4463.T

• Overall 2025 Full Year Results • Consolidated revenue was 55.705 billion yen, up 3.0% year-over-year, reaching an all-time high. • Consolidated operating profit was 3.847 billion yen, an increase year-over-year, falling just short of the 4.0 billion yen target. • Recurring profit decreased 3.2% year-over-year due to the absence of large 2024 foreign exchange gains and higher syndicated loan arrangement costs. • Net profit decreased 13.4% year-over-year driven by higher tax expenses from the reversal of deferred tax accounting adjustments. • PBR improved to 0.74x, share price reached the 1,800 yen level, and full year dividend per share is planned at 60 yen, marking 6 consecutive years of dividend increases. • Operating cash flow remained stable at approximately 5.5 billion yen year-over-year, while investment cash flow saw ~11.5 billion yen in spending and financing cash flow raised over 8.0 billion yen in new borrowings, leading to a larger balance sheet compared to the prior year.

• Review of Previous Mid-Term Plan "INNOVATION25" • Both sales and operating profit reached all-time highs despite slight misses on original revenue and 4.0 billion yen operating profit targets, achieved after multiple unforeseen events including the COVID-19 shock, Trump tariffs, soaring construction costs, and rising labor costs. • The company prioritized investing in necessary preparation for 2026 and beyond over hitting the 4.0 billion yen target, resulting in the slight miss, but still delivered strong underlying growth. Share price rose from 830 yen at the end of 2022 to ~1,800 yen, and dividends increased from 30 yen to 60 yen (to 70 yen in 2026).

• Chemicals Business Operational Progress • EHD strategy has been implemented for 5 years, with a policy of only developing new EHD-related products; EHD products have a ~10% higher profit margin than non-EHD products. High-growth products include fluorine-free PFAS-free water repellents and environmentally friendly process chemicals that greatly reduce water usage. • High operation rates at large textile processing facilities in China drove strong performance, while the India subsidiary (founded 2020) has remained profitable since two years ago, and electronic materials-related business also performed well. • India's new lab completed construction and started operation in January 2026, and a bonded warehouse in Bangladesh is scheduled to start operation in January 2027 to support the rapidly growing textile industry in South Asia. • The company's proprietary Neochromat processing polyester upcycling technology was exhibited at the Expo and received strong visitor interest.

• Cosmetics Business Operational Progress • The new Fukui Smart Factory, currently under construction, is scheduled to start operation between March and April 2027. It will triple production capacity, target over 50% improvement in per capita productivity via automation, reduce the current 50% outsourced production share, and is expected to significantly improve EBITDA despite new depreciation expenses. • The company's scalp care technology received the Japan Patent Attorneys Association Chairman's Award at the Kinki Regional Invention Awards.

• New Mid-Term Plan "INNOVATION30" (2026-2030) Strategy • Core purpose remains "Activate Your Life", with three core strategic pillars: business expansion and growth investment, balanced cash flow allocation, and sustainability-focused management to strengthen the management base. • The main growth priorities are expanding the cosmetics business, focusing on the EHD segment in chemicals, and expanding textile chemical business in South West Asia (India and Bangladesh). • Targets: 70.0 billion yen in total revenue and 9.0 billion yen in EBITDA by 2030. Breakdown targets: grow cosmetics revenue from 15.2 billion yen to 20.0 billion yen, grow EHD segment revenue in chemicals from 18.0 billion yen to 27.5 billion yen, and grow total chemicals revenue from 40.0 billion yen to 50.0 billion yen. Cosmetics EBITDA is targeted to double from 1.5 billion yen to 3.0 billion yen. Automotive products, water-based urethane, and PFAS-free water repellents are each targeted to add 2.5 billion yen in new revenue. • Financial strategy targets lifting PBR to above 1x via growing net profit, appropriate net asset management, leveraged growth investment, and strengthened SR/IR. • Cash allocation: 250 billion to 300 billion yen in total cash generation over 5 years, to be allocated between active growth investment, progressive dividends targeting at least 3% DOE, and debt repayment in a balanced manner. • Sustainability: CO2 emissions have already been cut by over 30% compared to 2018 levels, with further reductions planned. The company continues to develop upcycling technologies and water reduction processes for textile manufacturing to reduce environmental impact. • Operational base improvement: Active AI adoption, new ERP system / BPR project scheduled to launch next fiscal year, and initiatives to improve employee engagement.

• 2026 December Full Year Guidance • Total consolidated revenue is projected to grow 5% year-over-year, and operating profit is projected to grow ~9% year-over-year to exceed 4.0 billion yen. • Full year dividend per share is planned at 70 yen, which will finally reach the 3% DOE target. • Management shifted the cosmetics business strategy from focusing on per-employee productivity improvement to prioritizing market size expansion, with plans to add ~20 new sales employees annually and actively expand the ODM business. • Chemicals business will continue to focus on EHD products to improve profitability.

• New Mid-Term Plan (2026-2030) Guidance • Maintains the 3% DOE or higher dividend commitment, with a policy of sustaining at least 70 yen per share dividends barring extreme unforeseen events that damage profitability. • Overall 2030 target: 70.0 billion yen in total revenue, 9.0 billion yen in EBITDA. The overseas sales ratio is expected to remain around 50%, half domestic half overseas. • The EHD product sales ratio in chemicals is targeted to rise from 45% to 55% by 2030, driven by expansion of the digital (semiconductor-related) segment.

1. Chemicals Business: Achieved both revenue and profit growth. Excluding foreign exchange impacts, revenue grew approximately 1.0 billion yen year-over-year, with strong growth in China and South Korea markets. The EHD (Environment, Health, Digital) product sales ratio reached approximately 45%, up 0.8 percentage points from the previous term. Its core products include fiber processing chemicals (global distribution), cleaning chemicals (No.1 market share in Japan), and semiconductor manufacturing coolant (top market share in Japan). 2. Cosmetics Business: Achieved slight year-over-year revenue and profit growth, accounting for approximately 25% of total consolidated revenue. The core salon business faced headwinds from high inflation and extended customer visit cycles, but the ODM business grew strongly driven by new client orders, offsetting declines from existing large clients. South Korean business, which had grown ~20% annually for years, reached a plateau for the first time in 2025. Cosmetics are primarily sold in Japan, while chemicals have a very high overseas revenue share, with total consolidated revenue split roughly 50/50 between Japan and overseas.

• External market risks: Management recognizes the current operating environment is very challenging, with headwinds including Trump tariffs, geopolitical risks, worsening China-Japan relations, and domestic deflationary/macro economic pressures. • Industry-specific risks: The global textile chemical industry has seen clear winner-takes-all dynamics, with smaller low-technology companies facing severe market pressure. China and Vietnam's US-bound textile exports faced temporary full stoppages due to Trump tariffs, which had a material negative impact on chemical business performance. • Cosmetics market risks: The domestic salon-specific cosmetics market has seen stagnant growth after COVID-19, with headwinds from high inflation and extended customer visit cycles that pressured the core salon business in 2025. South Korean cosmetics business growth reached a plateau for the first time in 2025 amid a challenging South Korean economy. • Financial risks: Aggressive growth investment has increased borrowings and expanded the balance sheet, which led to declines in ROA, ROE, and ROIC in 2025. PBR remains below 1x at 0.74x, and the company has noted a need to continue efforts to improve this metric.

• Q: Is it correct that there is no specific chemical investment factored into the mid-term plan? Given the projected sales growth, wouldn't production capacity expansion be needed?

A: Chemical investment is absolutely included in the plan. We budget 1.5 billion to 2.0 billion yen annually for regular renewal investment, which covers both chemicals and cosmetics. There is also potential for new investment projects over the 5-year period, and our policy is to actively invest in any segment with strong growth prospects for both chemicals and cosmetics. The 1.5 billion to 2.0 billion yen annual figure covers both businesses, and investments go toward both capacity expansion and efficiency improvement—we are already accelerating AI adoption for production site efficiency, and this will continue. Chemical production capacity exists at both Fukui and Kashima factories in Japan, plus we have multiple overseas production bases, so overseas investment is also on the table.

• Q: Can you restate the purpose of the bonded warehouse construction in Bangladesh? Is it for expanding sales of textile processing chemicals in the market?

A: Bangladesh and India have been seeing double-digit sales growth, and we view this as a very promising region. Bangladesh had 20-30% sales growth over the past several years, even with a temporary slowdown over the past two years due to the 2024 political crisis, and has returned to strong growth in the current fiscal year after clearing Trump tariff challenges. Currently almost all sales are handled via import from our Indonesia factory, requiring customers to open letters of credit for large orders. The bonded warehouse will let us quickly fulfill small and medium-sized customer orders (e.g. 3 ton, 2 ton orders) and enable reliable US dollar-denominated transactions, which is why we decided to proceed with construction.

• Q: What is the central strategic priority of the new mid-term plan?

A: We are not rolling out major new strategic directions—core priorities remain expanding the cosmetics business, expanding the EHD segment in chemicals, and expanding overseas presence in South West Asia. The main change from the previous mid-term plan is a large increase in growth investment. The largest single investment is the ~20.0 billion yen investment in the new cosmetics factory, and balancing progress on this investment with gradual debt repayment over the next 2-3 years is the most important near-term priority. We will make additional announcements for any new major projects as they come up.

• Q: Could total investment exceed the 250 billion to 300 billion yen guidance? There appears to be room for additional borrowing on your balance sheet, and could you be more aggressive if attractive opportunities emerge? What areas do you see opportunity in, and what investment size is possible?

A: We will make separate announcements for future investment updates. It is possible we will make several announcements in the relatively near future, so we can discuss this in more detail when we meet again in six months.

• Q: Can we expect continued dividend increases over the mid-term plan period?

A: That is correct. We plan to maintain at least 70 yen per share dividends consistently. Barring extreme unforeseen events like natural disasters or unexpected large profitability declines, we will stick to this policy of maintaining dividends at or above 70 yen.

• Q: The EHD sales ratio target is 55% by 2030, but growth in the ratio has been slow in recent years, reaching only 45% currently. What products will drive the projected acceleration in ratio growth next year?

A: It is true that growth has been slower than originally targeted, and one key reason is that higher overseas sales expansion has brought more growth in non-EHD legacy products alongside EHD products, balancing out the ratio growth. We want to clarify that non-EHD products are not environmentally harmful; we are just focusing on expanding EHD while growing the overall overseas market, and targeting to lift the ratio from 45% to 55% by 2030. The fastest growing segment driving this growth is the digital (semiconductor-related) segment. We are expanding our product offering beyond cutting coolant into washing and polishing processes, and expanding this segment into overseas markets to drive EHD growth.

• Q: 2026 is a critical year for cosmetics business growth with the new factory coming online and planned capacity expansion. What is your 2026 plan and share expansion strategy given the challenging market environment?

A: 2026 is indeed a critical year. Before last year, the salon-specific cosmetics market had grown ~5% annually, but growth stalled after COVID due to inflation and falling customer visits, the first such stagnation in the post-war era. We expect the market to return to growth now that wage hikes have run their course. Our market share is still low, so we have significant room to expand share. We have been hiring additional sales resources for two years, and these new hires are finally becoming productive this year, so we have high expectations for 2026 results.

• Q: What is the projected overseas sales share for the 70.0 billion yen 2030 revenue target?

A: We have not published an official updated target, but we expect the ratio will not change much, remaining approximately 50% overseas and 50% domestic.