BRIDGESTONE CORPORATION Q2 FY2025 earnings call

2025 Designated as 'Emergency Crisis Response Year' amid High Global Uncertainty:

• Bridgestone is proactively adapting business structures to market changes by region to turn volatility into growth opportunities. H1 2025 reported revenue over 2.1 trillion yen, adjusted operating profit of 235 billion yen, and an 11.1% adjusted operating margin, marking year-over-year profit growth in line with original plans. U.S. tariff impacts were minimal in H1 due to shipping and lead time lags.

'Defense': Restructuring Phase 2 Progress (Global):

• Completed multiple restructuring actions: consolidated European retreading production facilities, reduced capacity at European truck/bus tire plants, closed the LaVern plant in the U.S., optimized headcount across North American functions, announced the divestment of a domestic logistics subsidiary, in-house carbon black business, and two facilities in Thailand and Mexico. Continued progress on lean restructuring of Japan's heavy organizational structure and accelerated restructuring of chemicals and diversified businesses through 2025.

'Offense': Top-Tier Product Expansion and Capability Improvement:

• Passenger vehicle premium tires: Launched two ENLITEN-technology TURANZA models in North America in H1, with an new ALENZA model scheduled for September 2025. Firestone launched the new AFFINITY AS all-season model in April. Premium models are also being rolled out in India, Japan, and other markets to improve sales mix and gain share.
• Truck/bus premium tires: Launched new ENLITEN-equipped models across North America, Japan, and Europe in 2025, with expansion tied to retreading and fleet business growth.
• Global cost reduction: Delivered 35 billion yen in profit contributions in H1, beating plan. Full-year 2025 is projected to hit 61 billion yen in year-over-year savings, bringing cumulative savings since 2024 to ~136 billion yen, which will meet the original 100 billion yen cumulative target one year early. Additional annual production cost improvements of 1.5 billion yen are targeted from the Bridgestone Manufacturing System (BCMA), with benefits expanding to procurement and logistics from 2026 onward.

'Offense': Growth Market Initiatives:

• U.S. business: Accelerating consumer business restructuring via a multi-brand strategy. The Bridgestone brand remains focused on the premium segment, while Firestone targets expansion in the growing BETTER & GOOD+ (upper Tier 2/Tier 3) segment reshaped by U.S. tariffs. Leveraging Firestone's 125-year U.S. heritage and ties to motorsports like INDYCAR to strengthen branding, with ENLITEN-equipped models planned for 2026 onward. Firestone's existing 2,200+ direct retail locations already reach over 80% of the family channel, and same-store sales grew year-over-year in Q2.
• Production B2B solutions: Expanding co-creation centered on mining and aviation solutions. Bridgestone MASTERCORE is deployed at ~130 mines, and the easytrack digital tire management system entered formal operation with Cebu Pacific Air to improve inventory efficiency, continuing to expand the combined physical-digital solution value.

1. Geographic Segments:

• Japan: Increased sales driven by solid mining tire demand, but recorded a year-over-year profit decrease due to profit declines in chemicals and sports/cycle segments plus negative yen appreciation impacts on export transactions.
• Americas: North America truck/bus tire business delivered profit growth and improved profitability. Brazil continued to post larger-than-expected net losses, though the deficit narrowed slightly in Q2 after a Q1 bottom; Argentina improved to a 12% adjusted operating margin.
• Europe: Achieved year-over-year profit growth for the second consecutive quarter. The truck/bus tire business reached break-even (excluding retreading) in the first half on the back of production optimization, and retail operations also narrowed losses. Passenger tire business grew both revenue and profit, with the overall premium tire segment securing 5% profitability.
• Asia, Oceania, India, China: Delivered solid year-over-year profit growth with an adjusted operating margin of approximately 12%. India consumer tires expanded sales and gained share in the premium high-inch tire segment; Thailand improved profitability via restructuring.

1. Product/Portfolio Segments:

• Passenger & Light Truck Tires: Decreased revenue due to lower original equipment sales volume and higher raw material prices, but maintained over 10% profit margin (in line with prior year) amid continued growth in premium high-inch tire sales.
• Truck & Bus Tires: Delivered year-over-year profit growth driven by sustained sales expansion centered on the North American replacement market, with materially improved profitability as restructuring gains gradually materialized.
• Specialties (Premium Tire & Solutions): Maintained a high 21.2% adjusted operating margin overall, but posted year-over-year profit decline due to large profit drops and losses in agricultural machinery tires, plus timing lags in mining tire price adjustments tied to raw material and exchange rates. Mining and aviation tire sales remained solid, and B2B solutions continued to expand.
• Chemicals & Diversified Business: Remained profitable overall but faces deep structural challenges. Hydraulic hose and crawler segments saw reduced revenue and profit on weaker construction and agricultural machinery demand. The U.S. sports business posted sales declines, and the cycle business recorded an operating loss due to exchange rate-driven cost increases, while Americas diversified business improved year-over-year profit.
• Core Premium Tire Business: Secured a 13.5% adjusted operating margin in H1 2025.
• Solutions Business (Growth Segment): Adjusted operating profit reached 145% of the prior year level, with a 2.2 percentage point improvement in profit margin. Strategic production B2B solutions grew adjusted operating profit to 149% year-over-year, and retail services grew 143% year-over-year led by European retail improvements.

• Full-year 2025 guidance is maintained from the February 2025 announcement: adjusted operating profit is projected at 505 billion yen, profit from continuing operations at 253 billion yen, and a full-year dividend of 230 yen per share is retained, with the dividend commitment held even if the 10 billion yen unpriced U.S. recession risk materializes. Capital policy is proceeding as originally planned.
• The projected direct impact of U.S. tariffs on 2025 full-year adjusted operating profit was revised downward to 25 billion yen from the prior 45 billion yen estimate. Tariff impacts will be fully felt in H2, and the company is mitigating impacts via additional restructuring and optimized global sourcing.
• The projected indirect downside risk from a U.S. economic slowdown was revised downward to 10 billion yen from the prior 20 billion yen estimate, based on latest GDP data. This risk is not incorporated into the current full-year guidance.
• 'Quality-focused growth' will launch in H2 2025, building on completed restructuring, with growth initiatives focused on the U.S., India, mining solutions, and B2B solutions, targeting a transition to the 'True Next Stage' in 2026.

• Brazil continues to face sustained large operating losses, though the deficit narrowed in Q2; the company targets a return to profit in Q4 2025 via full end-to-end restructuring, but profitability improvements remain at risk of delays.
• Delays in the restructuring of chemicals and diversified businesses represent a key ongoing risk, as the segment continues to face deep structural challenges despite maintaining small profits.
• U.S. economic outlook remains volatile, with continued uncertainty around Federal Reserve policy, creating unpriced downside risk to full-year performance even after the downward revision to the projected impact.
• Global raw material price inflation continues to put upward pressure on costs, partially offset by sales mix improvements, cost reduction, and restructuring gains.

Q: Truck & Bus (TB) tire results are positive for the first time in a while. Was this driven by pre-tariff rush demand, what is driving improved performance, and are there further margin expansion opportunities?

A: There was no material pre-tariff rush demand in North America; the core driver is Bridgestone's strong integrated package of new TB tires, retreading, national fleet services, and maintenance that remained intact through prior downturns. High customer satisfaction has driven new customer gains, and major brand (member) demand is already growing in H1, with further growth projected in H2 as tariffs shift market structure. Management expects continuing tailwinds for TB, and restructuring gains will be larger in H2, with North American margin projected to hold steady or improve slightly. The changing Tier 2/Tier 3 market structure creates opportunities for Firestone to gain share from weaker competitors.

Q: What progress has been made on Firestone brand restructuring and strengthening in the U.S. passenger tire market, and what gaps still remain?

A: Firestone has been prioritized for restructuring since H2 2024, including a full reboot of dealer relationship that has already improved direct retail customer satisfaction and sales. Concrete plans are in place to grow same-store sales and expand the store footprint, the new AFFINITY AS all-season model launched in April 2025 is already delivering early results, and ENLITEN-equipped models will launch in 2026. With 80% of Firestone sales through the family channel, strengthening this channel is the top priority, paired with brand building via its longstanding tie to the Indy 500 and 2025 125th anniversary. The main remaining gap is that dealer relationships had eroded, so rebuilding trust is ongoing, and new product launches need to accelerate. Bridgestone is shifting R&D resources from Japan to the U.S. to speed up new product development for this key growth market.

Q: With the projected U.S. tariff impact revised down from 45 billion yen to 25 billion yen, how confident is management in hitting the 505 billion yen full-year adjusted operating profit target?

A: The lower projected impact reflects changed competitive conditions from updated tariff policy, and Bridgestone is adjusting its mitigation measures to match the new market environment rather than holding to prior plans. Confidence in hitting the full-year target is supported by three core factors: solid performance from mining, Asian, and Indian solution businesses; improving North American fundamentals with TB leading growth and consumer tires set to accelerate in H2; and Europe now delivering solid full-year results after completing restructuring. Brazil and the chemicals/diversified segment remain challenging, but these headwinds will be offset by stronger performance elsewhere, and management remains committed to delivering on the full-year guidance. Additional upside opportunities are being pursued across regions to offset any potential unforeseen headwinds.

Q: Why is management emphasizing 'emergency crisis response' and executing committed actions in this period: is this an external message or an internal priority, and what is the core risk awareness driving this framing?

A: This is a shared message for both internal teams and external stakeholders. After COVID-19 drove a 69-year record deficit in 2020 and a subsequent V-shaped recovery, Bridgestone missed its 2023 and 2024 profit targets in North America and Europe, leaving potential profit on the table that would have exceeded 500 billion yen in adjusted operating profit. There is a clear internal need to strengthen alignment around core Bridgestone operating principles (on-site problem-solving, teamwork, accountability) that had weakened after several years of disruption. Management also wants to ensure that past legacy issues, including underperforming older facilities, are not pushed into the future: completing phase 2 restructuring while launching quality-focused growth is operationally challenging, but failing to execute now will block progress to the next growth stage. This shared sense of urgency is required across the global organization to deliver on 2025 commitments and set up 2026 growth.