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2021-2025 Medium-Term Management Plan Summary

• Overall Financial Target Achievement: The 6% ROIC target was achieved, with a final 6.2% ROIC in FY2025. The plan's key focus on ROIC-driven management was successfully implemented.
• Business Strategy Outcomes: Deep dives into existing businesses delivered growth: foldable materials and ultra-fine wire substrates in electronics, water treatment pressure vessels in industrial materials, and medical display/AR/VR components in display materials. New business creation progress includes adopted high-speed communication substrates, advanced development in new energy materials, and expanded AR/VR display business.
• Financial Strategy Outcomes: 16 billion yen of non-operating assets (mostly policy-held shares) were monetized, with 14.3 billion yen allocated to capital investment. Shareholder returns were strengthened with adoption of a 6% DOE or 80% total payout ratio (whichever is higher) policy.
• ESG Strategy Outcomes: Carbon neutrality progress is on track at 54% of target. Targets for female management ratio and gender wage gap reduction were met, and progress on circular economy and governance improvements continues.

New 2026-2030 Medium-Term Management Plan Strategy

• Core Vision & Targets: Aim to become a global top runner in core weaving, coating, and forming technologies, and a preferred partner for customers and rewarding workplace for employees. Quantitative 2030 targets: revenue ≥70 billion yen, operating profit 8.5 billion yen, ROIC ≥8%, ROE ≥10%. The new plan will expand new business segment revenue contribution from 15% (FY2025) to 40% (FY2030).
• Business Strategy: Focus on two core pillars: 1) deepening existing business with differentiated proprietary technology and expanded production capacity, 2) creating new business focused on environmental/social problem solving, including next-generation batteries, next-generation computing, next-generation mobility, and hydrogen energy.
• Financial & Cash Allocation Strategy: Prioritize growth investment (capital expenditure and M&A), maintain the existing shareholder return policy, and target a 50% equity ratio (down from 67.7% in FY2025) by utilizing interest-bearing debt to improve capital efficiency. Total planned capital expenditure over the 5-year period is ~28 billion yen, focused on electronic materials capacity expansion.
• Strategic Initiatives: The new Innovation Center, opening September 2025, will serve as an open innovation hub for cross-department collaboration and co-creation with external partners and research institutions. Human resources strategy focuses on cultivating employees that embody the company's "Create, Innovate, Challenge" core values, building diverse talent pipelines, and improving workplace engagement.
• Segment-Specific Strategic Priorities:
  • Electronic Materials: Expand capacity for semiconductor/data center materials, capture growth in China/Asia for mobile products, and develop products for high-speed AI computing and high-thermal-performance mobility electrification.
  • Industrial Structural Materials: Grow water treatment business via group network, develop next-generation fuel cell and hydrogen energy materials, and advance new lightweight environmentally friendly interior materials for aircraft.
  • Display Materials: Expand into new industrial mobility/heavy equipment applications, and pursue new market development for large, high-precision medical display products in China and Asia.

• FY2026 (ending March 2026) Consolidated Guidance: Expects 3.2% revenue growth YoY to 51.4 billion yen; expects 8% operating profit decline YoY to 4.5 billion yen, and a 19.4% net income decline YoY to 3.2 billion yen. The anticipated decline is driven by rising fixed costs and expected yen appreciation (assumed 140 JPY/USD at mid-year, 135 JPY/USD at year-end).
• FY2026 Half-Year Guidance: Expects 2.3% revenue decline YoY and 23.2% operating profit decline YoY, due to expected inventory adjustment in honeycomb panels and 3D display materials, and yen depreciation impact on U.S.-bound polarizing components. Full year expects recovery in demand for both categories in H2, leading to full year revenue growth.
• Dividend Guidance: Maintains the return policy of 6% DOE or 80% total payout whichever is higher. For FY2025, full-year dividend is set at 96 JPY per share (80.3% total payout ratio). For FY2026, the annual dividend is guided at 88 JPY per share.
• Medium-Term Guidance (FY2030): Confirms target of 70 billion yen total revenue, 8.5 billion yen operating profit, ROIC of 8% or higher, and ROE of 10% or higher by FY2030.

1. Electronic Materials: Segment revenue of 26.371 billion yen, a 25.4% increase year-over-year (YoY). Segment profit of 2.593 billion yen, an 11-fold increase YoY. This segment contributed 53% of total consolidated revenue and 53% of total operating profit in FY2025. For the 2026-2030 medium-term plan, the segment targets revenue growth from 33 billion yen in FY2026 to 43.2 billion yen in FY2030.

2. Industrial Structural Materials & Electrical Insulating Materials: Segment revenue was roughly flat YoY with a 0.1% increase. Segment profit of 286 million yen, a 19.3% increase YoY, driven by improved product mix and strong demand for water treatment FRP pressure vessels offsetting weaker performance from honeycomb panels and automotive materials. This segment contributed approximately 27.5% of total consolidated revenue and 5.8% of total operating profit in FY2025. For the 2026-2030 medium-term plan, the segment targets revenue growth from 13.7 billion yen in FY2026 to 20.4 billion yen in FY2030, a 10.5% CAGR.

3. Display Materials: Segment revenue of 7.89 billion yen, a 39.0% increase YoY, driven by growth in 3D-related materials (especially for medical monitors) and polarizing utilization components for AR/VR applications. Segment profit of 789 million yen, an 83.9% increase YoY. This segment contributed approximately 16% of total consolidated revenue and 16.1% of total operating profit in FY2025. For the 2026-2030 medium-term plan, the segment targets revenue growth from 4.3 billion yen in FY2026 to 6.3 billion yen in FY2030.

• U.S. reciprocal trade policy impacts are currently under investigation, and no quantitative impact has been incorporated into the FY2026 guidance. Customer feedback on potential downstream demand impacts for products like smartphones/tablets remains unclear, so the company cannot yet build risk scenarios for this external shock.
• The current expected yen appreciation will pressure profit for export-focused segments, particularly display materials' polarizing components that have high exposure to the U.S. market.
• Electronic materials capacity expansion timing requires careful assessment, as customer demand forecasts for semiconductor packaging materials have already been pushed back twice, requiring the company to time investments to avoid overcapacity.
• External market complexity has increased, with risks from climate change, geopolitical tensions, energy/resource supply constraints, and trade policy uncertainty impacting overall business planning.

Q: The 2026 electronic materials plan projects slight growth, with FPC materials expected to lead. Can you break down the outlook by product category?

A: Management expects Arisawa's proprietary FPC materials (including the ThinFlex product line) to drive segment growth. Mobile-focused FPC materials are expected to be flat YoY, while semiconductor packaging-related FPC materials are expected to see a slight increase. The company does not expect a decline in semiconductor film processing demand, and forecasts growth, with only the magnitude of growth remaining uncertain.

Q: Why is the industrial structural materials H1 FY2026 outlook weak even with full year growth expected for water treatment pressure vessels?

A: H1 FY2025 had an unusually favorable product mix with a high share of high-margin products that pushed margins to elevated levels. Product margins have since normalized starting in Q3 FY2025, and the company expects margins to remain at normalized levels in FY2026. Overall demand and order intake for water treatment pressure vessels remains solid, so the H1 decline is purely a base effect from the strong prior year H1 rather than a weakening of underlying demand.

Q: What is the outlook for 3D display materials and polarizing components in FY2026, after the strong growth in FY2025?

A: FY2025 saw very strong order intake for 3D materials, especially in Q4, with many orders pulled forward. A temporary pullback and inventory adjustment is expected in H1 FY2026, but this is viewed as a temporary correction, with demand recovery expected in H2. For polarizing components, strong FY2025 growth was driven by AR/VR development projects that are now expected to slow, so a revenue and profit decline is projected for FY2026, though project-based demand is inherently volatile and can shift quickly.

Q: The growth plan shows larger expansion in new electronic material segments while also planning capacity expansion for semiconductors. Is this growth coming from new product categories rather than just expanding existing semiconductor business?

A: Capacity expansion for existing semiconductor packaging materials is needed because current capacity cannot meet end customer forecast demand. The timing of this expansion has been pushed back twice as demand forecasts shifted, so the company is waiting for the optimal timing to invest. New growth in electronic materials will come from new FPC material applications in smartphones/tablets, segments the company has not historically served heavily, which are now starting to launch with new customers and will become a major growth driver going forward. New growth will be driven primarily by new FPC material applications, while existing semiconductor business will also grow alongside, with flexible boundaries between existing and new segments.