Sekisui Kasei Co.,Ltd. Q2 FY2026 earnings call

• Completed Divestment of European Proseat Business

  • Divestment of 6 Proseat group companies was completed, and these entities will be removed from the consolidated group starting in the second half of FY2025, eliminating future negative impacts on operating profit. Related name changes are scheduled for remaining entities undergoing liquidation.
  • Completed refinancing of existing foreign currency debt related to the divestment via a syndicated loan, with a target to reduce interest-bearing debt by the end of FY2027.

• Capital Investment Plan

  • Capital expenditure and depreciation were slightly lower than planned in the first half; investment will proceed per plan in the second half. First-half investments focused on North American mobility business expansion and polymer particle plant control system upgrades. Second-half planned investments include increasing Pioceylan production capacity, EPS recycling equipment, foam core R&D equipment, and DX investments.

• Medium and Long-term Strategy Progress

  • Core targets: Achieve operating profit margin ≥8% and ROE ≥8% by FY2030. The current medium-term plan Going Beyond 2027 ~Transformation and Completion targets 4.5 billion yen in operating profit (a 3.9 billion yen increase from FY2024), while the Target 2030 plan targets 10 billion yen in operating profit by FY2030, with ROE targets of 6% by FY2027 and ≥8% by FY2030.
  • Slimming initiatives: Target 3.5 billion yen in total profit improvement, with 3 billion yen from the Proseat exit (2 billion yen of benefit already realized in the first half of FY2025, with full impact starting in the second half). Another 0.5 billion yen in improvement will come from additional facility consolidation (Kobe Factory was already closed this half), low-profit business exits, and site restructuring.
  • Rationalization: Target 1.2 billion yen in total profit improvement, including 0.6 billion yen from labor saving/efficiency improvements (70 million yen of benefit expected in FY2025 via DX-driven production efficiency and site optimization) and 0.5 billion yen from personnel/placement optimization (20 million yen of benefit expected in FY2025 via automation-driven headcount reduction). Headquarter cost reduction is being accelerated ahead of plan.
  • Existing business profit improvement: Target 0.7 billion yen in total improvement, with 0.2 billion yen from the EPS beads business and 0.5 billion yen from the high-performance gel business (gaining adoption in existing and new applications through FY2030).
  • New revenue growth: Target 4.0 billion yen in total profit improvement across three core pillars:
    1. Electronic polymer microparticles (Techpolymer): 2.0 billion yen target; 2 customers have already adopted low-dielectric hollow particles for semiconductors/electronic materials, with mass production starting Q4 FY2026.
    2. Mobility automotive components: 1.2 billion yen target; 110% YoY growth expected in FY2025, with steady growth through FY2027, followed by North American expansion targeting European and American OEMs and expansion into new core material businesses through FY2030.
    3. Food sector sheet business: 0.8 billion yen target; growing via switching from solid to low-foam PSP and increasing demand for recycled material grades, with new product launches planned by FY2030 to expand into untapped markets while maintaining leading market share.

• Key Product Pipeline

  • Techpolymer low-dielectric soft polymer microparticles: Planned for mass production after FY2028, currently undergoing customer testing; solves brittleness issues of traditional inorganic low-dielectric materials, improving strength by 24%.
  • Techpolymer hollow nanoparticles for displays: Planned for mass production between FY2027 and FY2028, currently undergoing customer testing; improves high-definition display image quality by reducing reflection.
  • RETONA FOAM R BIO CB: Co-developed with Daicel, a marine-biodegradable cellulose acetate bead foam that combines the convenience of styrofoam with solutions to marine plastic pollution.

For the first half of FY2025:

1. Industry Segment: Revenue of 39.26 billion yen, a decrease of 3.97 billion yen year-over-year (YoY). Operating profit of 0.66 billion yen, a decrease of 0.16 billion yen YoY. Within the segment, the base business saw strong sales of automotive components and high-performance gel materials but reduced sales of packaging materials; the Proseat business saw reduced revenue due to the European automotive market downturn. The segment accounts for 59.7% of total first-half revenue.

2. Human Life Segment: Revenue of 26.46 billion yen, an increase of 0.62 billion yen YoY. Operating profit of 1.63 billion yen, an increase of 0.98 billion yen YoY. Within the segment, sheets for natto and instant noodle containers saw strong growth, while beads saw reduced demand overall; living environment and energy businesses saw YoY revenue growth. The segment accounts for 40.3% of total first-half revenue.

• Full-year FY2025 guidance: Total revenue of 114 billion yen, operating profit of 2.35 billion yen, and ordinary profit of 1.6 billion yen. This represents a YoY decrease in revenue (due to the removal of Proseat from consolidation) and a YoY increase in profit. Operating profit and ordinary profit guidance have been upwardly revised from prior management forecasts, while net income attributable to parent shareholders guidance is maintained as the negative impact from the first half Proseat special loss is expected to be offset by gains from low-profit business and asset portfolio reviews.
• Full-year FY2025 Industry Segment guidance: Revenue of 61 billion yen (21.1 billion yen YoY decrease), operating profit of 2.5 billion yen (2.0 billion yen YoY increase), driven by the Proseat divestment. The Industry Segment base business is expected to have revenue of 42.3 billion yen and operating profit of 3.4 billion yen, nearly flat YoY, with growth in polymer microparticles, automotive components, and high-performance gel materials offsetting declines in packaging and shoe materials.
• Full-year FY2025 Human Life Segment guidance: Revenue of 53 billion yen, operating profit of 2.8 billion yen, representing a YoY decrease in revenue and profit due to continued weakness in the EPS beads market and fading price pass-through effects. The segment expects slight growth in food sheets (outperforming industry forecasts), continued declines in beads, and growth in living environment and energy businesses.
• The 2027 medium-term target of 4.5 billion yen in operating profit is currently on track to potentially be exceeded, but management will review external changes and internal risks before updating guidance alongside the FY2025 full-year results announcement.
• Annual dividend guidance is maintained at 10 yen per share, with no change from the initial announcement.

• Continued weak demand for packaging materials in Northeast Asia creates sustained downward pressure on sales volume.
• The EPS beads market is expected to remain low, with fading price pass-through effects pressuring segment profits.
• External environment volatility and negative risks from existing business performance could impact medium-term target achievement.
• Uncertainty in the European automotive market previously led to larger than expected losses in the Proseat business, which required a larger than planned special loss in the first half of FY2025.

No question and answer section is included in the provided transcript.