ASAHI KOGYOSHA CO.,LTD. Q4 FY2025 earnings call

• Overall Financial Performance:

  • Total company orders received: 93.098 billion yen, a 4.6% decrease YoY, which met management's planned target via strategic, deliberate order selection aligned with construction capacity
  • Total company net sales: 91.947 billion yen, a 0.3% increase YoY, remaining at a historically high level
  • All profit levels (gross profit, operating profit, net income attributable to parent shareholders) saw substantial growth driven by improved gross profit margin, marking the second consecutive year of record all-time high profit
  • Carried-forward orders: 89.441 billion yen, a 1.3% increase YoY, maintaining a high base for future performance

• Strategic Milestones:

  • Asahi Kogyosha celebrated its 100th founding anniversary on April 3, 2025, and launched a new corporate philosophy "ASAHI-PHILOSOPHY" and new long-term vision "ASAHI-VISION 2050" centered on the purpose "Optimize the world more with passion and technology"
  • The 18th Mid-Term Management Plan (FY2024–FY2026 March Term) is on track: FY2025 orders received beat the 84.7 billion yen target at 93.098 billion yen, operating profit massively beat the 3.6 billion yen target at 7.248 billion yen, and ROE reached 15%, exceeding plan

• Capital Strategy and Shareholder Returns:

  • Management prioritizes capital cost awareness and balance between capital efficiency and financial health; ROE exceeded 15% in FY2025, far above the recognized cost of equity
  • The company is reducing cross-held policy shares, targeting a ratio below 20% of net assets by the end of FY2026; the ratio fell to 23.4% at the end of FY2025, progressing toward the target
  • A 120 yen annual per-share dividend (including a 20 yen 100th anniversary special dividend) is planned for FY2025, resulting in an expected consolidated payout ratio of 49.6%, exceeding the 40%+ mid-term target; the raised dividend level will be maintained in FY2026 to continue active shareholder returns

• Human Capital Strategy:

  • Management is actively advancing human capital management: exceeded hiring targets, hiring 56 new graduates and 17 mid-career hires in FY2024
  • Implemented an average 7% wage increase for all employees for the second consecutive year, raised new graduate starting salaries by 30,000 yen, and updated the employee evaluation system for fairer performance assessment
  • Continues workplace reform and DX adoption to reduce on-site workload and improve employee motivation and retention

1. 設備工事事業 (Equipment Construction Business):

• Orders received: 85.716 billion yen, an 8% decrease year-over-year
• Net sales: 86.111 billion yen, a 2.4% decrease year-over-year
• Operating profit: 7.606 billion yen, a 48.8% increase year-over-year driven by improved gross profit margin
• Revenue contribution: 93.6% of total company net sales

1. 機器製造販売事業 (Equipment Manufacturing and Sales Business):

• Orders received: 7.382 billion yen, a 66.9% increase year-over-year
• Net sales: 5.835 billion yen, a 69.6% increase year-over-year
• Operating loss: 0.358 billion yen, with a clear reduction in deficit size compared to the prior fiscal year
• Revenue contribution: 6.4% of total company net sales

• Overall FY2026 March Term (next fiscal year) guidance: Management expects total orders received and net sales to increase compared to FY2025, and targets full-year profit to exceed FY2025's record level, targeting a third consecutive year of record all-time high profit
• 設備工事事業 guidance: Both orders received and net sales are expected to increase YoY, supported by the high level of carried-forward orders from FY2025 and continued strong capital investment demand for production-related facilities
• 機器製造販売事業 guidance: A YoY reactionary decline in orders received is expected due to the large dryer order secured in FY2025, but total sales across semiconductor, FPD, and dryer product lines are still expected to exceed FY2025 levels; the large dryer order will be recognized as revenue starting in FY2027 March Term
• Management notes that continued high resource prices, labor shortages, and increased costs from human capital management initiatives will pressure margins, but will continue working to improve project profitability to meet or exceed performance targets

• Persistent high material and equipment costs, which pressure project profitability and margins
• Industry-wide labor shortage in construction and manufacturing, which can extend project timelines (noted for production environment facility projects) and increase labor-related costs
• 機器製造販売事業 has not yet achieved operating profitability, though the deficit has narrowed steadily
• Cross-held policy share reduction is slightly behind the original target timeline, needing additional progress in FY2026 to meet the 20% of net assets target
• Semiconductor customer production adjustments have negatively impacted 機器製造販売事業 order flow for related products in recent periods

Q: Why did total orders received decline year-over-year, and what is the future outlook for orders?

A: The decline was a deliberate strategic outcome from the company focusing on higher-profit, capacity-aligned orders rather than chasing unprofitable volume. Domestic manufacturing capital investment appetite remains strong, and the company continues to see abundant medium- and long-term order opportunities especially from semiconductor fabs and data centers where the company’s specialized expertise adds value.

Q: What were the core drivers of the improvement in gross profit margin?

A: The improvement came from targeted efforts to improve project selection and on-site construction profitability, paired with more stable material pricing after years of post-pandemic cost volatility. Disciplined cost management across all construction projects was the main contributor to the large jump in operating profit this term.

Q: When do you expect the equipment manufacturing and sales segment to reach operating profitability, and what is the progress?

A: The segment’s deficit has narrowed steadily year-over-year, supported by strong order growth in FPD equipment and large dryer product orders. Management is working through remaining cost structuring issues and expects the segment to reach full operating profitability as the large recent orders are recognized as revenue in coming periods, with progress remaining on track.

Q: What is the timeline and target for reducing cross-held policy shares?

A: The target remains to bring the ratio of policy-held shares to below 20% of net assets by the end of FY2026 March Term. The company made good progress to 23.4% by the end of FY2025, and will accelerate reduction efforts in FY2026 to hit the target, improving overall capital efficiency for shareholders.