BRIDGESTONE CORPORATION Q3 FY2025 earnings call

• Overall Operating Context & Cost Reduction

  • 2025 is designated the "Year of Emergency Crisis Response", with accelerated restructuring and cost-cutting activities. Cumulative global business cost reduction delivered ~52 billion yen in YoY benefits as of 9M.
  • Rising raw material costs, inflation and other cost increases were offset by price/mix improvement, restructuring gains and cost reduction, resulting in YoY adjusted operating profit growth. Sales quantity grew in Q3, and volume gains improved processing costs, delivering ~6 billion yen in incremental profit for the Q3 single period.

• Qualified Growth Strategy

  • The company began rolling out "qualified growth" starting in H2 2025, starting with replacement tires. The strategy is based on a premium focus, with market-specific BBGF (Best/Better/Good/Fighting) segmentation strategy. A key priority is revitalization of the Firestone brand in the core North America market.
  • In Q3, the company achieved sales expansion for replacement passenger tires (North America Firestone, Europe, Japan), truck/bus tires (North America, Japan). B2B production solutions adjusted operating profit grew 144% YoY, leading qualified growth.
  • 2026 (the final year of the 2024 mid-term management plan) will see a generational shift in top management and a full shift to qualified growth, building a more resilient Bridgestone capable of outperforming in volatile markets.

• Capital & Balance Sheet Management

  • Free cash flow reached 243.7 billion yen for 9M, up 97.8 billion yen YoY, driven by improved operating cash flow via tighter working capital management alongside steady growth investment. Lean inventory management delivered an inventory decline YoY (ex-FX).
  • Share repurchase program was 86% complete as of end-October, progressing as planned. The board approved a 2-for-1 stock split effective January 1, 2026 to expand the investor base.

1. Geographic Segments:

• North America (within Americas): Year-over-year (YoY) profit growth, with premium tire adjusted operating margin at ~15%. U.S. directly-operated retail achieved YoY profit growth with adjusted operating margin over 7%. Achieved sales expansion and share growth for Firestone brand consumer and truck/bus tires, and retread products.
• South America (within Americas): YoY profit growth driven by restructuring, but the target of Q4 single-period profitability is no longer achievable due to dropped exports to North America caused by U.S. economic slowdown.
• Europe: YoY revenue and profit growth. Premium tire adjusted operating margin reached 6%. Achieved full profitability across truck/bus tire business including new, replacement and retread. Full-year profitability for retail business is on track. Passenger replacement tires grew 5% YoY overall, with high-inch tires growing 13% YoY, gaining market share.
• Japan: Revenue grew on higher domestic replacement tire sales, but profit declined YoY due to timing lags in currency/raw materials linked price adjustments for mining tires; revenue and profit grew when excluding foreign exchange impacts.
• Asia, Oceania, India, China: Profit declined YoY due to foreign exchange impacts, but grew when excluding FX impacts, with adjusted operating margin holding at 11% level. India consumer tires delivered sustained profit and share growth; Thailand restructuring delivered initial sales and share gains. The segment maintains high market share in Thailand and Indonesia amid intense competition from Chinese low-cost tires.

1. Product/Portfolio Segments:

• Passenger/Light Truck Tires: Improved profitability YoY on expansion of premium high-inch tires and product mix improvement.
• Truck/Bus Tires: YoY profit growth and significant profitability improvement, driven by solid replacement sales in North America and incremental restructuring benefits.
• Specialties (Premium Tire & Solutions): Profit declined YoY due to timing lags in mining tire price adjustments and weaker agricultural tire performance, but maintained high profitability with adjusted operating margin of 20.6%. B2B solutions for mining and aircraft tires continued steady expansion.
• Solution Business: Adjusted operating profit grew 155% YoY, with margin up 2.7 percentage points YoY. Production goods B2B solutions achieved margin over 11%, up over 3 percentage points YoY, leading the company's qualified growth.
• Retail Business: Adjusted operating profit grew 163% YoY, delivering sustained profitability improvement.
• Chemicals & Diversified Business: Chemicals delivered YoY profit growth via fixed cost cuts but remains in a tough market on weak construction/agricultural machinery demand. Sports/cycle business remained unprofitable but narrowed its deficit via sales expansion and fixed cost cuts. Americas diversified business improved profitability and delivered YoY profit growth. Overall, the segment has deep challenges and restructuring is being accelerated.

Consolidated 9M 2025: Revenue of 3.2349 trillion yen (1% decline YoY); adjusted operating profit of 368.4 billion yen (4% growth YoY), with adjusted operating margin of 11.4% (up 0.6pp YoY)

• Full-year 2025 consolidated guidance was revised: adjusted operating profit was lowered 15 billion yen from the original 505 billion yen to 49 billion yen (still expected to deliver YoY profit growth). Revenue is guided to 4.36 trillion yen (up 1% from the February plan). Net income attributable to parent shareholders and full-year dividend of 230 yen per share are maintained at original forecast levels.
  • Full-year 2025 projected adjusted operating margin is over 11%, projected ROIC is 9%, projected ROE is 7% (weighed down by ~100 billion yen in planned restructuring charges).
  • For full-year 2025 segment guidance: Americas profit guidance was lowered from the February plan due to U.S. economic slowdown and cyber incident impacts, but still targets YoY profit growth. Europe profit guidance was raised from the February plan driven by stronger-than-expected premium tire sales and steady restructuring progress.
  • 2026 full-year guidance is still being finalized, and will be officially published in February 2026. Management is working to align targets with the 2024 mid-term plan, accounting for unplanned headwinds including U.S. tariffs and South American market volatility that were not included in the original mid-term plan.

• U.S. economic slowdown: Consumer confidence has deteriorated rapidly since Q3, reducing demand in the company's directly-operated retail business, slowing the pace of previously expected improvement. U.S. truck manufacturers have cut new vehicle production sharply since August, reducing demand for original equipment truck/bus tires, which also reduced exports of tires from Brazil to North America. These factors were the largest contributors to the 15 billion yen full-year profit downward revision.
• U.S. tariffs: Full-year 2025 direct negative impact on adjusted operating profit is expected to total 25 billion yen, with 0.5 billion yen in H1, 7 billion yen in Q3, and 17.5 billion yen in Q4. If current tariff levels remain unchanged, this level of negative impact is expected to apply to full-year 2026, requiring ongoing mitigation efforts.
• Cyber incident: A cyber incident in North America in August-September 2025, now resolved, caused temporary production disruptions and volume losses that have created lingering backlogs that will negatively impact Q4 2025 results. The impact is expected to be one-time and will not recur in 2026.
• Market competition in Asia: Intense competitive pressure from Chinese low-cost tire manufacturers is increasing in Asian markets.
• EU Deforestation-free Products Regulation (EUDR): While the regulation creates additional compliance costs for natural rubber sourcing, management views it as an opportunity given Bridgestone's early preparation and investments in traceability and supplier relationships, and plans to leverage this to gain share in the European market.
• South American performance: Brazil's restructuring progress is on track, but export headwinds from North America mean Q4 2025 profitability is unlikely, pushing back the target turnaround timeline.

Q: What are the drivers of the U.S. economic slowdown's impact on Bridgestone, and what is your outlook going forward? / A: Two main factors are driving the impact: first, slowing U.S. consumer confidence has reduced retail foot traffic and demand. While retail operational metrics like customer satisfaction are improving, the slowdown means we will not meet our originally targeted aggressive improvement for the full year. Second, U.S. truck OEMs have sharply cut production amid poor industry performance, reducing original equipment tire demand. Even though Bridgestone has gained share in this segment, overall market contraction has still reduced our sales. Management expects the environment to remain volatile next year, with continued pressure on truck OEM demand, though consumer demand could shift if new government policy is introduced.

Q: What drove strong Americas segment profit in Q3, and why is Q4 projected to decline YoY? What does this mean for 2026? / A: Q3 Americas delivered ~23 billion yen in YoY profit growth, led by price and product mix improvement, plus solid volume growth and tight expense control. Q4's projected YoY decline is driven mostly by timing shifts in expense recognition that benefit full-year results but weigh on Q4 alone, plus a larger full impact of U.S. tariffs in Q4 than in prior quarters. Management confirmed the full-year 2025 tariff impact of 25 billion yen is unchanged, with 17.5 billion yen of impact hitting Q4. If tariff levels do not change in 2026, this annual level of impact will persist, and the company is currently updating its sourcing plans and mitigation strategies to offset this.

Q: What is the breakdown of the 15 billion yen downward revision to full-year profit, and do you need additional restructuring for North America OEM and retail? / A: The largest contributor to the revision is slower-than-expected retail improvement, accounting for roughly half of the 15 billion yen cut. The remainder is split between lower truck OEM sales and the cyber incident impact. Current North America operations are already aligned with demand: the LaVergne plant closure has already adjusted production capacity for truck/bus tires, so no additional major restructuring costs are needed. Management will continue current improvement activities, and is positioned to capture growth when demand recovers. The cyber incident impact is one-time and will not affect 2026.

Q: How is the Firestone brand performing in the North American market, and what is your competitive position? / A: Firestone brand sales growth has accelerated quarter-over-quarter in 2025. High-inch passenger tire sales grew to 113% of YoY levels in Q3, and Firestone truck/bus tires grew ~8% YoY. Competitors have struggled to match this growth trajectory, as Bridgestone has successfully communicated the value of the Firestone brand across price and product quality to gain share. Q3 volume growth has also improved production efficiency, lifting the overall business baseline, positioning the brand for further expansion in 2026.