 1:

Regarding Agenda Item 1: Appropriation of surplus, I would like to know how you will use that money.

Respondent:

Akira Oyama, President and CEO

Answer:

The Company has committed to using earnings and cash to sustainably enhance corporate value, primarily by investing in growth and generating shareholder returns.

Our shareholder returns policy is to keep increasing dividends in line with profit growth and flexibly repurchase shares. We target a total return ratio of 50%. As explained in Agenda Item 1, our dividend per share for the fiscal year ended 2022, including our interim dividend, was 34 yen. We repurchased 30 billion yen in treasury stock between May and September 2022. The total return ratio for the term was thus 93.8%.

We are investing extensively to become a digital services company and grow sustainably. Our policy allocates interest-bearing debt to stable business domains and equity to growth business domains. Digital services are growth businesses in uncertain operating climates, including because of external factors. So, we intend to deploy capital to expand these services.

We will keep tapping earnings to invest in sustainable business growth and profit expansion while generating shareholder returns.

Question 2:

Tell us about your specific products and solutions, such as for digitalization and decarbonization.

Respondent:

Akira Oyama, President and CEO

Answer:

I will first cover solutions that help customers to digitalize their business processes.

We deliver services that leverage the power of digital technology to help customers grow and become more competitive. Efforts include working closely with customers to share operational information and help them streamline business processes.

One offering is the Scrum series of packaged solutions that help small and mid-sized enterprises finding it hard to allocate sufficient resources to their IT departments to resolve their business issues and improve productivity. I note that solutions sales in response to the revision of the Electronic Bookkeeping Law and invoicing system increased in fiscal 2022. We also formed a business alliance with Cybozu, through which we began selling RICOH kintone plus software. This platform enables customers, particularly small and medium-sized enterprises, to enhance their operations without writing complicated programming code. We will deploy that product worldwide, starting with Japan.

I will now outline our decarbonization solutions.

PLAiR, a plant-derived material that we presented today, is one offering that contributes to decarbonization. I will also introduce some others.

We recently launched the Ricoh IM C6010 series of advanced MFPs. The series incorporates enhanced features that help digitize workflows and also focus on reducing environmental impact. It offers class-leading standard power consumption, contributing to office energy savings. It also helps to conserve resources by employing 50% recycled plastic.

Domestic sales company Ricoh Japan additionally installs and maintains solar power equipment and electric vehicle rechargers. It also produces and saves energy through electricity retailing, lighting, air-conditioning control systems, and other offerings.

One new business is an advanced solar cell that can efficiently generate power even under indoor lighting. This product applies technology that we cultivated in developing MFPs. We started trials at a store with a reduced environmental footprint to help 7-Eleven progress with its initiatives to save, create, and store energy.

Ricoh will contribute to a decarbonized society through businesses like these that leverage its robust technologies and customer touchpoints.

Question 3:

What is your policy on new business initiatives?

Respondent:

Akira Oyama, President and CEO

Answer:

The Ricoh Futures business unit is the prime driver of new businesses that seek to resolve social issues through business.

Our premise in managing the portfolios of new businesses is that they can harness our technological and intellectual property strengths to resolve issues and generate synergies with existing markets and customer segments. We recognize the need to balance management resource allocations. The PLAiR and biomedical businesses that we presented today exemplify our approach.

Question 1:

Some sections of the press reported that China wants to implement a new national standard that would compel MFP manufacturers to design and develop their offerings within that nation. How might such a regulation affect Ricoh’s MFP design and production, and what steps would you take in that case?

Respondent:

Akira Oyama, President and CEO

Answer:

We are working with the government, relevant authorities, and industry groups to assess what we need to do based on the facts. We cannot say anything about specific impacts as all this is hypothetical at this stage.

We are striving to become a digital services company. Our policy of selling devices and solutions as packages to resolve customer issues instead of simply selling MFP hardware remains unchanged. We aim to take that approach in building our China business.

Question 2:

Your foreign exchange rate assumptions for fiscal 2023 seem conservative. Can we anticipate further earnings growth due to the yen’s recent depreciation?

Respondent:

Akira Oyama, President and CEO

Answer:

Although the yen is falling against the dollar, it is hard to say what will happen down the road. A one-yen depreciation against the dollar should add around 100 million yen annually to operating profit. A one-yen depreciation against the euro should boost operating profit by 1 billion yen. It is hard to provide exact figures because there are various factors to consider.

Question 3:

Regular shareholders ask you to boost dividends. I have asked you to undertake initiatives for poor people at various shareholder meetings. I want Ricoh to reinforce its social contribution activities.

Respondent:

Mikako Suzuki, Corporate Officer

Answer:

The Ricoh Group contributes to society through five programs in three priority areas worldwide. Those areas are (1) worker inclusion, (2) improving the quality of life, and (3) tackling the climate crisis and safeguarding biodiversity.

The five programs are (1) The Digital Support Program for Young People, (2) the Ricoh Science Caravan, (3) the Ichimura Nature School, (4) FreeWill, and (5) the One Million Trees Project. The Digital Support Program for Young People, which we launched in 2021, provides IT-related education and employment support at several sites across Japan in collaboration with nonprofit organizations and local sales companies. The program is for individuals who have struggled to cope with rapid digitization and find work. We extended the program to Vietnam this year.

Also, we have contributed one billion yen to the scholarship partner program for students at the Kamiyama Marugoto College of Design, Technology, and Entrepreneurship in Tokushima Prefecture.

Question 4:

You hope to bolster talent and expand your businesses simultaneously. How are you progressing in those regards?

Respondent:

Mayuko Seto, Chief Human Resources Officer

Answer:

We think we are progressing reasonably. Employees are proactively upskilling through the Ricoh Digital Academy.

Question 5:

While you only needed a resolution of the Board of Directors to establish a joint venture with Toshiba Tec, I consider it proper to submit decisions on changes to the organization underpinning the business to a general meeting of shareholders. What is your stance on involving shareholders in management?

Respondent:

Akira Oyama, President and CEO

Answer:

I would like to begin by explaining the benefits to shareholders of forming a joint venture with Toshiba Tec. That entity will manufacture common engines for the MFPs of both companies, boosting production volume and thus achieving economies of scale. Utilizing the plants of both companies will enable us to avert risks. It is also important to note that robust engines are essential to developing digital services that employ edge devices. So, we believe our decision to create a joint venture will help increase shareholder value.

Question 6:

You outlined a special project to lift your price-to-book ratio above 1x. Do you plan any share repurchases?

Respondent:

Akira Oyama, President and CEO

Answer:

In principle, we target a total return ratio of 50%. We will act flexibly, including by repurchasing shares, while keeping tabs on dividends and capital. Please understand that we cannot disclose whether or not we would make share repurchases or how we would proceed with them.

Question 7:

I once worked for PFU developing scanners and was somewhat frustrated at the prospects of doing business leveraging PFU’s technology. How do you think Ricoh will tap PFU’s technology in its business?

Respondent:

Akira Oyama, President and CEO

Answer:

PFU’s hardware and software draw on some outstanding technologies. We will employ its excellent scanners to expand solutions beyond the office business domain to encompass where our customers work on the frontlines. We will combine PFU’s scanner technology with our products to develop superior offerings.

Question 8:

How do you decide which questions to answer from shareholders attending this meeting online?

Respondent:

Akira Oyama, President and CEO

Answer:

Time permitting, we answer all questions as long as they are keeping with the purpose of a general meeting of shareholders.

Question 9:

I thought you would strengthen digital services based on your printing business. Will the engineers from your MFP business keep working in the printing area, with others engaging in your growth strategy for digital services? Alternatively, will people shift from printing into the digital arena? Also, while the printing business does not seem to grow, I think ongoing efforts would enable you to maintain things at the same level. Please share your thoughts in that respect.

Respondent:

Akira Oyama, President and CEO

Answer:

The printing business is maturing amid intensifying competition and minimal market growth, so we need to streamline operations. Employees who can help us to be more efficient are valuable. We want them to keep contributing in this area. We will support employees from the printing business who wish to upskill and contribute to expanding digital services and will help them develop new skills.

Question 10:

A digital services company would need to secure talent. Other companies have reported lifting salaries and offering inflation and home allowances, but Ricoh has not. Because of the lack of such announcements, couldn’t that potentially cause misunderstanding and damage Ricoh’s value? In voting on director selections and bonuses, we cannot honestly determine whether management is doing well when you haven’t announced key details. I would like to see specifics on the rates of salary rises and inflation and home allowance amounts.

Respondent:

Mayuko Seto, Chief Human Resources Officer

Answer:

We have increased salaries, including basic pay, by 2.8%. We base raises on whether our wages are competitive with other companies and the market. From there, we discuss the extent we should adjust salaries. So, our pay levels don’t lag behind those other companies. New graduate hiring has been excellent. We boosted wages for these people by 4%.

We are continuing to discuss home and inflation allowances. We seek to optimize performance by eliminating as many time and location constraints as possible, not simply at home. Offering a home allowance is inconsistent with our corporate direction.

It is becoming harder to attract talent, so we will keep working hard in that regard. Worker turnover rates are low. New graduate and mid-career recruiting are recovering, so we have secured sufficiently competitive levels.

Respondent:

Akira Oyama, President and CEO

Answer:

As well as offering competitive wages, we want to provide fulfillment through work to our employees, with Ricoh’s fundamental value growing with its people.

Question 11:

Generative AI has boomed in recent years, and many companies have announced that they will eventually apply it to their operations in one form or another. Does Ricoh have a specific vision for using AI in unique ways?

Respondent:

Seiji Sakata, Director and CTO

Answer:

There has been much buzz recently about chatGPT and AI. Ricoh set up an AI team in 2017. Its 200 or so members conduct industry-leading research.

Through AI for Work, for example, we have offered a solution over the past two years that gathers call center customer feedback, analyzes this data with AI, and then employs it in corporate activities.

We have also incorporated this setup in production processes at toner plants. AI analyzes data from each of those processes and optimizes it so we can deliver high-quality toner.

Question 12:

What specific strategy are you using to establish your joint venture with Toshiba Tec?

Respondent:

Akira Oyama, President and CEO

Answer:

We are starting with efforts to standardize imaging functions, scanners, and other engine parts. We will leverage each other’s technology to create high-quality products. If we can increase supply volumes, we can cut costs and be price competitive. We will also be able to avoid geopolitical risks by leveraging our respective production bases. We will take full advantage of our channels with the software that drives our engines to differentiate through sales organizations.

Question 13:

Given the geopolitical risks, what are your thoughts on production and development sites in China in the coming years?

Respondent:

Akira Oyama, President and CEO

Answer:

Ricoh maintains plants in China and Thailand and manufactures some products in Japan. On top of that, we are preparing to make the same models in China and Thailand. We have positioned ourselves to minimize the risks of something somewhere going wrong by flexibly leveraging our sites.

Question 14:

You explained that you are passing costs on to customers. What’s your basic approach and policy on this?

Respondent:

Akira Oyama, President and CEO

Answer:

We sometimes pass on costs in overseas markets with high inflation rates. Our basic approach is to set prices according to the value we deliver to customers.

Question 15:

In what product areas will the joint venture with Toshiba Tec undertake joint development? Also, how do you intend to separate those offerings from regular Ricoh ones?

Respondent:

Akira Oyama, President and CEO

Answer:

The venture will develop MFP engines. In the coming years, the venture could conceivably develop new products based on the technologies of both partners, but there are no plans we can discuss at this stage. Fundamentally, sales will be through our respective brands and channels.

Question 16:

There has been considerable action recently to boost wages. Your corporate activities are attributable to employees, who are important stakeholders. Worker compensation tends to be more constrained than shareholder returns. What’s your vision for employee returns?

Respondent:

Akira Oyama, President and CEO

Answer:

The prime principle is to allocate the resources we need to maintain Ricoh regarding the relative share of labor, shareholder returns, and growth investments. We want to build a virtuous cycle in which we continue to maintain and expand the company to compensate employees further, pay dividends and generate returns for shareholders, and invest more in growth.

Question 17:

What are your automating vehicle painting outlooks and plans?

Respondent:

Seiji Sakata, Director and CTO

Answer:

We have been working with automobile manufacturers for the past four years. We are not yet able to share our future outlook or plans, but we hope we can report to you on this by the end of the 21st Mid-Term Management Strategy.

Question 18:

Ricoh seems nothing more than a photocopier company. It will inevitably go under if its executives suffer from the big business disease. I hope they invest in new businesses and don’t let the company fail.

Respondent:

Akira Oyama, President and CEO

Answer:

Ricoh Futures is launching new businesses that help resolve social issues and is cultivating businesses that contribute to a sustainable economy and Ricoh’s performance. We also maintain an advanced technology research center that explores new technologies and develops businesses for tomorrow.

Question 19:

Governance has become an important focus recently. We hear tales about corporate directors covering up harassment or being unable to discuss it because they fear retaliation. How do directors take responsibility when harassment happens?

Respondent:

Akira Oyama, President and CEO

Answer:

We have a high awareness of compliance, which we manage internally. In particular, the Internal Control Committee extensively discusses compliance and formulates necessary measures. We established an internal whistleblowing program that allows any director, officer, or employee to report issues. It is absolutely unacceptable for a director to engage in harassment. There have been no such instances at Ricoh to date. We will remain vigilant in that respect.

Question 20:

I want to know if the chairmanship is necessary. I also want to understand how the roles of the chairman and president differ.

Respondent:

Akira Oyama, President and CEO

Answer:

We have clearly delineated the roles of the chairperson and president. The president is an executive; the chairman is not. The chairperson oversees execution or provides guidance as necessary in a non-executive capacity, drawing on experience as an executive. A non-executive chairperson is vital for effective governance.

Question 21:

Competitors’ commercials highlight their business expansion and social contributions from specializing in core technologies. What are Ricoh’s core technologies? Do they relate to electrophotography, inkjet technology, or software for your digital transformation strategy?

Respondent:

Seiji Sakata, Director and CTO

Answer:

We have operated for many years as a copier company. Electrophotography is one of our core technologies. We will integrate such capabilities with software technology to bolster our solutions. Another strength is inkjet technology. For the automobile painting mentioned a little earlier, our progress has included creating extremely viscous industrial inks and making batteries with inkjets. I would like you to look forward to more of these core technologies from Ricoh in the coming years.

Question 22:

All eight candidates for the Board of Directors are Japanese, and only one is a woman. What’s your stance on diversity and inclusion?

Respondent:

Yoshinori Yamashita, Chairperson

Answer:

The selection of directors is an important process. We nominate directors based on whether they have a solid understanding of our management philosophy and whether they can contribute to sound, sustainable growth. After assessing their management skills, personality, and other attributes, we evaluate whether the overall composition and diversity of the Board of Directors are appropriate. We generate 60% of our sales overseas and are expanding globally. In the years ahead, we will offer positions without regard to nationality, age, gender, or other distinctions in line with changes in the operating climate and our business strategy.

Question 23:

What bonuses are paid to the chairperson and president?

Respondent:

Akira Oyama, President and CEO

Answer:

One of the agenda items shows the total bonuses allocated for five directors. In an upcoming securities report, we plan to disclose compensation for Yoshinori Yamashita, who was president last year.

Question 24:

What competitive edges do you have in digital services?

Respondent:

Akira Oyama, President and CEO

Answer:

They include a competitive lineup of devices, global customer touchpoints, and the RICOH Smart Integration platform, which connects devices and applications.

Question 25:

Tell us about the future of the printing business, progress with going paperless business, and your outlook for the next ten years.

Respondent:

Akira Oyama, President and CEO

Answer:

The pandemic dramatically transformed work styles and decreased print volumes. While it has gradually recovered, print volumes will not return to pre-pandemic levels because customers will maintain hybrid work models. However, paper will remain convenient, and there will still be jobs that use paper. We want to keep contributing to customers in that area. Recurring revenues from printing will not increase. We aim to build recurring revenues from digital services.

Question 26:

I no longer see vehicles sporting the Ricoh logo around town. Do you still engage in sales and service?

Respondent:

Akira Oyama, President and CEO

Answer:

As hybrid work models become more common, sales are now through online meetings and sales activities that augment customer site visits. We are more active than before through a range of different approaches.

Question 27:

Pages 53 and 54 of the Notice of Convocation of the General Meeting of Shareholders show that the urgency level is 5 for your risk of non-compliance with NIST SP800-171. The urgency level for Adaptation of information security is 4. The levels don’t match. If your Adaptation of information security isn’t in place, then you can’t be in line with NIST, right?

Respondent:

Mikako Suzuki, Corporate Officer

Answer:

The Risk Management Committee deliberates and sets up the urgency and impact indicators. Its members are from each department within Ricoh, experts, and Internal Control Committee members. We assess these indicators at the management level. Security and geopolitical risks change rapidly and are challenging to tackle. We review the urgency and impact of threats every six months and confirm that we keep abreast of them at the management level. We set up the Information Security Committee, which reports directly to the president to ensure that we promptly reinforce information security measures in response to a rising risk of cyberattacks.

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