2734.T

• 2025 November Term Full-Year Consolidated Results

  • Full-year consolidated revenue grew 4.6% year-on-year to 251.5 billion yen, and consolidated operating profit grew 17.0% year-on-year to 7.3 billion yen, marking all-time record highs for both metrics. Net profit attributable to parent company shareholders grew 11.8% year-on-year to 5.8 billion yen, delivering a solid result of higher revenue and higher profit.
  • The 5th Medium-Term Management Plan (previous 3-year period) achieved a consolidated operating profit of 7.3 billion yen, falling short of the original 8.0 billion yen target. Results varied across segments, with challenges remaining in improving profitability of existing businesses, despite progress on strategic initiatives including the consolidation of Yasue Kometten, launch of Sala Agri (agriculture business entry), entry into grid storage battery and real estate investment businesses, and the launch of the SALA business creation challenge program to foster internal innovation.
  • In October 2025, the company opened a solar-linked storage facility in Toyohashi and a grid-connected energy storage facility in Hamamatsu. These facilities store excess renewable energy and dispatch it during peak demand to stabilize the regional power grid and support renewable energy adoption.

• 6th Medium-Term Management Plan Overview (5-year plan through 2030)

  • The plan is framed as the final 5-year period to deliver on the 2030 Vision, developed via backcasting from the company's desired future state including Beyond 2030. The core goal is to establish "SALA for Living" and "SALA for Business", building Sala as the most trusted brand among customers, focused on three core business areas: E (Energy/Environment), Food/Agriculture, and Housing. The basic policy is "X (Cross) & 120", which emphasizes cross-sector collaboration and co-creation to deliver 120% of Sala's total capability, aligned with the 120th anniversary of the company's founding in 2029 and the 2030 target of 12.0 billion yen in consolidated operating profit.
  • Core Strategic Priorities:
    • 1. Establish unique customer-centric business models: Build a renovation-focused stock housing business centered on the integration of Yasue Kometten's design capabilities and profitability framework with Sala's customer base, targeting 30.0 billion yen in revenue by 2030 and aiming to become the top independent renovation company in Japan long-term. For B2B business, deliver integrated smart energy and facility solutions combining energy supply, equipment upgrades, factory automation, and energy management for the regional manufacturing base, targeting 30.0 billion yen in revenue.
    • 1. Expand existing growth businesses and create new value: Grow the power business to become the second core profit pillar after gas, focusing on new retail customer acquisition, renewable energy promotion, and steady storage facility operations. Build a 25.0 billion yen real estate investment portfolio with expanded investment areas and pursue off-balance sheet transactions via asset securitization. Develop a high value-added profitable agriculture business to revitalize the regional food and agriculture sector and build a new core business for after 2030.
    • 1. Improve profitability of existing businesses: Shift from P/L-focused business management to ROIC-focused capital efficiency management, reallocating resources to higher capital efficiency businesses. Leverage the upcoming June 2026 launch of a new core system to build an integrated customer data platform for optimized customer proposals.
  • Enabling Foundations for Transformation:
    • Prioritize recruiting and training of essential frontline workers (carpenters, construction trades, delivery staff) to address industry-wide labor shortages, and build systematic training pipelines for management and transformation leadership to boost employee engagement.
    • Drive DX through adoption of generative AI and vertical industry-specific AI to fundamentally restructure business processes, and use data-driven insights to deliver new customer value.
  • Financial Strategy and Capital Market Engagement:
    • The company will allocate 45.0 billion yen to growth investment over the 5-year plan period (a 10.0 billion yen increase from the original plan), with the incremental funding to come from borrowings and sale of assets including policy-held stocks. Investment will focus on high-return priority growth areas in living/housing and social/industrial infrastructure. Total shareholder return over the 5-year period is targeted at 21.2 billion yen, with progressive dividends and agile treasury stock purchases to maintain an equity ratio of approximately 40%. The company changed its dividend policy in July 2024 to a minimum payout ratio of 40% (from a target of 30%), with the prior full-year dividend increased 2 yen to 32 yen per share, marking consecutive annual dividend increases since 2013.
    • PBR improved from 0.62x to 0.8x over the past year, but remains below 1x. The company targets PBR above 1x by 2028 at the latest, with initiatives including a 2025 executive stock compensation program and updated capital allocation policy. ROE currently stands at 6-8%, in line with the estimated 7% cost of equity, and targets 10% by 2030. The company is expanding IR engagement, implementing enhanced disclosure including pre-general meeting annual securities report disclosure, launching analyst reports, and early publication of integrated reports.

• The full-year 2026 performance guidance is maintained at the upwardly revised level announced in the first quarter earnings release, with no changes made in this briefing.
• 2030 long-term quantitative targets from the 6th Medium-Term Management Plan:
  • Consolidated revenue of 300.0 billion yen, consolidated operating profit of 12.0 billion yen, ROE of 10%, ROIC of 6%
  • 50% reduction in scope 1 and scope 2 CO2 emissions compared to 2021 levels
• Power business specific guidance: The combined revenue of power retail and power generation was approximately 15.0 billion yen last fiscal year, with a target of 23.0 billion yen in total power business revenue by 2030. The newly operational storage facilities are targeting 1.5 billion yen in revenue by 2030, with an expected IRR of approximately 6%.
• The company targets increasing EPS from the current 80 yen level to 140-160 yen by 2030, and increasing PER from the current ~12x level to 14-15x via enhanced IR activities.

• Energy & Solutions Segment: Revenue of 120.8 billion yen (1.1% increase year-on-year), operating profit of 4.2 billion yen (44.6% increase year-on-year), accounting for approximately 48% of total consolidated revenue. Growth was driven by higher equipment construction revenue and steady operations at the biomass power plant.
• Engineering & Maintenance Segment: Revenue of 35.2 billion yen (7.8% increase year-on-year), operating profit of 3.4 billion yen (30.6% increase year-on-year), accounting for approximately 14% of total consolidated revenue. Strong order growth across equipment construction, architecture, and maintenance segments drove higher completed construction volume, while improved process management lifted gross margins.
• Housing Segment: Revenue of 44.8 billion yen (25.9% increase year-on-year), operating profit of 0.9 billion yen (22.1% increase year-on-year), accounting for approximately 17.8% of total consolidated revenue. Strong sales of the SINKA series of custom homes and the full-year consolidation of Yasue Kometten (acquired December 2024) drove top-line and bottom-line growth.
• Car Life Support Segment: Revenue increased year-on-year, but the segment posted an operating loss of 0.6 billion yen. Higher new car sales from recovering import vehicle supply were offset by lower margins from aggressive used vehicle inventory disposal and weak used vehicle sales performance.
• Animal Healthcare Segment: Revenue of 23.4 billion yen (8.3% decrease year-on-year), operating loss of 0.5 billion yen, accounting for approximately 9.3% of total consolidated revenue. The loss was driven by the discontinuation of the segment's core therapeutic diet product line following a supplier supply chain change. The company is currently accelerating structural reforms including logistics network consolidation and sales capability building.
• Property Segment: Revenue of 7.3 billion yen (9.6% decrease year-on-year), operating profit of 0.4 billion yen (flat year-on-year), accounting for approximately 2.9% of total consolidated revenue. Revenue declined due to the timing of condominium handovers, but profits were supported by the sale of owned assets and buy-renew-sell transactions.

• The company conducts regular company-wide risk identification and assessment using a risk map framework, with key risks including:
  • Large-scale earthquakes such as the Nankai Trough earthquake, which could impact core operations in the company's primary operating region of eastern Aichi and western Shizuoka prefectures
  • Cyber risk, which has grown in importance recently amid increasing domestic cyberattacks, and is now treated as a critical management priority with active countermeasures underway
  • Execution risk related to new innovation and transformation initiatives, which the company addresses via cultural building for innovation and organizational mindset reform

• Q: What size target is the company aiming for in the power business, and what is the income outlook for the energy storage facilities?

A: Last fiscal year, combined revenue from power retail and generation was approximately 15.0 billion yen. The company targets 23.0 billion yen in total power business revenue by 2030. For the storage facilities that started operations in October last year, the company targets 1.5 billion yen in revenue by 2030, with an expected IRR of approximately 6%.

• Q: What regions and areas will you focus on for future M&A?

A: The company has allocated 45.0 billion yen for growth investment over the next 5 years. Priority areas for M&A include the power business, living-related consumer services, and the engineering and maintenance sector for B2B.

• Q: What risks do you anticipate that could impact your business?

A: Since 2020, the company has used a risk map framework to identify risks by business segment, and conducts group-wide discussions to prioritize risks that impact the entire business. Key specific risks include large-scale earthquakes such as the Nankai Trough earthquake in the company's core operating area. Cyber risk has also grown in importance recently amid increasing domestic cyberattacks, and the company is advancing countermeasures as a critical management issue. More details are available in the company's annual securities report.

• Q: What is your analysis of the stock price movement after earnings release, and what is needed for further stock price growth?

A: The stock price movement was impacted by the market focusing on the full-year forecast showing double-digit declines in ordinary profit and net profit attributable to parent shareholders. This difference is because the prior year included an 1.8 billion yen derivative valuation gain from foreign exchange contracts, which is not included in the current year plan, and the underlying business trend remains solidly higher revenue and higher profit. The company believes the market overemphasized the "lower profit forecast" headline given the afternoon timing of the earnings release. To drive further stock price growth, the core priority is increasing EPS, with a target to lift EPS from the current 80 yen to 140-160 yen by 2030, and lift PER from ~12x to 14-15x via active IR activities.

• Q: What impact does exchange rate movement/yen depreciation have on your business results?

A: For the core energy business, exchange rate movements impact raw material procurement costs, but the raw material cost adjustment system passes through these price changes to selling prices, so revenue fluctuates but the impact on profit is minimal. For biomass fuel procurement, the company uses foreign exchange forward contracts to mitigate exchange rate fluctuation risk.

• Q: What is your outlook for the energy storage business?

A: The expansion of renewable energy has significantly changed the overall power supply and demand balance, and grid energy storage has attracted growing attention. The company opened its grid-connected storage facility in October last year. Leveraging Sala's core strength of direct customer access, the company will focus on building know-how: offering energy efficiency solutions including energy saving, power generation and storage equipment to corporate customers, and offering solar generation and storage equipment to residential customers to improve energy resilience, leveraging the company's existing strengths.

• Q: Are you considering expanding your operating area in the future?

A: For the housing sector, which is a core pillar of the 6th Medium-Term Management Plan, the company has historically focused on the Tokai region as its core area, but plans to expand into eastern Shizuoka and the Kanto region going forward. The company already has "Good Life Sala Kanto" operating energy businesses in Kanto, and will use this as a base to expand living-related businesses.

• Q: Why do you continue focusing on unprofitable segments instead of concentrating on your core strengths?

A: The weak performance of unprofitable segments last term was driven by specific temporary factors, and management believes these businesses are capable of generating solid profits. The company has been推进 structural reforms since last term, and expects to see results this term. As outlined in the 6th Medium-Term Management Plan, the company will focus on creating new value via cross-segment collaboration across segments, building a conglomerate premium as a core Sala strength, and pursuing further expansion and growth.

• Q: Is there a possibility of obtaining a credit rating and issuing corporate bonds?

A: The company does not currently have an external credit rating, but based on feedback from financial institutions, management believes the company has credit quality equivalent to BBB+. For a long period of low interest rates, the company determined that bank borrowing was the most cost-effective funding method, so has used that for capital raising. Amid the current rising interest rate environment, the company is considering optimal funding methods including corporate bond issuance.

• Q: What is your current share of female employees and female directors?

A: Management believes incorporating diverse perspectives is critical for a company with multiple retail businesses. Currently, 2 out of 10 directors are women (20%), one of whom is a career employee. The share of female managers is still in the single digits, but the company is actively promoting female hiring and development, with female hires accounting for approximately 30% of recent new hires.

• Q: Your profit margin target is significantly higher than current levels. Which businesses will drive this improvement, and how will you achieve the target?

A: Some businesses currently have profit margins below industry averages, so first the company will improve profitability via structural reform as outlined in Priority Strategy 3. After that, the company will grow revenue and profit by focusing on the stock housing business via integration with Yasue Kometten and B2B group business solving corporate client management issues, as outlined in Priority Strategy 1. The company will also continue to strengthen profitability by expanding power and real estate investment businesses adjacent to existing operations, as outlined in Priority Strategy 2.

• Q: What are the core strengths of Sala Corporation?

A: Since its founding, the company's core strength has been its progressive spirit of flexible and rapid business development in response to changing social challenges. This has fostered group-level capabilities that enable product development aligned with changes in market conditions and consumer lifestyles. The company also has a strong customer base built on trust from consistent customer-focused operations, which is a core asset. Going forward, the company will leverage its structure to comprehensively deploy the customer bases built across each business, expand its market presence, and deliver comprehensive services that cannot be matched by competitors.