The Nisshin OilliO Group,Ltd. Q4 FY2025 earnings call

• Mid-term Strategy (Value UpX) Updates

  • The company updated its capital efficiency strategy, announcing a plan to repurchase up to 20 billion yen of own shares during the Value UpX period, a major change from the previous mid-term plan. The company will also accelerate working capital reduction to improve capital efficiency, which will support debt reduction and stabilize the liability-capital balance.
  • Segment-level mid-term targets were clarified in response to investor questions. For the ISF Group (global specialty fats), operating profit is targeted to grow from 5.3 billion yen in 2024 to 8.1 billion yen in 2028; after adjusting for 1.2 billion yen of 2024 mark-to-market palm oil gains, this represents a 150% core profit increase. Capacity investments will come online in late 2027 to early 2028, so volume growth will mostly contribute to profits in the later half of the plan period.
  • For the domestic Oils & Fats/Seeds segment, operating profit is targeted to grow from 8.1 billion yen in 2024 to 14.8 billion yen in 2028, with growth driven by three core priorities.

• Global Oils & Processed Fats Strategic Priorities

  • Growth will center on expanding sales of chocolate fats, particularly CBE (cocoa butter equivalents). The primary growth markets for CBE are Asia (including Japan) and North America, with capacity investments focused on increasing production and supply capability. ISF will collaborate with Nisshin OilliO America to expand sales in North America.
  • For non-CBE chocolate fats, the company will focus on strengthening service and supply chains for key European customers, while developing and expanding sales of these products in Asia and North America. All expansion is focused on improving raw material supply security and strengthening regional supply chains.

• Domestic Oils & Fats, Processed Food & Ingredients Strategic Priorities

  • The top near-term priority is restoring olive oil profitability, after the segment struggled with olive oil cost pressures in recent years. The company will rebuild profit scale for marketing-focused, functional (high value-add) home-use products through marketing and product function strengthening.
  • For business/industrial use and domestic processed fats, the company will expand sales by focusing on functional product benefits, and will continue to grow sales of new products including functional fats and functional oil agents, which have been steadily gaining traction.
  • The company will complete the catch-up on price hikes for general-purpose oils, after progress lagged for some food service and home-use products in 2024. Momentum for price realization has improved since March-April 2025, and the company will work to fully implement these hikes to restore profits.

• Fine Chemicals Segment

  • While still small relative to other segments, the company will continue to steadily grow profits centered on cosmetic raw materials.

For the full 2024 fiscal year, Nisshin OilliO Group reported total consolidated sales of 530.8 billion yen and operating profit of 19.2 billion yen. Segment performance is as follows:

1. Oils & Fats/Seeds Segment: Operating profit decreased from 14.4 billion yen to 6.9 billion yen, on reduced revenue. While overall sales volume grew due to recovering food service and tourism demand, falling selling prices for general-purpose products, higher olive oil raw material costs, and increased logistics costs drove the large profit decline.
2. Processed Fats Segment (global): Operating profit grew from 4.5 billion yen to 6.3 billion yen, on increased revenue. Higher sales volumes and selling prices, combined with favorable mark-to-market impacts from palm oil trading and currency effects, offset rising raw material costs at ISF Malaysia and drove overall segment growth. ISF Malaysia, ISF Italy, and ISF Shanghai combined contributed a 1.55 billion yen profit increase for the segment.
3. Processed Food & Ingredients Segment: Operating profit grew sharply from 0.9 billion yen to 4.7 billion yen, on increased revenue. Higher chocolate selling prices (following price hikes at Daito Kakao) and proper pricing for MCT ingredients drove the strong profit growth.
4. Fine Chemicals Segment: Increased sales volume of cosmetic raw materials drove an increase in profit, with no specific absolute figure reported.

• Full year 2025 consolidated guidance calls for 550.0 billion yen in sales (an increase from 2024), 21.0 billion yen in operating profit (an increase from 2024), 19.5 billion yen in ordinary profit, and 27.5 billion yen in net income attributable to parent shareholders. The large net income increase includes a one-off gain from land sale of the Yokohama-Kanagawa plant; adjusting for this one-off impact, core net income is guided to 13.0 billion yen.
• ROIC (return on invested capital) is expected to improve 0.7 percentage points to 5.3% for the full company in 2025.
  • Global Oils & Processed Fats: ROIC is expected to decline temporarily year-over-year due to ongoing investments in the ISF Group and North America, even as segment profits grow.
  • Oils & Fats/Seeds + Processed Food & Ingredients: ROIC is expected to improve 0.9 percentage points to 4.8%, as profit growth outpaces invested capital growth.
  • Fine Chemicals: ROIC is expected to remain flat at 10% year-over-year.
• Segment-level 2025 guidance:
  • Global Oils & Processed Fats: Guided to 6.0 billion yen in operating profit, an increase from 2024. Growth will come from 9% year-over-year sales volume growth for specialty fats, higher gross margins, and cost reduction from improved sourcing. A 1.0 billion yen profit increase is expected at ISF Malaysia.
  • Oils & Fats/Seeds: Guided to 10.7 billion yen in operating profit, a 2.65 billion yen year-over-year increase. Growth will come from higher sales volumes and selling prices across home-use, food service, and industrial segments, as well as lower olive oil raw material costs, offsetting higher total costs from yen depreciation and lower meal selling prices.
  • Processed Food & Ingredients: Guided to lower revenue growth but lower operating profit year-over-year, due to ongoing soaring cocoa bean costs that will compress gross margins for chocolate, even as sales grow from higher chocolate volume and expanded MCT distribution.
  • Fine Chemicals: Sales volume of cosmetic raw materials will grow, but higher raw material costs will lower gross margins, leading to a slight year-over-year profit decline.

• The domestic Oils & Fats segment faces ongoing cost pressures from yen depreciation, lower meal selling prices, and sustained high energy, logistics, and packaging costs that could pressure margins even after price hikes.
• Global chocolate fat growth depends on the successful ramp-up of capacity investments, which will not contribute meaningful volume growth until late 2027 to early 2028, creating near-term pressure on ROIC from higher invested capital.
• Processed Food & Ingredients segment profits remain exposed to ongoing cocoa bean price volatility, which is expected to compress margins in 2025 even after implemented price hikes.
• Olive oil profitability has underperformed expectations in recent years, and the success of the company's turnaround plan for the category is not guaranteed.

The provided transcript does not include a transcribed question and answer section, so no content can be summarized from this part.