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• First Half 2026 Consolidated Performance Highlights

  • Global automotive production was 3% below plan overall: Japan, North America and China performed in line with plan, while Asia saw a 19% production shortfall due to economic weakness and market mismatch; full-year production also came in below prior-year levels due to declines in China and Asia.
  • Consolidated revenue fell 8% YoY due to yen appreciation, automotive production cuts in China/Asia, and lower chemical sales. Consolidated operating profit rose 12% YoY (a total 0.19 billion yen increase) driven by price optimization, cost improvements, elimination of losses from the sold Mexican subsidiary, and lower depreciation from prior-year impairment; ordinary profit rose 1 billion yen YoY from smaller foreign exchange losses.
  • Balance sheet: The deconsolidation of the Mexican subsidiary reduced total balance sheet items, but equity ratio rose 4 percentage points to 55%, maintaining a stable financial base. Free cash flow was -0.5 billion yen, ending cash balance was 15.4 billion yen. Capital expenditure was lower than planned as North American battery EV mass production investment was pushed back.

• Shareholder Return Updates

  • Interim dividend is maintained at 57.5 yen per share, full-year dividend guidance of 115 yen and DOE of 2.7% remain unchanged. A 1 billion yen share repurchase program completed by June 2025, all repurchased shares were cancelled. The long-term target is DOE of 3%+ by the 2028 March fiscal year, with increases considered alongside business growth.

• Resonac Mobility Business Acquisition (M&A) Strategic Overview

  • The acquisition is targeted to close on April 1, 2026, for a purchase price of 17.8 billion yen, funded by proceeds from policy-held stock sales and bank borrowing. The acquired assets include sales/R&D/business planning functions and 2 manufacturing plants in Japan, plus 1 manufacturing plant and a design center in Thailand.
  • The acquired business adds new technologies that Moriroku lacked mass production experience with, including exterior foam molding technology that enables weight reduction while maintaining surface smoothness, and extensive mass production experience for resin back doors with strong competitiveness in lightweight modular components. It also adds commercial vehicle interior/exterior components to Moriroku's product portfolio, which was previously focused only on passenger vehicles.
  • The transaction is expected to expand Moriroku's total revenue to ~200 billion yen, making it one of Japan's largest domestic resin component suppliers. Acquired customers do not overlap with Moriroku's existing key customers, expanding the company's customer portfolio through relationships with multiple major Japanese OEMs.

• Expected Synergies from the Acquisition

  • Sales/Technology: Combine the acquired business's lightweighting technologies with Moriroku's existing decoration and electrification technologies to strengthen customer proposal capabilities, and drive cross-selling to both company's existing customer bases.
  • R&D: Fuse technical knowledge to accelerate development of next-generation mobility and eco-friendly products, plus improve R&D efficiency by eliminating duplicated work and sharing testing/evaluation resources.
  • Manufacturing: Domestic and Thai production facilities will complement each other, enabling flexible response to production volatility and reducing costs by optimizing painting line capacity utilization.
  • Chemical Business: Leverage the Chemical segment's global network to improve quality, cost and delivery for the acquired business through improved raw material sourcing and logistics efficiency, creating new cross-segment value.

• Full-year 2026 consolidated guidance has been revised downward: Revenue is now 131.2 billion yen (5.8 billion yen lower than prior forecast), operating profit is 3.5 billion yen (1.5 billion yen lower than prior forecast), and net income is 1.8 billion yen (1.4 billion yen lower than prior forecast). The revision incorporates reduced production in Asia and North America, plus 0.6 billion yen in one-time M&A advisory and financing costs for the Resonac mobility business acquisition. Updated exchange rate assumptions are 145 yen per USD and 20.7 yen per Chinese yuan for the second half.
  • Excluding the one-time M&A costs, core operating profit is expected to be 4.1 billion yen, 0.9 billion yen lower than the initial forecast.
  • For the mid-term, Moriroku expects revenue and profit growth to start from the 2027 March fiscal year, with 30%+ revenue growth and 40%+ operating profit growth expected by the 2028 March fiscal year (the final year of the 14th Mid-Term Management Plan). The previous mid-term target of 5.5 billion yen+ operating profit and 6%+ ROE will be updated after the acquisition closes in April 2026, following a full review.

1. Resin Processed Products Business: Reported revenue of 53.9 billion yen, operating profit of 2 billion yen. This represented a year-over-year decrease in revenue but an increase in profit; operating profit grew 60% YoY driven by price pass-through, cost improvements, and lower depreciation following prior-year impairment, offsetting negative impacts from production volatility and inflation-driven cost increases. For the full fiscal year 2026, the revised guidance is revenue of 105.6 billion yen (down 4.4 billion yen from prior forecast) and operating profit of 4.3 billion yen (down 0.8 billion yen from prior forecast). This segment accounts for 81.4% of total first-half revenue.

2. Chemical Business: Reported revenue of 12.3 billion yen, operating profit of 0.6 billion yen. This represented a year-over-year decrease in both revenue and profit; operating profit fell 45% YoY. While mobility demand (electronics, domestic 2/4-wheel vehicles) was solid, broad sales declines across automotive raw materials, functional materials, and coating raw materials due to China's automotive market slowdown, plus lower sales of high-performance medical films from customer production adjustments, drove the lower result. For the full fiscal year 2026, the revised guidance is revenue of 25.6 billion yen (down 1.4 billion yen from prior forecast) and operating profit of 1.6 billion yen (down 0.1 billion yen from prior forecast). This segment accounts for 18.6% of total first-half revenue.

• Macro and industry risk: Persistent weak economic conditions and slow automotive production growth across Asia and China continue to pressure sales and profitability. Japan-based OEMs are increasingly adopting Chinese suppliers not only in China but also in Southeast Asian markets like Thailand, creating long-term competitive pressure.
  • Operational risk: Production disruptions at Nexperia have led to the company incorporating a 0.6 billion yen operating profit negative impact in the full-year guidance.
  • Execution risk: Successful integration of the acquired Resonac mobility business is required to realize expected synergies, and there is no guarantee that cross-selling and new customer wins will meet management expectations.

Q: Is the first half's profit growth actually driven by temporary factors? What is the profit impact of the Nexperia production halt, and can North America recover lost production? What are the key risks and opportunities for the full year?

A: Management confirms that while the half showed a small overall profit increase, the underlying operating environment was extremely difficult, with large production declines across China and Asia. Profit was only protected by aggressive cost-cutting such as headcount optimization in China, plus one-time gains from prior-year Chinese business impairment (lower depreciation) and the sale of the unprofitable Mexican subsidiary. The Nexperia halt is expected to reduce full-year profit by ~0.6 billion yen, and the key upside opportunity is capturing profit if North American customer demand recovers. Management will meet recovery demand by scheduling production without mandatory overtime to protect margins.

Q: How is Moriroku addressing intensifying competition from Chinese suppliers in China and Asia, and the trend of Japanese OEMs using Chinese suppliers in Southeast Asia? What is the outlook for China operations?

A: Management acknowledges the trend is a major competitive threat, and expects difficult conditions for Japanese OEMs in China to continue. While no major customers have yet shifted orders to Chinese suppliers in Moriroku's product segment, the company is focused on downsizing its Chinese production footprint to build a profitable operating model amid stagnant sales volume. For the broader Asian region, the company is also working to build profitable operations despite lower production volumes, expanding sales efforts across a wider base of OEMs while actively developing strategies to counter growing competition from local Chinese suppliers.

Q: How will Moriroku generate cross-selling and synergy by pushing the acquired resin back door technology to its existing major customers, who likely have existing long-term suppliers? What is the outlook for future additional M&A?

A: Product adoption decisions depend on each OEM's specific vehicle program and manufacturing process, so Moriroku cannot force adoption of the acquired technology. Instead, the company will focus on demonstrating the technical advantages of the acquired foam molding technology (which addresses the growing need for vehicle lightweighting as battery EVs gain share) to both existing and new OEM customers, and adapt to customer program timelines. The acquisition aligns with the company's core strategic goals of expanding its customer portfolio and growing exterior resin components. Additional M&A is currently on hold, as management's top priority is completing a successful integration of the current acquisition and delivering stable profit growth from the combined business.