Ricoh Group Integrated Report 2026 Interview with the CFO

In fiscal 2025, consolidated sales increased 3.2% year on year to ¥2,608.3 billion, operating profit rose 42.1% to ¥90.7 billion and profit attributable to owners of the parent increased 21.8% to ¥55.6 billion. ROE improved to 5.1%. Even though profitability has steadily recovered, we did not reach the targets set in the 21st Mid-Term Management Strategy. We take this result seriously, as we were unable to fully meet the expectations of shareholders and investors.

At the start of the 21st Mid-Term Management Strategy, we recognized that continuing with business as usual would not be enough to achieve our targets. This sense of urgency led us to launch the Corporate Value Improvement Project. Through this project, we reduced fixed costs, reviewed our business portfolio, and advanced structural reforms in the Office Printing business. We positioned the Office Services business as a pillar of growth and worked to build up recurring earnings. In the Office Printing business, where the market continues to shrink, we established ETRIA and undertook initiatives such as reviewing our sales and services structure and optimizing our supply chain. As a result, we generated profit improvements worth ¥57.8 billion over the two years from fiscal 2024 to fiscal 2025.

However, despite improvements in our earnings structure, we have not yet reached a level where we can consistently generate returns above the cost of capital, and challenges remain in both the speed and execution of earnings improvement. The business environment is changing rapidly, with factors such as U.S. tariff policy, economic weakness in Europe, and rising tensions in the Middle East creating uncertainty. At the same time, AI is significantly transforming the way people work. In this environment, we must use the data available to us, address issues without delay, translate them into concrete actions, and execute them swiftly.

We placed the greatest emphasis on working backward from where we aspire to be in the future. Starting with a vision for five years ahead, the executive team came together multiple times over the course of one year to thoroughly discuss what should be changed in our businesses, organizations, and earnings structure to realize that vision. Furthermore, we compiled a financial tree linking the expansion of recurring earnings to ROIC, ROE, and PBR, visualizing how each strategy and initiative contributes to financial performance. As a result, this enabled us to formulate a mid-term strategy that is consistent—from the future vision right through to strategy and financial targets.

The financial goal of Mid-Term Strategy ’26 is to achieve an ROE above 10%. We estimate our cost of equity at around 7.5% to 8.0%. By consistently achieving an ROE above this level, we aim to enhance TSR through both share price appreciation and shareholder returns.

To that end, my role is to build a financial foundation and prepare management options that enable us to continue creating value, whatever changes may arise in the operating environment. The target of achieving ROE above 10% was set after careful consideration from that perspective. It is grounded in realistic assumptions, not wishful thinking. We see it as the level we ought to achieve even after factoring in various conceivable scenarios, such as deterioration in the business environment or changes to our business portfolio.

To achieve it, we will simultaneously use three levers: profit growth, enhancement of asset efficiency, and optimization of capital structure.

We will enhance profit growth and cash generation by expanding recurring earnings centered on Workplace Services and improve asset efficiency by driving the transition to an asset-light business structure. At the same time, we will appropriately utilize debt, based on stable cash flow to optimize the cost of capital. By pursuing these three measures simultaneously, we will improve ROE. Among these, expanding recurring earnings is especially important. This is because it not only enhances earnings stability, but also leads to an improvement in capital efficiency.

Our net D/E ratio is currently below 0.3x, and going forward, we will manage it within an appropriate range of up to 0.4x. The purpose is to maintain financial soundness while moving toward a more appropriate capital structure. By keeping financial risk within an appropriate range and making effective use of debt, we aim to reduce WACC, expand the equity spread, improve capital efficiency, and sustainably generate returns that exceed the cost of capital.

We execute growth investments while maintaining financial discipline that is mindful of our credit rating. In addition, as we transition to an asset-light business structure, we will optimize asset efficiency, including maintaining an appropriate level of liquidity on hand. We are also continuing to strengthen cash management globally.

The Treasury Department at Headquarters will centrally manage cash across the Group and optimize fund allocation. Through this, we will improve capital efficiency, strengthen financial governance, and further reinforce our financial foundation.

In Mid-Term Strategy ’26, we have allocated approximately ¥350 billion of generated operating cash flow for growth investments, of which about ¥250 billion will be allocated to M&A and other investments. We intend to concentrate our M&A activities on the Workplace Experience and Process Automation domain so as to develop software in-house and generate recurring earnings.

At the meetings of the company-wide Investment Committee, I continuously ask why certain investments are necessary for Ricoh. We execute M&A deals not just to expand sales, but to create synergies and enhance cash generation capabilities and capital efficiency. We conduct rigorous assessments, including PMI considerations, during the acquisition process and make timely decisions to exit businesses when necessary. As for research and development, we plan to continue investing in the inkjet domain and in creating synergies with ETRIA.

Cost structure reforms are not something to be completed under the Corporate Value Improvement Project implemented in the 21st Mid-Term Management Strategy. Instead, they are an ongoing effort. As our business portfolio continues to evolve, we will constantly update our structural reforms. Considering inflation and many other uncontrollable external factors, we will implement appropriate pricing for our products and services, but what is more important is that we continuously pursue cost improvements by strengthening our underlying business structure. More specifically, we will focus on advancing four key initiatives.

The first is our Back-Office Operations Transformation, focused primarily on corporate functions. We will enhance operational efficiency through the utilization of DX and AI and optimize the overall organization by reallocating talent and capacity created through those efficiencies to growth areas.

The second is Global SCM Transformation. As we ramp up our business as a workplace integrator, we will strengthen global procurement capabilities and improve “last-mile” efficiency by reforming logistics operations.

The third is Business Portfolio Optimization for both business units and Group companies. Based on market conditions and profitability, we will review not only the businesses but also the structure of Group companies. In some regions, we will transition to an optimal business model, including the utilization of sales partners, rather than focusing on direct sales.

The fourth is Asset Rationalization and Site Optimization. In optimizing our sites, we will review our multiple shared service centers worldwide not only from the perspective of consolidation, but also from the perspective of which functions can be performed most efficiently at which locations. We will rebuild our structures from the viewpoint of overall optimization and establish more productive operations.

By advancing these four initiatives in a holistic manner, we will reduce costs and assets by more than ¥40 billion.

As a milestone toward our five-year goals, we are targeting fiscal 2026 consolidated sales of ¥2,700 billion, operating profit of ¥95 billion, and profit attributable to owners of the parent of ¥62 billion. Workplace Services will drive growth. The effects of the Corporate Value Improvement Project implemented under the 21st Mid-Term Management Strategy will also continue. Although we anticipate increased costs for semiconductor memory, we believe that most of this can be absorbed through pricing revisions and reforms in SCM and procurement.

We are also taking measures to address risks such as rising material and logistics costs due to the situation in the Middle East and other geopolitical factors.

As for shareholder returns, we are targeting a total return ratio of 50% and are committed to increasing dividends every fiscal year. For fiscal 2026, we plan to pay an annual dividend of ¥44 per share, which is expected to mark the sixth consecutive year of dividend increases. Furthermore, we will carry out share buybacks worth ¥25 billion, acquiring up to 23 million shares, which corresponds to 4% of outstanding shares (excluding treasury stock). As a result, we forecast a total return ratio of around 80%.

I regard it as an important process for enhancing corporate value. Shareholders and investors critically evaluate not only financial performance but also the validity of our strategies, execution capabilities, and management’s recognition of issues. To earn support from the capital market over the medium-to-long term, it is important to carefully explain the business structure and market environment behind the data and help shareholders and investors understand how the Ricoh Group’s initiatives contribute to enhancing corporate value. At the same time, we honestly communicate not only our strengths but also areas for improvement and future challenges. We aim to share in a transparent manner the issues we recognize and the options available to us, while applying the insights gained through these exchanges to our management.