3708.T

• Capital and Share Price Focused Management

  • Management recognizes the sustained PBR below 1x as a critical strategic issue, and identifies ROE improvement as the core solution. Detailed new strategies will be announced alongside the next medium-term management plan in May 2026.
  • Implemented a 3-for-1 stock split effective October 1 2025 to improve liquidity and lower entry barriers for retail investors, addressing investor feedback that high per-unit purchase cost limited investment consideration. Stockholder benefits have been left effectively unchanged, with future shareholder return policy (including benefits) to be released with the next medium-term plan.
  • Held the first dedicated IR briefing for individual investors after the split, and will continue expanding outreach to both retail investors and small fund managers while maintaining existing engagement with institutional investors and analysts.
  • Approved the introduction of an employee stock compensation ESOP trust plan, which will distribute ~290,000 treasury shares to all group employees, with each employee receiving a full trading unit after 3 years. The plan aligns employee incentives with shareholder interests, improves motivation, and strengthens group cohesion.

• 6th Medium-Term Management Plan Portfolio Strategy

  • The company has pursued business portfolio reform since the 4th medium-term plan to transition beyond a paper-only company, with growth now structured around the two core pillars of paper manufacturing and environmental businesses.
  • For the base paper business: Consolidated declining demand fancy paper production by closing the Gifu plant and consolidating output at the Mishima plant; acquired the specialty functional paper business rights and inventory from the exiting Tomokawa Corporation (covering sterilization paper, passbook paper, card paper, currency paper, and impregnated paper), and is currently conducting customer-by-customer transition discussions.
  • Exited the lithium-ion battery separator (Fibric) business using cellulose nanofiber, as end product sales underperformed and continued capital investment was not justified; reclassified the underperforming packaging business from growth to review status.
  • Expanded the priority recycling business by adding two new group companies during the medium-term plan period and completing targeted capital expenditure:
    • RPF fuel manufacturer Rex will relocate one aging, overcrowded plant to a new larger facility in Shizuoka next month, shifting from 2-shift to 3-shift 24-hour operation, which is expected to increase production capacity by 20% at full utilization.
    • Group company Toei in Aichi has installed a new high-purity plastic sorting line to handle mixed metal-plastic waste (such as auto parts and toys) that older equipment could not process, expanding the range of recyclable waste and enabling development of new recycled material sales channels.
  • Growth whiskey business (included in environment-related segment): Production is on track, a 3-year product launched last year, and the business is expected to reach profitability this fiscal year as planned. A new aging warehouse was added in July 2024; long-term strategy positions 12-year aged product as the core offering, with limited-edition releases twice per year in the interim to build a premium brand tied to the company's South Alps owned forest.

• ESG andOwned Forest Initiatives

  • The company's Ikawa owned forest operations follow the philosophy of

• Management maintained the original full-year 2026 March fiscal year guidance unchanged: full-year revenue of 99.0 billion yen, operating profit of 5.0 billion yen, and ordinary income of 7.0 billion yen, representing year-over-year growth in both revenue and profit. The first half results reached 47% to 48% of full-year guidance, which management considers on track.
  • While early signs of recovery in specialty functional paper sales volume are expected from Q3, full recovery to prior year strong levels is not projected. The combined positive impact from price increases for specialty printing paper and consumer products, plus steady volume growth for consumer products, is expected to add 1.074 billion yen in profit.
  • This positive impact is expected to be offset by 0.401 billion yen in negative impact from higher material costs and 0.695 billion yen in negative impact from higher fixed costs (primarily labor costs). The resulting gap will be covered by 0.379 billion yen in expected profit growth from the environment-related segment, plus 0.686 billion yen in other factors including continued inventory buildup ahead of next year's specialty material manufacturing equipment modernization (which leaves some fixed costs capitalized in inventory).
  • Full-year ordinary profit growth reflects the increase in operating profit plus the expected gain from the October 2025 price increase implemented by joint venture NTI, which will flow through to equity method investment income.

1. 産業素材セグメント (Industrial Materials): Revenue increased 0.606 billion yen year-over-year; Operating profit increased 0.243 billion yen year-over-year. The prior year period saw a 1.5-month shutdown of the hydroelectric power plant due to equipment failure, which did not recur in the current period. Profits from the corrugated base paper/kraft paper joint venture NTI are accounted for as equity method investment income in non-operating income, not in segment operating profit.
2. 特殊素材セグメント (Specialty Materials): Revenue decreased 0.623 billion yen year-over-year; Operating profit decreased 0.111 billion yen year-over-year. Price increases for specialty printing paper were offset by lower sales volume of specialty functional paper due to slowing customer production, alongside higher human capital costs.
3. 生活商品セグメント (Consumer Products): Revenue increased 0.362 billion yen year-over-year; Operating profit increased 0.107 billion yen year-over-year. Price adjustments took effect at the start of the period and sales volume remained relatively steady.
4. 環境関連セグメント (Environment-related): Revenue increased 0.764 billion yen year-over-year; Operating profit increased 0.26 billion yen year-over-year. Growth was driven by full 6-month consolidation of acquired subsidiary Kito (only 3 months consolidated in the prior year), improved performance of industrial waste processing subsidiaries, higher civil engineering work at Tokai Special Forest, and the absence of one-time M&A due diligence costs recorded in the prior year.

• Sustained high raw material and fuel prices for paper production, combined with weak overall demand in the industrial paper market, have reduced profits at the NTI joint venture, leading to lower equity method investment income in the first half.
  • Demand for specialty functional paper has slowed amid broader manufacturing weakness, leading to lower sales volume that offset price increase benefits in the specialty materials segment.
  • Persistent upward pressure on labor and other fixed costs, as well as ongoing raw material cost inflation, creates headwinds for profit growth that must be offset by growth in other segments.

No Q&A section was included in the provided earnings call transcript.