CXO Interview

We will accelerate our growth by strengthening our business portfolio through steady growth investments and asset replacements with no exceptions, as well as by expanding horizontal collaboration initiated by digital transformation.

Member of the Board, Executive Officer, CXO^*;
General Manager, Group CEO Office

Hiroyuki Naka

* Chief Transformation Officer

Many growth investments were conducted in FYE 2025. Could you share the key points you prioritized when making investment decisions as Chairman of the Investment Consultative Committee?

I make growth investment decisions based on the required returns and growth potential expected of the Company as a whole.

Under the Management Policy of “No growth without investments,” we executed investments of approximately ¥766 billion in FYE 2025. Furthermore, when adding the amount which has already been executed in FYE 2026, we achieved the ¥1 trillion growth investment that was set forth in the Management Policy announcement. However, our investments are not driven by the target amount of ¥1 trillion. A considerable number of projects were rejected or required a reconsideration of their schemes, as we carefully screened each proposal in detail. By maintaining strong collaboration among the management team, we believe we have been able to make meaningful investments totaling ¥1 trillion, selected from a rich pipeline, with a focus on enhancing our future corporate value.

There were two key points on which I placed particular emphasis when making investment decisions.

The first point is whether the investment project can truly contribute to the returns and growth required of the Company as a whole. Our investment criteria include setting hurdle rates by industry. For example, even in sectors such as consumer-related fields, where growth rates tend to be relatively low, or in low-risk, low-return businesses, investments primarily aimed at expanding profit scale may still be pursued if the expected returns are commensurate with the associated business risks. However, in our 54 ITOCHU Corporation Integrated Report 2025 long-term Management Policy, where we advocate for continuing high growth and highly efficient management, it is important not only to focus on projects that contribute to short-term profits but also to pursue investments that broaden our business base and enhance the Company’s overall growth rate in the medium- to long-term. When executing investments, in addition to strictly screening whether each project meets our criteria, we place importance on whether it contributes to fostering market expectations for our growth—taking into account the growth potential and efficiency expected of the Company as a whole, as well as the potential to expand our business through the investment. To firmly secure the enhancement of corporate value through ¥1 trillion growth investments, I instruct each segment not only to actively consider new investment opportunities but also to discuss growth strategies in each area aimed at sustainable growth, and to develop projects with a medium- to long-term growth perspective.

The second point is the further evolvement of investment structuring, which I mentioned last year. Regarding “The Four Lessons for Investments” learned from our past investment failures, we not only promote awareness of the lessons through internal training and front-line engagement but also rigorously embed them into contract terms, securing both the creation of synergies and the rights and means to exercise influence. Relying solely on verbal agreements or strategic concepts often fails to deliver the anticipated results. While maintaining an appropriate distance with negotiation counterparties and making swift decisions are important in M&A, we cannot tolerate compromises resulting from lax negotiations. For certain large-scale investments executed in FYE 2025, we instructed revisions and renegotiations of contract terms, and through persistent and resourceful efforts at the front line, we were able to execute them under more favorable conditions.

We plan to continue making proactive growth investments in FYE 2026. Even amid an uncertain business environment, we will rigorously maintain our focus on the key points described above. At the same time, we will pay close attention to balancing and diversifying our overall portfolio, and we will execute optimal growth investments to achieve the sustainable enhancement of corporate value.

As you step up growth investments, will you also accelerate asset replacements?

In order to make more effective use of management resources, we will not only divest unprofitable businesses, but also build a more efficient portfolio through asset replacements with no exceptions.

We conduct an annual review of all business investments and reassess our holding policy based on our business exit criteria. As a result, we do not have a significant number of unprofitable businesses in our portfolio. However, it is also true that after investments are executed, some may gradually lose their initial strategic significance or future growth prospects. While they may still contribute to profits to some extent, there are cases where they should be reviewed in order to pursue a more efficient portfolio. The dissolution of strategic investment with the CP Group, announced in April 2025, is an example of asset replacements with no exceptions. 10 years have passed since the initiation of our capital alliance, the transaction amount has increased to five times its initial level at the beginning of the partnership, and relationships are being developed across various areas. Therefore, we concluded that maintaining the mutual capital alliance was no longer necessary. In April 2025, we had fully recovered the cash from the dissolution of the cross-shareholding. Excluding the initial investment of ¥87 billion, the total cash return over the past 10 years amounted to approximately ¥120 billion, which we consider to be a significant quantitative contribution.

Although we have a rich pipeline of growth investments aimed at growing earnings, as a company that operates with a small organization comprising select individuals, we must make effective use of our limited resources. Even with our strength in hands-on management, we do not intend to allocate resources indiscriminately to all investment projects. For example, even for wholly owned subsidiaries, if the returns generated do not meet our expectations relative to management resources allocated, it is important to adopt a more flexible approach, such as inviting partners with different expertise and revise the capital structure to manage the business. In order to build a more efficient, competitive, and robust portfolio, we will execute asset replacements with no exceptions alongside our growth investments.

What are the initiatives toward maximizing synergies through horizontal collaboration among Division Companies, and the current status of business transformation utilizing digital technologies?

We will accelerate our growth by strengthening horizontal collaboration initiated by digital transformation.

In recent years, many companies have seen their market evaluations improve by utilizing digital technologies as a growth driver. Similarly, we have two major strengths: a broad business base in the information technology and communications sector, and vast amounts of data obtained from our consumer sector. Therefore, compared to other companies, we are confident that we have built a highly advanced foundation for utilizing digital technology to drive growth. While it goes without saying that the utilization of AI and digital transformation has contributed significantly to dramatic cost reduction and increased efficiency, in FYE 2025 we have also begun full-scale development and use of platforms in supply chain management and marketing support. These platforms leverage front-line expertise and accumulated data, leading to new cases where our earning power is evolving, and the pace of growth is accelerating.

The diverse range of businesses handled by a general trading company spans various industries, each with its own business models and commercial practices, making collaboration not always straightforward. However, by leveraging the power of digital technology as a catalyst, we can connect to previously unrelated businesses, and it is precisely in these new connections that the infinite potential of a general trading company lies. Furthermore, the insights gained from digital utilization within our Group are creating a virtuous cycle, as they contribute to building up achievements in our digital business portfolio. In addition, with respect to growth investments, following initiatives with FamilyMart and WECARS Co., Ltd., we are exploring projects that could lead to the development of platforms in which multiple Division Companies bring together their expertise to achieve a higher level of growth. Regardless of the external environment, we will continue to enhance our competitiveness through proactive transformation and sustain steady growth.（→ Digital Strategy for the Sustainable Enhancement of Corporate Value）