TOAGOSEI CO.,LTD. Q1 FY2026 earnings call

Leadership Transition

• Hidenori Obuchi took office as President and COO in January 2025, marking the first leadership change at Toagosei in 9 years.
• Obuchi built his career starting in R&D in 1988, with experience in sales and business planning, and has worked exclusively on functional polymer, oligomer, and adhesive product lines. He led the commercialization of lithium-ion battery binders, one of the company's current core growth drivers.

Core Growth Drivers

• The company identifies two core high-growth priority areas: mobility and semiconductors, both with product lines that hold high global market share.
  • Mobility: Core products include lithium-ion battery binders (for which capacity expansion at the Nagoya plant is planned for 2026, with planned subsidies from Japan's METI, Aichi Prefecture, and Nagoya City) and automotive battery adhesives, which are growing rapidly as the number of compatible vehicle models increases. The company serves all powertrain types: electric vehicles, hybrid vehicles, fuel cell vehicles, and gasoline vehicles.
  • Semiconductors: High-purity liquefied hydrogen chloride for high-grade epitaxial wafer manufacturing holds the number 1 global market share, is the global de facto standard material, and is experiencing steady sales growth alongside ongoing aligned capacity investment. High-purity potassium hydroxide and high-performance acrylic polymers for CMP wafer polishing are also growing steadily, with ongoing manufacturing capacity expansion.

Strategic Investment

• Over the current medium-term management plan period, Toagosei will implement the largest research and development (R&D) and capital expenditure investments in the company's history. Investments exceed the original medium-term plan target, with a focus on the mobility and semiconductor growth drivers. The company has established a positive cycle where R&D themes move quickly to capital investment for commercialization.

New Growth Areas

• Aronix Sheet, a glass replacement resin, has been adopted for LiDAR cover sheets. It combines the good optical and heat resistance properties of glass while overcoming brittleness and weight disadvantages, and has begun adoption for automotive autonomous driving applications as well as robots and agricultural equipment.
• The company is strengthening sales of sewer pipe aging repair products sold by Aron Kasei, which address the critical social issue of infrastructure aging that causes over 2,600 road collapse incidents annually in Japan. These products enable efficient repair of lateral connection pipes, where 70% of sewer-related collapses occur.
• Future growth drivers planned for launch in the next medium-term plan include cellulose nanofibers and medical products such as dental hemostatic materials.

Capital Strategy and Shareholder Returns

• The company targets a ROE of 8% and PBR above 1x. Dividends and share buybacks have increased annually over the last three medium-term plan cycles, with total payout ratio expected to exceed 100%. The company will maintain its shareholder-first approach.

1. Basic Chemicals Business: Composed of inorganic chemicals (caustic soda, hydrochloric acid from salt electrolysis) and acrylic monomers. Generates over 50% of total operating profit for the company, acts as the stable cash cow that supports investment in higher-growth product lines, and delivered strong performance in 2024.
2. High-performance Materials Business: Focuses on high-purity purified hydrochloric acid and other products used as semiconductor manufacturing chemicals, which are currently experiencing strong sales growth.
3. Polymers & Oligomers Business: Produces acrylic polymers for lithium-ion batteries and cosmetics, and photo-curable resins for electronic materials. This business strengthens the entire acrylic supply chain from upstream to downstream.
4. Adhesive Materials Business: Includes two core product lines: high-growth automotive battery adhesives for mobility applications, and the consumer-facing Aron Alpha instant adhesive brand with a dominant market share. Recently launched Aron Alpha Hikari, a new light-cured instant adhesive that avoids common whitening issues.
5. Resin Processed Products Business: Operated by group company Aron Kasei. It includes the top market share Anju brand of nursing care products, and a range of products for repairing aging sewer pipe infrastructure. No absolute revenue values for individual segments were provided in the transcript.

• 2024 full-year results hit record-high revenue, with both revenue and profit increasing year-over-year, driven by steady shipment volumes.
• 2025 is projected to deliver year-over-year profit growth, driven by steady sales of high-performance products.
• The company will continue accelerating investment in R&D and capacity for its core mobility and semiconductor growth drivers, with total investment reaching an all-time high during the current medium-term management plan that exceeds the original plan target. Future growth areas (cellulose nanofibers, medical products) are targeted for commercialization in the next medium-term plan.

• New US administration trade policies and tariffs are currently disrupting global trade. While Toagosei sees little direct impact at present, indirect negative impacts remain a possible risk going forward, and the company will monitor developments and respond flexibly.
• Severe aging of Japanese sewer infrastructure creates operational risk if the company cannot scale its repair product offering to meet growing demand, though the company is positioning itself to capture this growing market opportunity.

Q: What are Toagosei's core current growth drivers? / A: Management identifies two core growth drivers: mobility and semiconductors. Both are composed of product lines that hold high global market share. Mobility growth comes from lithium-ion battery binders and automotive battery adhesives, while semiconductor growth comes from various high-purity manufacturing chemicals. These priorities align with Obuchi's R&D background in functional materials for these high-growth areas.

Q: Can you share more details on the mobility growth strategy? / A: The lithium-ion battery binder product that Obuchi helped launch in 2017, which meets early customer demand for negative electrode swelling suppression, is growing steadily, with a 2026 Nagoya plant capacity expansion planned. The product is expected to capture significant global share and will receive government subsidies. Automotive battery adhesives are also growing with expanding model adoption, and Toagosei serves all vehicle powertrain types to balance performance across market segments.

Q: What is the current state and growth plan for the semiconductor business? / A: High-purity liquefied hydrogen chloride for high-grade epitaxial wafer manufacturing is the global de facto standard and holds the number 1 global market share, with steady growth and ongoing aligned capacity investment. Additional products including high-purity potassium hydroxide and high-performance CMP acrylic polymers are also growing steadily, with ongoing manufacturing capacity expansion to meet rising demand.

Q: How does Toagosei plan to improve its current PBR which is below 1x? / A: Management states that improving corporate value and PBR requires raising ROE and PER, which will be achieved through deepening and accelerating the existing growth and financial strategies. This includes strengthening existing businesses, reviewing the business portfolio, and continuing to increase shareholder returns, which have risen annually for the past three years with total payout projected to exceed 100%.