SAKATA INX CORPORATION Q4 FY2025 earnings call

Overall Strategic Positioning

• 2025 marked the second year of the mid-term management plan CCC-II, which is focused on business expansion and profitability improvement, and the midpoint of the 2030 long-term vision.
• Core growth priorities focus on expanding sales of package ink and metal ink in high-growth overseas markets driven by population growth and expanding middle classes, growing digital products including industrial inkjet ink, and accelerating growth via the functional coating agent business expanded through US acquisition to meet rising sustainable packaging demand.

New Business Development

• Functional Coating Agent Business: Global regulatory trends (starting with Europe's PPWR) and circular economy shifts are driving demand for packaging compatible with recycling, and this trend is expanding globally. The coating business, which supports recycling, has significant long-term growth potential.
• Electronics Sector Expansion: Progress is steady in new business development. The company exhibited at Japan's largest international trade show for electronic circuits, received strong customer interest, and is prioritizing development of electronic materials for semiconductor device peripherals via close technical collaboration with customers to establish the new business line.

Organizational & Governance Changes

• The company announced a transition to a holding company structure and shift to a company with an audit & supervisory committee in November 2025. This change is intended to strengthen group-wide governance, enable faster decision-making, and enhance supervisory functions to support cross-regional group collaboration and more agile responses to global customer needs, which has become increasingly important as customer base globalizes.

Capital Policy & Corporate Value Improvement

• Cumulative 250 billion yen capital investment is planned for the 2024-2026 three-year period, focused on expanding production capacity and optimizing supply chains in high-growth Americas and Asia regions, plus strategic investments to expand sales in high-potential regions via integrated production, sales, and technical support in Europe.
• Cash allocation progress is approximately two-thirds complete against the mid-term plan, tracking as scheduled. Balance sheet improvement is progressing steadily, alongside continued shareholder returns to meet the 50%+ total payout ratio target.
• In 2025, the company achieved its target of reducing policy-held shareholdings by more than 50%. A secondary offering of shares held by financial institutions increased the individual shareholder ratio by approximately 5 percentage points, which is expected to improve share liquidity.
• Europe acts as a global hub for environmental regulatory development, and product development and testing in Europe serves as a starting point for global product rollout across the Americas, Asia, and Japan, driving the entire group's global expansion.

1. Japan Segment (Printing Ink & Equipment): Package ink sales were low due to sluggish personal consumption of food driven by price inflation. Multiple cost increases occurred: higher raw material prices driven by yen depreciation, labor cost and logistics cost adjustments, and inflation-related base wage hikes. However, effects from persistent price revisions implemented since 2023 and business structural reforms including unprofitable business rationalization drove a 55% year-over-year increase in operating profit. 2026 forecast expects a slight sales decrease with an increase in operating profit.
2. Asia Segment (Printing Ink): Negative macro impacts from US tariffs and unstable geopolitical factors held back economic activity. Package ink sales volume stayed flat year-over-year, but the elimination of sales from the divested Chinese offset ink business resulted in a 3% year-over-year sales decrease. Operating profit reached 6.9 billion yen, a 20% year-over-year increase, driven by benefits from the supply chain strategy led by the Asia regional headquarters and sales volume exceeding the prior year in the second half on the back of recovering economic conditions and expanded sales. 2026 forecast expects continued sales recovery from the second half of 2025, with focused expansion in India, Indonesia, and Vietnam.
3. Americas Segment (Printing Ink): Despite sustained high labor costs, consumer demand remained resilient, and sales of package ink and metal ink grew steadily. The acquired INX C&A and the broader Americas coating business performed strongly, contributing to improved segment profitability. Operating profit reached 5.2 billion yen, achieving significant year-over-year growth. 2026 forecast projects sales of 109.5 billion yen and operating profit of 5.5 billion yen, representing continued growth in both sales and profit.
4. Europe Segment (Printing Ink): Sales were solid, led by package ink. While total metal ink sales volume decreased due to partial production transfer to Vietnam, domestic European metal ink sales grew steadily. 2026 forecast projects sales of 24 billion yen and operating profit of 0.3 billion yen, with expansion focused on Eastern Europe, the Middle East, and Africa via newly established local subsidiaries in Poland and Turkey.
5. Functional Materials Segment: Sales volume of water-based industrial inkjet ink decreased, but sales of higher-priced UV inkjet ink grew. Expansion of sales in new apparel, food, and housing end markets progressed, along with adoption for new printer models. Image display materials sales volume increased driven by strengthened black matrix production in China and solid demand. As a result, sales grew 5% year-over-year, but higher R&D expenses and operational strengthening costs led to a roughly 9% year-over-year decrease in operating profit. 2026 forecast projects sales of 30.2 billion yen and operating profit of 3.2 billion yen, representing growth in both sales and profit.

• For the full year 2026, the company projects consolidated net sales of 276 billion yen, operating profit of 17 billion yen, ordinary profit of 17.8 billion yen, and net income attributable to parent company shareholders of 11.8 billion yen. The company targets a fourth consecutive year of record operating profit.
• Sales growth is expected from expanded sales of ink and functional materials, plus steady expansion of the coating agent business. While the company expects cost increases from expanded business investment, DX promotion, and inflation-driven labor cost growth, these increases will be absorbed via expanded group-wide sales and efficiency gains from business structural reform.
• Segment level guidance: Japan expects a slight sales decrease with increased operating profit; Asia expects continued sales growth driven by recovery in core emerging markets; the Americas expects continued growth to 109.5 billion yen in sales and 5.5 billion yen in operating profit; Europe expects 24 billion yen in sales and 0.3 billion yen in operating profit; Functional Materials expects growth to 30.2 billion yen in sales and 3.2 billion yen in operating profit. All segments except Japan are expected to deliver year-over-year growth.
• Shareholder return guidance: For 2026, the company plans an additional 5 yen per share dividend increase to 100 yen per share annual dividend, and announced a new 1 billion yen share repurchase program. This is expected to deliver a total payout ratio exceeding 50%, meeting the company's stated target.
• Capital investment will remain focused on high-growth regions through the 2024-2026 mid-term plan period, with 250 billion yen total planned cumulative investment, on track for completion as scheduled.

• Persistent geopolitical risk across Europe and Asia, and ongoing inflationary pressure continue to create uncertainty for the global economy, leading to sluggish overall sales volume growth in 2025, with expectations that these risks will remain relevant in 2026.
• US tariff issues created potential cost pressures, but early implementation of appropriate pricing strategies limited the impact to the business in 2025.
• Sustained labor cost inflation in the US continues to create upward cost pressure, which is expected to persist in 2026.
• Rising raw material prices, increasing logistics costs, and inflation-driven wage growth create broad cost pressure across all regional segments.
• Global supply chain complexity has increased risk for raw material sourcing and finished product delivery, against the backdrop of changing global market conditions.
• Strengthening environmental regulations and the global shift to a circular economy create operational challenges, though the company views these shifts as net growth opportunities for its product portfolio.

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