BRIDGESTONE CORPORATION Q1 FY2026 earnings call

- **Overall Fiscal 2025 Results & Strategy Context** * Fiscal 2025 was positioned as a year of emergency/crisis management focused on defensive business rebuilding and cost reduction, following the 2024 Medium-Term Business Plan (MBP) roadmap. This phase was largely completed as planned. * Consolidated revenue hit 4,429.5 billion yen, up 2% YoY. Adjusted operating profit reached 493.7 billion yen, up 10.4 billion yen YoY. Profit attributable to parent owners was 327.3 billion yen, up 15% YoY, driven by higher operating profit and a reversal of uncertain tax positions. ROIC improved 0.2 points YoY to 8.3%. * U.S. tariffs reduced profit by approximately 25 billion yen in fiscal 2025, but supply chain optimization largely offset this impact. Business cost reduction generated 72 billion yen in benefits, supporting profitability. * A full-year dividend of 230 yen per share (pre-split) was approved, up 20 yen YoY. Free cash flow was a 435.5 billion yen inflow, up 141.7 billion yen YoY, driven by tighter working capital and lean inventory management.

- **Fiscal 2026 Strategic Direction** * Fiscal 2026 is framed as a critical transition year from rebuilding to *quality-focused growth*. Management will align the transition pace carefully to avoid undermining the strengthened business foundation, with the long-term goal of reclaiming the world's #1 tire manufacturer position by Bridgestone's 100th anniversary in 2031. * Growth strategy is built on three core pillars: 1. **Deliver competitive products and manufacturing excellence**: 25+ new passenger tire product launches (double the recent annual average) and 10+ new TB tire launches are planned globally. A new executive structure effective March 24 will prioritize technology: four of seven executive officers will be technical specialists, with Chief Innovation, Product, and Manufacturing Officers reporting directly to the Global CEO to strengthen cross-functional collaboration on materials, development, and production. R&D and capital expenditure (CapEx) will exceed the levels of the past two years. 2. **Strengthen the global portfolio**: Continue portfolio optimization aligned with 2024 MBP targets, with a focus on shifting to solution-based business models, strengthening the core TB business, improving European profitability, and growing profit in Asia and India. 3. **Enhance global brand power**: Expand motorsports engagement to boost brand recognition. Bridgestone will return to FIA Formula E as the exclusive tire supplier in H2 2026 (first return to FIA world championship in 15 years), while continuing its existing INDYCAR (Firestone) and Super GT programs.

- **Capital Allocation & Shareholder Policy** * Total planned capital allocation for the 2024-2026 MBP period is approximately 2.4 trillion yen, prioritizing growth investment while maintaining appropriate financial strength and increasing shareholder returns. Surplus cash from disciplined investment selection has been reallocated to shareholder returns. The 1.5 months of sales target for cash reserves and 55% midterm target equity ratio remain unchanged.

### By Geographic Segment - Japan: Revenue increased on expanded domestic replacement tire sales and steady performance of ultra-large off-road (OR) tires; profit grew, and profitability improved 0.4 percentage points year-on-year (YoY). - Americas: North America saw YoY profit growth and margin improvement from expanded replacement truck and bus (TB) tire sales and business rebuilding. Latin America achieved an overall breakeven/ modest net profit, with improving performance in Brazil in H2 2025 despite a tough operating environment. - EMEA: Profit and margin continued to improve, driven by expanded sales of premium passenger tires in the European replacement market and steady progress on business rebuilding. An adjusted operating profit margin of 5.5% was achieved, up over 2 percentage points YoY. - APAC (excluding Japan): Revenue decreased 2% due to regional currency effects and profitability-focused sales strategies, but adjusted operating profit margin held at 11.5%, supported by Thai operations restructuring and steady growth in India.

### By Product Segment - Passenger and Light Truck (PS/LT) Tires: Premium tire expansion and product mix improvement continued, but profit declined YoY due to a North American cyber incident and weak performance in Latin America. Revenue contribution was the largest segment by volume. - Truck and Bus (TB) Tires: Replacement tire sales remained steady in North America, and production base restructuring effects in North America and Europe were realized. This resulted in YoY profit growth and significant margin improvement. This segment is a core strength for Bridgestone. - Specialty Products: Ultra-large OR tire sales remained steady and B2B solutions expanded, but profit declined due to lower agricultural tire sales and raw material index price adjustment timing impacts. The segment maintains high profitability above 20% and supports overall consolidated performance. - Diversified Products: Profit grew YoY even after excluding a one-time asset sale gain, with continued steady operational improvements.

### By Business Portfolio - Tire Business: Delivered an adjusted operating profit margin of just under 13% in a tough operating environment. - Solution Business (growth segment): Achieved increases in revenue, profit, and profitability, with Commercial B2B Solutions posting a profit margin exceeding 11%.

- **Fiscal 2026 Consolidated Financial Guidance**: Revenue of 4.5 trillion yen (up 2% YoY), adjusted operating profit of 515 billion yen (up 4% YoY), adjusted operating profit margin of 11.4% (up 0.3 percentage points YoY), and net profit of 340 billion yen. Management expects raw material price improvements, business rebuilding benefits, and cost reductions to offset inflation and U.S. tariff cost increases. - **Segment Level Guidance**: All segments are targeted to achieve higher revenue, profit, and profitability: - APAC: Revenue and profit growth from expanded replacement tire sales in Thailand, Indonesia, and India. - Americas: Revenue and profit growth with a 0.6 percentage point margin improvement to the 10% range, driven by replacement tire growth. - EMEA: Continued profit and margin improvement of 2 percentage points, from capturing business rebuilding effects and expanding premium passenger tire replacement sales. - **U.S. Tariff Impact**: The projected full-year profit impact from U.S. tariffs in 2026 is 55 billion yen, with management expecting global supply chain optimization and group-wide cost cuts to partially offset the increase. - **Dividend Guidance**: The fiscal 2026 annual dividend will be 250 yen per share pre-split (125 yen post-stock split), an increase of 20 yen per share pre-split, meeting the 2024 MBP target. The company maintains a target consolidated dividend payout ratio of ~50%. - **Share Buyback Guidance**: A 150 billion yen share buyback is planned for fiscal 2026, keeping the 3-year (2024-2026) total buyback target of 450 billion yen unchanged. The company will consider additional share buybacks if excess cash remains after funding planned growth investments. - **CapEx Guidance**: Capital expenditure will increase to 410 billion yen, focused on upgrading facilities to produce higher-margin premium products (not expanding overall production capacity), with larger proportional allocation to the U.S. (retail store improvements) and Japan (mining large tire production capacity upgrades).

- U.S. tariffs will have a larger negative profit impact of 55 billion yen in fiscal 2026 (up from 25 billion yen in 2025) due to a full year of the new tariff regime, and not all of this impact can be fully offset by mitigation measures. - Persistent inflation increases operating and raw material costs, which will require ongoing cost cutting and productivity improvements to offset. - Latin America faces ongoing headwinds from expanded low-end imports, reduced exports to North America that lower cost conversion efficiency, and a tough overall operating environment that has kept profits near breakeven. - European and North American market demand remains sluggish, creating pressure on sales volume growth. - The company missed its 2024 MBP targets of 13% adjusted operating profit margin and 10% ROIC due to internal and external headwinds including U.S. tariffs, inflation, Latin America performance, and diversified product business weakness.

Q: The company has reduced the near-term share buyback allocation, implying more capital is directed to growth. To reach the goal of regaining the world's #1 position, what are the key priorities for growth, including Firestone revitalization and expansion in India? / A: Management's core growth focus is product and manufacturing competitiveness, with the goal of making high-quality products at industry-leading low costs. A new executive structure placing heads of materials development, product development, and manufacturing directly under the Global CEO is intended to speed up cross-functional collaboration and improve cost competitiveness. Multi-brand coverage from premium to value (including Firestone) is critical to accessing all market segments. Mid-term growth is centered on North America, with gradual expansion planned for India and other Global South markets, and a full 2031 roadmap is currently in development. Firestone revitalization in North America, a focus since H2 2025, has already delivered visible growth that management expects to continue in 2026.

Q: What is the breakdown of the JPY 71 billion operating expense increase included in fiscal 2026 guidance, and is guidance structured differently under new CEO Yasuhiro Morita? / A: Most of the increase consists of strategic investments for future growth from 2027 onward, including brand enhancement, IT, and productivity improvement initiatives, plus variable cost increases from planned volume growth and the absence of one-time asset disposal gains recorded in 2025. Inflation also contributes to higher costs. There is no change to the core medium-term plan from the leadership transition; the plan was developed jointly with the prior CEO, and guidance reflects a deliberate choice to allocate necessary resources to volume growth and brand enhancement after completing the rebuilding phase.

Q: Why is the 2026 payout ratio at 46% below the 50% target, and could additional share buybacks be implemented before the current program deadline if excess cash is available? Is there any change to core capital allocation policy? / A: There is no change to the capital policy: the 55% mid-term equity ratio target remains in place, and the company maintains balance between growth investment and shareholder returns. The 150 billion yen share buyback is framed as a value-enhancing investment to boost EPS, so total shareholder return (including buybacks) is balanced with growth investment needs. If excess cash and liquidity remain after all planned growth investments are funded, management will consider additional shareholder returns including additional buybacks, but no additional plan has been finalized.

Q: What does the higher projected JPY 55 billion U.S. tariff impact in 2026 reflect, and how much of this impact can be offset by cost reduction? / A: The higher impact reflects a full 12 months of tariff exposure (compared to a partial year in 2025), not a further increase in tariff rates. Management expects to generate an additional 25 billion yen in offsetting benefits from productivity improvements, efficiency gains from digitalization, and incremental business rebuilding benefits, and will deploy full corporate efforts to offset as much of the impact as possible.

Q: What areas are targeted for the higher CapEx budget in 2026, and is this for capacity expansion? / A: The CapEx increase is not for overall production capacity expansion; it is for upgrading facilities to produce higher-margin premium and high-performance products. Key focus areas include production capacity for highly profitable MasterCore large mining tires, U.S. retail store network upgrades, conversion investments to produce more high rim diameter passenger tires, and IT investment. Around half of Bridgestone's profit is generated in the U.S., so a disproportionate share of CapEx is allocated there, with large mining tire investment concentrated in Japan.