MORIROKU COMPANY,LTD. Q4 FY2025 earnings call

Corporate Integration

• In April 2025, Moriroku Technology and Moriroku Chemicals merged into a single unified entity, Moriroku Co., Ltd.
• Core goals of integration: create new value, accelerate management decision speed, maximize cross-business synergies, and strengthen corporate governance.
• Adopted the slogan "Let's challenge together for a new future" to build unified company culture.

13th Medium-Term Management Plan (Previous Plan) Review

• Achievements: Resin Processed Products accelerated technology development, new customer acquisition, and large capacity expansion investments; progressed DX and automation to improve manufacturing efficiency. Chemicals expanded sales of proprietary products, entered new markets and invested in high-growth segments; completed manufacturing capacity expansion for contract chemical manufacturing and started development of original materials. The company met its target of reducing cross-shareholdings to below 10% of net assets, reaching 9.1% by the end of FY2025.
• Challenges: Slower growth in core businesses due to deeper-than-expected production cuts in China and slowing demand in Asia; both sales and operating profit missed plan targets; ROE missed target significantly due to one-off impairment and disposal losses from non-profitable operations. Growth of stable revenue sources and new business development are urgent priorities.

14th Medium-Term Management Plan (FY2026–FY2028, New Plan)

• Overall Direction: Basic policy of "Agile Management to Open Up the Future", focused on boosting profitability of core businesses, accelerating development of new products, and creating cross-segment synergies.
  • Resin Processed Products Strategy: Pursue profit growth through optimized customer/part/region portfolio; expand profits in North America, restructure operations in Asia; strengthen core technology development and expand resin processing technology to non-automotive mobility segments.
  • Chemicals Strategy: Accelerate global business expansion, expand manufacturing operations, increase market share for proprietary competitive products, and step up development of original materials.
  • Synergy Creation: Leverage combined expertise and resources between the two core segments to create new value; initial成果 have already been achieved in expanding into non-automotive sectors and developing new original materials.
  • Foundation Strengthening: Updated materiality to align with the new plan; advance sustainability strategy, talent strategy, DX, and intellectual property strategy to improve long-term competitiveness.
• Financial & Non-Financial Targets: First year (FY2026) target: operating profit of 5.0 billion yen, ROE of 5%+; final year target: ROE above 6%; planned total investment of 29.0 billion yen for growth and maintenance; non-financial targets include improving employee engagement, increasing female manager ratio, and reducing CO₂ emissions.
• Cash Allocation: Prioritize growth, talent, and R&D investment; target 3%+ DOE by the final year of the plan; commit to increasing dividends aligned with business growth to enhance shareholder value.

2035 Long-Term Vision

• Mission: "Provide valuable solutions to society through manufacturing craftsmanship and chemical power";
• Key long-term priorities: expand customer portfolio, increase market share for exterior resin parts, raise global ratio of trading business, and expand into non-automotive mobility segments.

For the 2025 March Term (FY2025):

1. Resin Processed Products Segment: Revenue of 120.1 billion yen, up 1.1% year-over-year (YoY). Excluding 4.4 billion yen in foreign exchange impacts, organic revenue fell 2.6% YoY. Operating profit was 3.4 billion yen, down 25% YoY. This segment contributes approximately 82.2% of total consolidated revenue.
2. Chemicals Segment: Revenue of 26.0 billion yen, down 3.1% YoY. Operating profit was 1.2 billion yen, down 19% YoY. This segment contributes approximately 17.8% of total consolidated revenue.

For the 2026 March Term (FY2026):

• Consolidated guidance: Total revenue of 137.0 billion yen, operating profit of 5.0 billion yen, net profit of 3.2 billion yen (a large increase YoY due to the absence of FY2025 one-off special losses).
  • Resin Processed Products: Revenue of 110.0 billion yen, down 8.4% YoY; excluding foreign exchange and Mexico subsidiary disposal impacts, organic revenue increases 1.8% YoY. Operating profit is projected at 5.2 billion yen, up 26% YoY, driven by the cleanup of non-profitable operations in FY2025.
  • Chemicals: Revenue of 27.0 billion yen, up 3.6% YoY; operating profit projected at 1.8 billion yen, flat (up 0.1%) YoY. The newly established Indian entity will be included in consolidation starting FY2026 as its business scales.
• Dividend guidance: A 10 yen increase in dividend per share to 115 yen, with DOE of 2.7%.
• Guidance assumptions: Assumes yen appreciation vs FY2025, at 140 JPY/USD and 19.6 JPY/CNY; overall global automotive production is projected to see a slight decrease YoY, as production declines in China and Asia are partially offset by growth in Japan and North America. U.S. additional tariff impacts are not incorporated into the current forecast as there is insufficient clarity at this stage.

• Large-scale production cuts in China (-35% YoY in FY2025) and Asia (-20% YoY in FY2025) driven by slowdown of Japanese automaker sales amid EV transition and rising local competition, which pressured FY2025 profitability significantly
• Persistent risk of deeper-than-expected further production declines in China and Asia, which is only partially incorporated into the FY2026 forecast
• Uncertainty over U.S. tariff policy, with unclear future impacts on production arrangements and profitability
• Foreign exchange volatility: Mexico peso exchange rate swings caused a 1.1 billion yen profit in FY2024, swinging to a 1.4 billion yen loss in FY2025, which dragged down consolidated recurring profit
• One-off impairment and disposal losses in FY2025: 6.6 billion yen loss on Mexico subsidiary disposal and 4.2 billion yen impairment loss on Chinese subsidiary led to a full-year net loss of 7.8 billion yen
• Slower-than-expected growth in core businesses, with an urgent need to secure new stable revenue streams

Q: What impact will U.S. tariff policy have on FY2026 earnings? / A: Management confirms no material impact is built into the current forecast, as the outlook remains highly uncertain at this stage. If tariffs are prolonged, management notes customers may shift more production to the U.S. market, which could create growth opportunities for Moriroku. The company will continue coordinating closely with customers to adjust to changes flexibly.

Q: What are the key upside and downside risks to the FY2026 earnings forecast? / A: Upside comes from ongoing productivity improvement efforts at North American factories, which have additional room to deliver margin gains, as well as potential higher sales and profits from stronger-than-expected growth in hybrid vehicle volumes in North America, which is currently a strong segment for the company. Downside risk comes from deeper-than-expected production declines in China and Asia; while some downside is already priced into the forecast, further cuts remain a possibility. Management will continue working with customers to adjust pricing and production flexibly if needed.

Q: What are the specific targets for expanding the resin processing segment's customer portfolio? / A: The core expansion target remains Japanese automakers. RFI (request for information) discussions are already progressing with Toyota, and management aims to move to the RFQ (request for quotation) stage within the current fiscal year. Beyond Toyota, Moriroku is also targeting other Japanese automakers, and will consider non-Japanese customers in the growing Indian market over time, but will stay focused primarily on Japanese automakers for global expansion.

Q: What specific steps are planned for North American growth and Asian restructuring under the new regional strategy? / A: North American expansion is focused on improving profitability rather than just growing revenue, to strengthen the business's underlying performance. Asian restructuring centers on two priorities: optimizing operations in China, and expanding capacity in India. India has lagged in the high value-added exterior painted parts business, so the company is expanding coating capacity to drive future sales and profit growth in the market.

Q: What is the strategic direction for optimizing Chinese operations: contraction or expansion via local partnerships? / A: The core priority for China is not pursuing growth with local OEMs via alliances, but restructuring operations to deliver steady profits even at lower current production volumes. The company will adjust its organizational and cost structure to align with the current challenging market environment.