TOHO CHEMICAL INDUSTRY COMPANY,LIMITED Q3 FY2026 earnings call

Core Business Transformation & Portfolio Strategy

• The company positions the 3-year new mid-term plan (TOHO Step Up Plan 2027) as a "period of transformation for sustainable growth and value creation", laying the groundwork for long-term growth toward its 100th anniversary.
• Prioritize expansion and core business positioning for the electronic information materials business, which will be the main driver of profit growth. The second-phase expansion of the new electronic information materials plant is scheduled for completion at the end of 2026, which will enable rapid business scaling.
• Leverage Toho Chemical (Shanghai) Co., Ltd. as a key pillar of the optimal global production system: expand pressurized reaction kettle capacity by the end of 2025, complete the transfer of production from domestic plants, target 0.5 billion yen in consolidated operating profit from the two Shanghai-based subsidiaries, and accelerate market expansion across China and Asia.

Operational & Productivity Improvement

• Maximize underutilized production capacity at the Shanghai facility and Kashima Plant, advance production rationalization across all business segments, review unprofitable products, and push through further profitability correction.
• Introduce digital transformation, automate equipment, streamline operations to eliminate waste, and continue strengthening information security after a prior unauthorized access incident.
• Accelerate development of high-performance, high-value-added products, with a focus on advanced semiconductors, resin emulsions, and plastic additives. Use cross-functional project teams to speed up technical cross-utilization and product commercialization, and prioritize development of products that reduce environmental impact.

ESG & Human Capital Management

• Target carbon neutrality as a long-term goal; set a KPI of 35% reduction in domestic Scope 1+2 GHG emissions by 2030 (compared to 2013 levels), and advance emission reduction for Scope 3 Category 1 (raw material) emissions.
• Advance human capital management: promote work style reform, improve working environments, and push cultural reform to boost profitability awareness, speed, and a challenge mindset. Current KPIs for human capital have been largely met: 0% turnover for caregiving/parental leave, 99.9% paid time off compliance for the mandatory 5 days, and 122% of the legal employment rate for workers with disabilities.

Capital Efficiency & Shareholder Focused Management

• Identify improvement in profit margin as the top priority for increasing PBR, which was 0.81x as of September 2025. Target ROE above 8% by 2027 and above 10% by 2030, to stably exceed the estimated 5-7% cost of equity capital.
• Slim down total assets by improving asset turnover, reducing inventory, optimizing receivables collection, and cutting policy-held shareholdings.
• Strengthen investor relations: appointed a dedicated IR officer and department, will expand dialogue with shareholders and investors, and feed feedback back into corporate decision-making.
• Expand shareholder returns: plan to increase dividends to 30 yen per share by 2027 and 50 yen per share by 2030, expanded the QUO card shareholder benefit program from 2026, and will consider opportunistic share buybacks.

For the 2024 fiscal year (ending March 2025, actual results): 1. Surfactant segment: Operating profit of 0.73 billion yen; 2. Resin segment: Operating profit of 0.09 billion yen; 3. Chemical products segment: Operating profit of 0.07 billion yen; 4. Specialty Chemicals segment (composed of electronic information materials and solvent businesses): Operating profit of 0.95 billion yen. This marked the first time the Specialty Chemicals segment's operating profit exceeded that of the Surfactant segment, driven by 39 billion yen in sales growth for the segment over the prior 3-year mid-term plan period. For the 2027 fiscal year (ending March 2028, new mid-term plan target): 1. Surfactant segment: Target operating profit of 1.2 billion yen to 1.3 billion yen, contributing 40-43% of total planned consolidated operating profit of 3 billion yen; 2. Resin segment: Target operating profit of 0.2 billion yen to 0.3 billion yen, contributing 7-10% of total planned operating profit; 3. Chemical products segment: Target operating profit of 0.1 billion yen to 0.2 billion yen, contributing 3-7% of total planned operating profit; 4. Specialty Chemicals segment: Target operating profit of 1.5 billion yen to 1.6 billion yen, contributing 50-53% of total planned operating profit.

• Consolidated performance: The company confirmed that performance bottomed out in fiscal 2023 (ending March 2024), and has returned to growth starting in fiscal 2024 (ending March 2025). For the mid-term plan final year fiscal 2027 (ending March 2028), targets are: 60.0 billion yen in consolidated sales, 3.0 billion yen in consolidated operating profit, 5.0% operating profit margin, 23.0 billion yen in net assets, 32.0% equity ratio, 8.0% ROE, and 30 yen dividend per share.
• Longer-term 2030 (ending March 2031) targets: 69.0 billion yen in sales, 4.5 billion yen in operating profit, 6.5% operating profit margin, 27.0 billion yen in net assets, 35.0% equity ratio, 10.0% ROE, and 50 yen dividend per share. Also targets 35% reduction in domestic Scope 1+2 GHG emissions compared to 2013 levels.
• Cash allocation for 2025-2027: Expects 13.0 billion yen in operating cash flow, plus an additional 0.4 billion yen plus from policy shareholding reduction and balance sheet optimization. Allocates 12.0 billion yen to capital investment (2.3 billion yen for electronic information materials plant expansion, 2.2 billion yen for Shanghai facility capacity expansion) and 1.4 billion yen plus to shareholder returns.

• External macro risks: Severe external headwinds during the prior mid-term plan including COVID-19 related economic stagnation, Chinese economic slowdown, semiconductor downturn, prolonged Russia-Ukraine war, Middle East tension, sharp increases in raw material and utility costs, and intensified low-price competition from overseas manufacturers caused the prior mid-term plan's operating profit target of 3.0 billion yen to be missed, with actual profit coming in at 1.81 billion yen.
• Ongoing external risks: Global competition intensification and market fragmentation, growing impact of US-China economic tensions and US tariffs, potential slowdown of the Japanese automotive industry from EV transition, tight labor supply from population aging driving rising labor costs, sustained inflation and interest rate increases, and intense competition in the growing semiconductor-related chemical market.
• Past operational risks: In fiscal 2023, the company incurred unexpected costs related to response and security upgrades after an unauthorized access incident on its corporate server, which contributed to lower annual profit.

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