Financial Strategy

Moving forward with structural reforms
in line with financial strategies that
reinforce a shareholder perspective

Peter Kenevan
Member of the Board,
Senior Executive Officer,
Chief Financial Officer and Sustainability

This interview was originally published in the ROHM Group Integrated Report 2025.

I served as an outside director for ROHM from 2022, and took up the position of executive director in charge of finance in June 2025. In August of the same year, I also took up the position of executive director in charge of sustainability. My goal is to improve ROHM’s ROE and raise its PBR by further refining the company’s strengths through financial and non-financial means.

Determination when taking up the position of officer in charge of finance

I have been connected with Japan for about 30 years. In addition to studying abroad here in Japan during my university days, I worked in China for several years after joining McKinsey & Company and then became a partner at the Tokyo Office in 2000. When I subsequently took up the position of Head of Japan at the major online payment service PayPal, I was asked by ROHM to serve as an outside director and took up the position in 2022. After that, my term at PayPal ended and in June 2025, I accepted the offer to become an internal director at ROHM to reinforce finances because I felt that not only management, including President Azuma, but the company itself was appealing.

I have been involved with the semiconductor industry for many years as a consultant starting with my time at McKinsey, and while ROHM is wonderful in various ways, such as its integrity, technical capabilities, and honesty, I could see room for improvement in terms of flexibly responding to changes and boldly making decisions. My impression is that ROHM faces the same problems that many Japanese companies do.

The company is now earnestly working to implement a structural reform program that touts “returning to ROHM’s strengths.” The reforms entail pain as the changes are substantial, but I think that I can provide much advice precisely because I am from outside the company and unfettered. I firmly believe that ROHM can dramatically change with support for reforms provided from a detached, objective perspective.

However, what I have deeply felt since taking charge of finances is that ROHM’s accounting and finance departments are extremely sound, and the company possesses an extensive IR system. Information and systems are well-organized, and high-quality in-house material, such as monthly reports, as well as disclosure material, including securities reports and integrated reports, are being created. Therefore, I shun interfering with the details of improving operations, and want to provide support for reforms from a more overall perspective.

At the beginning of July, immediately after taking up my position, I traveled around Europe and met with institutional investors of about 20 companies, which made me once again realize that they could provide opinions on how to make ROHM an even better company. One of my duties is to reflect those opinions in management decisions, and I will continue to undertake dialogue in order to deepen both of our understanding after clearly explaining my ideas.

Role of finance officer in structural reforms

We should first strive to regain a muscular, agile system. ROHM now faces problems in terms of both revenue and costs. Regarding revenue, we must improve our business portfolio and pricing, while in terms of costs, we must optimize personnel and manufacturing sites. It is important that we regain our former selves when we were competitive despite being medium-sized and reinforce our management foundation. Striving for growth comes after that.

When supporting structural reforms from the financial side, I consider things from three levels. The most basic level is linked to recent implementation, such as product strategy, pricing, business portfolio, and in what form we should possess manufacturing sites, from a near future perspective based on the profit/loss statement (P/L) and balance sheet (B/S). At the next higher level, there are several capital efficiency indicators, including ROIC, ROE, and ROA, which combine P/L and B/S elements. Positioned at the highest level are PBR and PER, which are related to share price, and this field is entrusted to capital market valuation. At the most basic level, we will steadily raise ROIC and other indicators by improving performance through strict valuation of investments and assets. We are also moving forward with discussions regarding shrinking assets that have grown too large, and are working to improve our capital efficiency. If these are successful, our share price will rise, driving our PBR and PER to the required level.

One important indicator that we can control is ROE, and I think that we should aim for a double digit ROE. Furthermore, I envision a cost of shareholders’ equity of 7%-9%, but shareholder value will not improve unless we achieve profitability that exceeds this. I would like to aim to improve both shareholder and corporate value by achieving an ROE of 10% or more through greater profitability and capital efficiency.

In addition to promoting management that is conscious of share price and capital cost, we should expand a stock-based remuneration system in the medium and long terms in order to foster a performance culture mindset in employees, too. Restricted stock units (RSUs) are now granted only to management and corporate officers, but broadening that to employees, too, would spread a shareholder perspective throughout the company and lead to sustainable improvement in corporate value. Because it is now necessary to also reform the personnel system, I would like to examine developing a system design that incorporates experts.

Cash management and shareholder return

The current percentage of overseas customer sales is about 50%, but that should be higher considering the size of the Japanese and overseas markets. To further increase the percentage of overseas customer sales, it is important that we focus on the SiC product lineup and markets such as the automotive, industrial equipment, and AI server markets. Already possessing sufficient production capacity, we will push ahead with optimizing production lines while controlling capital expenditures with an eye on demand. Furthermore, we will plant the seeds for future growth through initiatives such as M&As by adding or incorporating new functions offered by startup companies with technology, products, and sales networks required by ROHM.

We are now in a transition phase, but we will restore cash flows to a positive level in FY2026. Despite lackluster profit, this fiscal year, too, is not too bad on an EBITDA basis because depreciation remains high. The benefits of structural reforms will further raise our ability to generate cash in the medium term.

Once structural reforms are near completion, and our cash balance is stabilized, we will aggressively direct free cash flows to shareholder return. With a goal of an ROE of 10% as discussed above, it is necessary to shrink net assets. Many of ROHM’s shareholders expect stable dividends, and thus we have adopted a policy of maintaining our dividend level even when struggling with performance. While our current target is a dividend payout ratio of 30%, I do not consider this to be etched in stone.

Decisions regarding elements other than investments for growth and working capital will be made taking all factors into consideration, including dividends and purchase of treasury shares, while monitoring the share price.

300 billion yen in assets and liabilities related to collaboration with Toshiba

The purpose of the investment in Toshiba is to generate synergies. We are, however, cautiously moving forward with deliberations because of strong market volatility due to the ferocious changes in the industry. Because of this, we issued convertible bonds (CBs), which was judged an appropriate method to procure funds that limits the burden on the P/L as interest rates were rising. I think that we should have made the decision from a slightly broader perspective, such as risk of dilution and capital cost if bonds are converted, which many investors are concerned about. Ultimately, however, I want to appropriately handle things in a way that wins the understanding of everyone.Deliberations with Toshiba are cautiously moving forward, and if it is determined that a partnership will not create shareholder value, we will immediately clean up both sides of the B/S.

2nd Medium-Term Management Plan

As for the Medium-Term Management Plan “Moving Forward to 2025,” we initially made firm progress, but fell behind in achieving the targets halfway through the plan as a result of changes in the semiconductor market. Even so, we were excessively tied to faithfully executing the plan, which resulted in us being slow to make decisions and unable to flexibly respond to the changes. For this and other reasons, I do not think it is essential to devise a Medium-Term Management Plan. It is necessary, however, to clearly indicate to both inside and outside the company the path we should move forward on when undertaking this kind of fundamental structural reform. So as not to fall in the same trap, we are pushing ahead with developing realistic plans based on the theme of “return to ROHM’s strengths” in the 2nd Medium-Term Management Plan.

When formulating the plan, it is important to clearly indicate the targets we should achieve and then link those to structural reforms. The sure way forward is to incorporate reform elements being examined by function into a bottom-up plan, which is centered on business units, and then integrating those. I think that of these financial targets, the profit target is more challenging than the net sales target, but it can be argued that it is more controllable than a plan focused on business growth. This is because cost-focused measures are the core. At the implementation stage, we will repeatedly verify whether things are progressing as planned, and if additional measures are required, we will quickly respond. I would like to improve effectiveness through more lively business debates based on more detailed information.

As for KPI in the plan, decisions will ultimately be made from a perspective of the degree of their impact on P/L items, such as labor costs and depreciation. There is a general tendency to focus on the number of facilities and employees when promoting structural reforms, but there are differences in labor costs depending on the individual, and while some equipment at facilities have been fully depreciated, there is also equipment that has not. Numerous improvement measures are proposed at meetings, but ones that have little impact on profit have low priority. Even for capital expenditure, which has grown over the past several years, will be written down or sold if they are not expected to be used.

Until these structural reforms bear fruit, we will push forward with all we have, and thus, I request the continued support of all our stakeholders.