YAMATO CORPORATION Q4 FY2026 earnings call

Previous Mid-Term Plan Review

• All key financial targets (sales, ordinary profit, ROE) were achieved one year ahead of schedule, and all targets are on track to be met in the final year of the plan
• 4.4 billion yen of treasury stock was purchased in the final year, and the payout ratio target is expected to be achieved
• Key achievements include: secured and strengthened construction management systems, built a company-wide cross-functional structure for large projects, advanced active sales and proposals for factory facilities that leverage industrialization strengths
• Governance improvements include establishing a nomination and compensation committee and introducing RS for directors; enhanced shareholder returns via treasury stock purchases/cancellations and introduction of a shareholder benefit system
• Contributed to regional revitalization through the opening of Michi no Eki Maebashi Akagi in 2023
• Improved human capital: achieved 81.3% male parental leave take-up in FY2024 as part of D&I initiatives, revised technical training curriculum content
• Unresolved challenges identified: need for deeper analysis of high-growth markets aligned with the company's industrialization strengths and resource reallocation to priority businesses; need to build "Construction Product" capabilities tailored to customer segment and business area specific needs; need to secure/train talent to drive business strategy and address labor shortages via DX

Long-Term Vision (2035)

• Official vision: "Building the future with Construction Products", which aims to proactively address social issues and accelerate value creation
• Core pillars: build a system where diverse talent can thrive to enrich work and working styles; challenge conventional practices to drive efficiency and labor saving, accelerate value delivery via productivity innovation; provide sustainable buildings using proprietary technology that contributes to energy saving and CO2 reduction

Construction Product Strategy

• Construction Product is a proprietary construction system that pushes front-loading and construction industrialization to enable shorter project durations while maintaining quality, addressing industry challenges including labor shortages, aging social infrastructure, and more frequent extreme weather
• Shifts the traditional planning-design-construction workflow to planning-design → front-loading → construction industrialization → construction, enabling shorter durations, lower labor requirements, and reduced on-site work, creating a sustainable growth model even amid market contraction and labor shortages
• Phase 1 (FY2026-FY2028): Build the 16,300 total floor area square meter Yamato Techno Park with a total investment of 7.1 billion yen, targeted for launch in April 2027. The facility will house an automated/robotized steel processing factory and an equipment processing facility to drive unitization/modularization, with expected outcomes including tripled steel processing volume, 1 billion yen in additional sales, increased on-site work reduction from 20% to 30%, and increased on-site sorting work reduction from 30% to 40%
• Phase 2 (FY2029-FY2031): Expand construction industrialization to entire buildings via upgrades to the Asakura Factory and Yamato Techno Park, targeting 40% on-site work reduction; build a membrane treatment regeneration plant and refrigeration/cold storage R&D facility to double core technology and service sales
• Phase 3 (FY2032-FY2034): Advance Construction Product capabilities, establish a production management center to pursue AI/IoT-enabled robotic construction and remote construction management, targeting over 60% on-site work reduction

Portfolio and Segment Strategy

• Concentrates management resources on high-growth areas with strong alignment to industrialization capabilities: factory, logistics, and hotel segments within the air conditioning/sanitation business, the renovation market, and the water treatment plant business
• Air conditioning & sanitation (factory/logistics/hotel): Target growth driven by reshoring of manufacturing expanding factory construction, EC growth driving logistics facility development, and inbound demand expanding hotel construction/renewal; focuses on food/automobile factories, cold storage/combined retail/logistics warehouses, and medium/large/luxury hotels in Saitama, Northern Kanto, Tohoku, and Nagano; leverages BIM and digital innovation to establish a large-scale mass production model, strengthen corporate alliances to expand project creation capacity, and promotes a unique "hot spring × construction × industrialization" brand for hotel projects
• Air conditioning & sanitation (renovation): Capitalizes on expanding market demand driven by environmental regulations and business change, particularly in the large, diverse Tokyo metropolitan area market; focuses on multiple building types and industrialization-based air conditioning heat source/equipment replacement; strategies include strengthening sales collaboration to develop new direct private customers, training multi-skilled talent, building non-price competitiveness based on the company's strengths, implementing disciplined selective order intake to build a high-profitability portfolio, and strengthening regional contribution to build local brand presence
• Water treatment plant business: Leverages growing demand for facility renewal, DX adoption, efficiency improvements, and PPP projects driven by aging infrastructure, population decline, and technician shortages; focuses on public water/sewage renewal and private water treatment facilities in Kanto and Tohoku; selects projects that can leverage Construction Product capabilities, and pursues sustainable growth via PPP participation and partnership with local governments and businesses
• Continuing businesses (architectural/civil, electrical/telecom, refrigeration/cold storage):
  • Architectural & civil engineering: Targets small/medium ZEB (Zero Energy Building) projects, participates in redevelopment and Michi no Eki projects, and promotes public-private partnership development of environmentally friendly industrial parks
  • Electrical & telecommunications: Capitalizes on growing demand for electrical equipment renewal and renewable energy projects, offers energy visualization alongside equipment upgrades, promotes next-generation energy solutions, and improves productivity via off-site unit processing to reduce on-site labor
  • Refrigeration & cold storage: Addresses growing demand for sustainable facilities, equipment renewal aligned with refrigerant regulations, provides one-stop design-construction-maintenance services to deliver user-tailored facilities and gain customer trust

Human Capital Management

• Pursues continuous team capability updates across four pillars: organizational culture, talent acquisition, well-being, and team management
• Builds engaging organizational culture via engagement surveys to identify issues and drive autonomous sustainable improvement
• Expands recruitment of engineer trainees, expands the education center to deliver one-year technical training, strengthens expert development for construction management and sales roles, recruits specialized talent for Yamato Techno Park (steel technicians, DX talent for new production management systems), and trains/recruits project managers for PPP expansion
• Improves work environment via health management promotion and expanded D&I initiatives
• Strengthens management training, revises evaluation systems, and promotes rotational personnel placement to build growth-focused teams
• Plans 10% headcount growth over three years, shifting the workforce composition to increase the share of construction management staff from 33% at the start of FY2026 to 42% at the end of FY2028, and increase IT/DX staff share from 3% to 4% to prepare for future labor shortages

DX Promotion

• Builds a DX platform centered on Construction Product that acquires and connects real-time on-site data to visualize and optimize all processes from planning through maintenance, to support advanced AI and robotic construction
• Strengthens on-site production systems: Advances BIM-linked digital twin technology, digitizes management work via upgraded IT infrastructure, and leverages AI for on-site management to reduce labor requirements; improves productivity and construction quality via unified BIM information management
• Builds factory production systems: Advances production management system capabilities and data linkage, enables real-time material ordering, inventory management, and shipping management to improve productivity, implements a dedicated steel factory production system to balance quality, delivery, and productivity, and enables fast accurate data linkage between factories and on-site teams via BIM
• Refreshes core systems: Reconstructs infrastructure, core systems, and controls, upgrades IT infrastructure for group subsidiaries, and enables real-time accurate information sharing to improve operational efficiency and speed up management decision-making

Financial and Capital Strategy

• Total 3-year cumulative cash inflow is projected at 15.7 billion yen, consisting of 13.2 billion yen from operating activities and 2.5 billion yen from policy-held share sales; total cash outflow is 15.7 billion yen, allocated to 9.6 billion yen in growth investment (4.9 billion yen for facilities, 3.3 billion yen for human capital, 1.3 billion yen for DX), 1.4 billion yen for interest-bearing debt repayment, and 4.7 billion yen for shareholder returns
• Targets maintaining ROE of 8% or higher over the mid-term plan period, sets a target payout ratio of 45% (up from the previous 30%) and introduces a new 4.0% target DOE
• Aims to reduce policy-held share holdings to below 20% of net assets by FY2028, representing a 20%+ reduction in holding value versus FY2025; proceeds from sales are allocated to growth investments to improve profitability

ESG Management

• Environmental: Promotes green innovation to drive labor saving, resource loss reduction, and lower environmental impact via industrialization and DX; provides balanced environmental, comfort, and economic value via one-stop design and construction (e.g., ZEB, ESCO, small hydropower); targets full supply chain efficiency and emission reduction
• Social and regional: Continues to operate as an essential regional enterprise, manages Michi no Eki Maebashi Akagi, participates in regional revitalization, urban redevelopment, and supports local sports and arts
• Governance: Strengthens the effectiveness of the board of directors, board of auditors, and nomination/compensation committee; introduces a group governance officer to strengthen board oversight and clarify accountability; builds a group-wide compliance system to prevent and detect misconduct early; promotes timely stakeholder engagement and policy-held share reduction

The transcript only provides forward-looking 2028 fiscal year target revenue for each product segment, no current period actual absolute or percentage contribution financial performance is disclosed:

• Air conditioning and sanitation business: 39.5 billion yen target revenue in FY2028, accounting for approximately 65.8% of the total 60 billion yen group target revenue
• Water treatment plant business: 6 billion yen target revenue in FY2028, accounting for approximately 10% of the total group target revenue
• Architectural and civil engineering business: 1 billion yen target revenue for the steel frame factory segment in FY2028, as part of base building for future production expansion
• Electrical and telecommunications business: No standalone 2028 revenue target disclosed, targets growth through synergy with the core air conditioning and sanitation business
• Refrigeration and cold storage business: No standalone 2028 revenue target disclosed, targets growth through provision of high value-added environmentally friendly facilities

For the previous mid-term management plan period: The air conditioning and sanitation business delivered revenue and profit growth from large hotel and factory projects, supported by a solid order environment and improved profitability at order intake.

• Multi-phase medium-to-long term growth targets:
  • Phase 1 (FY2026-FY2028): Targets 60 billion yen in order value, 60 billion yen in sales, and 5.8 billion yen in ordinary profit by the end of the period
  • Phase 2 (FY2029-FY2031): Targets 66 billion yen in sales and 6.6 billion yen in ordinary profit, expanding industrialization across architecture, electrical, and equipment segments
  • Phase 3 (FY2032-FY2034): Targets 72 billion yen in sales and 7.4 billion yen in ordinary profit, advancing automated construction and remote management
• Financial targets over Phase 1: Maintains ROE of 8% or higher, targets a 45% payout ratio (up from the prior 30% target) and a 4.0% DOE, with aggressive but flexible treasury stock purchases based on market and investment conditions
• Operational efficiency targets for Phase 1 after Yamato Techno Park launch: Expects 30% total on-site work reduction (up from 20% prior) and 40% on-site sorting work reduction (up from 30% prior); Phase 2 targets 40% total on-site work reduction, Phase 3 targets over 60% on-site work reduction
• Policy-held share reduction target: Aims to cut holdings to below 20% of net assets by FY2028, a 20%+ reduction in holding value versus FY2025
• Personnel target: Plans 10% total headcount growth over the 3-year Phase 1 period, increasing the construction management share of the workforce from 33% to 42% and the IT/DX share from 3% to 4%

• Industry-wide structural risks: Persistent labor shortages in the construction industry, rising material and energy prices, aging social infrastructure, and the need to transition to a decarbonized economy
• Internal identified gaps from previous mid-term plan: Incomplete market analysis to identify high-growth segments aligned with the company's industrialization strengths, incomplete resource shifting to priority businesses, underdeveloped Construction Product capabilities tailored to specific segment needs, and insufficient talent development to support business strategy and address labor shortages via DX
• Ongoing operational challenges: Sustained high prices for equipment and materials, ongoing industry-wide labor shortages that complicate hiring and project execution

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