YOTAI REFRACTORIES CO.,LTD. Q4 FY2025 earnings call

Ownership Change

• ASNF Holdings (funded by Aso Group) completed a tender offer for Yotai shares between April 14 and May 14, 2025, acquiring 6,531,400 shares for a 35.44% ownership stake, becoming the largest shareholder. Former largest shareholder Sumitomo Osaka Cement now holds 16.03% stake as the second largest shareholder.
• The combination will allow Aso Group to access Yotai's refractory technical expertise and secure stable refractory supply for its cement business, while Yotai will leverage Aso Group's domestic and international sales networks and connections to accelerate its overseas expansion. No specific collaboration projects have been finalized yet, with discussions ongoing.

2025 March Full Year Consolidated Financial Performance

• Total revenue hit a record high of 29.305 billion yen, a 0.6% increase year-over-year, driven by price adjustments, large ceramic projects, and increased orders for environmental equipment.
• Operating profit was 3.484 billion yen, a 117 million yen decrease year-over-year. Recurring profit was 3.64 billion yen, a 1.7% decrease year-over-year, with higher raw material costs driven by yen depreciation and increased depreciation from capital investment as the main contributing factors.
• Net profit attributable to parent company shareholders was 2.623 billion yen, a 32.4% decrease year-over-year, due to the unwinding of large special gains recorded in the prior year from equity stake sales and policy holding share reductions.

Second Mid-Term Management Plan (FY2024-FY2026) First Year Progress

• Targeted investments in people, physical assets, and information technology are progressing as planned: Technical sales hiring and training continues, with work underway to build a data-driven strategic sales structure; large presses and solar power facilities have been installed, with work starting on IoT and automation of production processes to improve cost competitiveness; core system upgrades have been completed, with AI-OCR and RPA continuing to be used to reduce overtime hours.
• Overseas expansion progress: 2025 March fiscal year overseas revenue increased 62% year-over-year to 2.1 billion yen, with orders secured in India, Thailand, and Indonesia. Partnership development is progressing, with Yotai partnering with its Chinese subsidiary to expand OEM product lines and target early profit generation.
• Sustainability and product development: Yotai has begun development of eco-friendly refractories and started pilot testing of recycled raw material production, targeting 20%+ recycled raw material content in finished products to improve resource efficiency.
• Solar power deployment has continued across factories, with 2,325 MWh generated in FY2025, enough to power 560 average households annually and cutting electricity costs amid rising power prices. Work has started on fuel conversion for kiln firing to reduce Scope 1 GHG emissions.
• DX progress: Core system "Mikumo" is operational, with DX expanding from administrative functions to production sites, including optimized production planning, automated inventory management, and manufacturing traceability implementation. Yotai is also recruiting and training DX talent, rolling out sales support systems, centralizing cloud-based data management, and using generative AI to improve operational efficiency.

Capital Strategy and Shareholder Returns

• Yotai targets ROE of 10%+ and PBR of 1x+ to improve capital efficiency, with a total 80 billion yen planned for investment over the 3-year mid-term plan, including 15 billion yen for renewal investment, 40 billion yen for strategic investment, 5 billion yen for DX investment, and 20 billion yen for other investments. 23 billion yen of investment was deployed in the first year of the plan.
• Shareholder return policy pays out the higher of 60% consolidated payout ratio or 85 yen per share dividend. For FY2025, a 90 yen per share dividend (5 yen increase from prior year) is planned, for a 63.5% payout ratio. The same 90 yen per share dividend is planned for FY2026, maintaining a 63.5% payout ratio.

1. Refractory Business: Revenue of 24.167 billion yen (0.9% increase year-over-year), accounting for 82.5% of total consolidated revenue. Segment profit was 4.723 billion yen, a 2.5% increase year-over-year. While orders for steel customers saw a slight decrease due to lower steel mill production volumes, orders from other industries increased. 2. Engineering Business: Revenue of 5.138 billion yen (0.8% decrease year-over-year), accounting for 17.5% of total consolidated revenue. Segment profit was 716 million yen, a 13.9% decrease year-over-year, driven by lower revenue from the unwinding of a large non-ferrous metal project from the prior year and increased labor costs due to overtime regulations.

• For the 2026 March fiscal year, Yotai guidance calls for 30 billion yen total consolidated revenue (2.4% increase year-over-year) and 3.9 billion yen recurring profit (7.1% increase year-over-year), driven by expected steady demand from steel and non-ferrous metal customers.
• By industry: Demand recovery centered on electric arc furnaces is expected for steel; cement sales are expected to remain stable at FY2025 levels; non-ferrous metal orders are expected to recover on stronger overseas demand; steady demand is expected for environmental equipment and electronic components.
• The mid-term management plan targets FY2027 (end of the plan period) performance of 32 billion yen total revenue (9.2% increase from FY2025), 4.5 billion yen recurring profit (23.6% increase from FY2025), 3.2 billion yen net profit attributable to parent shareholders (22.0% increase from FY2025), ROE of 10%+, and a 60% consolidated payout ratio.

• Rising raw and fuel costs driven by yen depreciation and global commodity volatility put downward pressure on profitability
• Slowing demand from the domestic steel industry, the company's largest end market, reduces sales volume and increases fixed cost burdens per unit produced
• Geopolitical instability, foreign exchange volatility, and slowing Chinese economic growth create uncertainty for overseas expansion plans
• Increasing labor costs from overtime regulations and industry-wide labor shortages pressure margins for the engineering segment
• Competitive pressure from local and European refractory manufacturers in Asian overseas markets

No question and answer section is included in the provided transcript.