Chugai Ro Co.,Ltd. Q4 FY2025 earnings call

• 2024 Consolidated Financial Performance: • Total orders: 39.4 billion yen (102% of the prior year level), sales: 36.2 billion yen (124% of the prior year level) • Operating profit: 2.7 billion yen (185% of the prior year level), ordinary profit: 3.0 billion yen (175% of the prior year level) • Net income attributable to parent company shareholders: 2.9 billion yen (136% of the prior year level), with partial sales of policy-held shares contributing to the result • Gross profit margin was maintained at prior year levels despite cost pressure; SG&A ratio improved 2.4pp, pushing operating profit margin up 2.5pp to 7.5% • Closing order backlog increased 3.5 billion yen year-over-year to 37.8 billion yen

• Balance Sheet and Cash Flow: • Total assets: 48.7 billion yen (down 0.1 billion yen year-over-year), total liabilities: 20.1 billion yen (down 0.9 billion yen), net assets: 28.6 billion yen (up 0.8 billion yen) • Equity ratio maintained above the 50% target for financial health • Operating cash flow decreased 2.8 billion yen year-over-year due to extended collection periods for increased large orders; investment cash flow increased 0.1 billion yen year-over-year from sales of investment securities; financing cash flow decreased 5.1 billion yen year-over-year due to lower short-term borrowings • Closing cash and cash equivalents balance decreased 5.6 billion yen year-over-year to 4.3 billion yen

• Mid-term Management Plan "Management Vision 2026" Progress: • 1. New Market Creation Centered on Carbon Neutrality:

  • Targets: 4.0 billion yen in segment revenue by 2026 (final plan year), 10.0 billion yen by 2030; 20% CO2 emission reduction from 2013 levels by 2026 (upgraded from 17% target), net-zero emissions by 2050
  • 2024 segment revenue reached 1.0 billion yen; cumulative CO2 reduction hit 18% from 2013 levels, which is on track for the accelerated target
  • Milestones: Received Toyota's Top Technology Development Award for hydrogen combustion technology, and delivered Japan's first commercial industrial ammonia burner to UBE Mitsubishi Cement • 2. Existing Product Refinement and Sales Expansion:
  • Target: 11.2 billion yen in incremental revenue and 2.0 billion yen incremental operating profit from 2021 levels by 2026
  • 2024 incremental revenue reached 9.8 billion yen; 290 million yen invested in R&D. Strong order flow for all-solid-state battery heat treatment equipment, and large orders for electric furnace exhaust gas treatment and energy-saving continuous annealing equipment driven by decarbonization investment in the steel sector • 3. Creating a Fulfilling Workplace:
  • Target: Simultaneously achieve higher profit per employee and reduced total working hours to improve productivity and employee satisfaction
  • 2024 profit per employee increased to 50 million yen year-over-year, but total annual working hours per employee rose slightly to 2,109 hours amid the efficiency improvement transition period. 140 million yen invested in digital systems; design support systems are operational, and procurement support system testing began in 2025

• Corporate Value Improvement Initiatives: • Policy-held share ratio reduction to below 20% is progressing one year ahead of the original schedule • Borrowing dependence target revised from below 10% to below 15% to account for financing costs • Added carbon neutrality targets from an ESG management perspective; PBR reached 1.0x at the end of March 2025

1. Development segment: Functions primarily as a cost center focused on future product development, with a negative operating profit, which management frames as a forward-looking investment. 2. Core operating segments: All core business segments achieved year-over-year revenue and profit growth, in line with the company's overall strong full-year performance. Specific segment-level absolute revenue figures and revenue contribution percentages were not disclosed in the transcript.

• 2025 full-year performance: Management expects continued revenue and operating profit growth, while prioritizing overall profit margin. Closing order backlog is projected to increase a further 0.3 billion yen to 38.1 billion yen.
• Mid-term Management Plan (to 2026) targets: Confirmed the final year targets of 42.0 billion yen in orders, 41.5 billion yen in sales, 3.6 billion yen in operating profit, and 10% ROE. ROE already reached 10.7% in 2024, exceeding the target a full two years early.
• Carbon neutrality target: Upgraded the 2026 cumulative CO2 emission reduction target from 17% to 20% (vs 2013 baseline) to accelerate progress.
• Shareholder return: Maintains the policy of total payout ratio above 50%. A 150 yen per share full-year dividend is planned for 2024 (meeting the 60%+ of NOPAT target), alongside a 0.4 billion yen share repurchase program.

• Longer collection periods for large new growth segment orders drove a significant year-over-year decrease in operating cash flow; management notes this issue will require negotiation with customers on revised payment terms to improve cash flow.
• Working hours per employee have not declined as expected amid the transition to new digital efficiency systems, which is a short-term challenge to the goal of improving work-life balance.

No question and answer section was included in the provided transcript.