5381.T

Overall Financial Performance

• Full year total revenue increased 19.4% year-over-year, and the company turned a net operating profit (returned to black ink) after prior period losses, driven by strong demand for high-tech product sales to data center end markets. Higher-margin high-tech products drove major overall profit margin improvement.
• Gross profit increased due to the sales growth of high-margin high-tech products, while selling, general and administrative expenses (SG&A) increased primarily due to higher personnel and logistics costs. The company recorded foreign exchange losses in the current period due to yen appreciation, compared to foreign exchange gains in the prior year.
• The balance sheet shows increased tangible fixed assets from the Tokyo office relocation, while long-term debt has been reduced via scheduled repayments, leading to a higher equity ratio and a stable financial base.

Operational Updates & Strategic Initiatives

• Opened four new sales offices in Kumamoto, Sendai, Kanazawa, and Kanuma as part of its regional strategy for the general abrasives segment, to strengthen local customer service and coverage of regional core industries.
• Signed a positive impact finance loan agreement with Mizuho Bank to strengthen sustainability efforts and support sustainable development goals.
• Achieved notable technical progress in semiconductor-related development, including launching 8-inch SiC semiconductor wafer dedicated polishing equipment and publishing development results for next-generation power semiconductor SiC wafers as part of a NEDO project.
• Other key initiatives include securing subsidies for the IH powder coating business, completing the expansion and relocation of the Marunouchi office, and investing in Thomas Inc. to advance digital transformation (DX) across the business.

Core Strategic Priorities

• The company identifies agility as its core competitive advantage to respond to external uncertainty. It has a proven history of agile supply chain adjustments, including moving manufacturing from the U.S. to China, then closing China operations and moving to Thailand, and finally consolidating manufacturing domestically in Japan to respond to trade policy changes. Management notes the organization is experienced in rapid equipment relocation and quality reconfirmation, and can quickly adjust manufacturing footprints (including resuming U.S. manufacturing) if needed.
• The company prioritizes balancing stable dividends with long-term growth investment. It has made a formal internal commitment to allocate 1% of annual revenue to personnel education and development, framing human capital investment as the most critical priority for future growth amid narrowing technological differences from new tools like generative AI.
• Mipox will celebrate its 100th anniversary in November 2025, and has committed to pursuing above-average growth for a manufacturing firm, with a new medium-term management plan under development that will be disclosed once future growth targets are finalized.

• For FY2026 (ending March 2026), Mipox forecasts total revenue of 11 billion yen, a 1.5% year-over-year decrease, reflecting cautious planning amid external uncertainty. The company forecasts 0.9 billion yen in operating profit, 1 billion yen in ordinary profit, and 0.7 billion yen in net profit.
• Product Business guidance: High-tech related products are expected to maintain solid growth, with continued strong demand for optical fiber products driven by U.S. optical network buildout and generative AI-related capital expenditure. HDD demand is expected to stabilize after inventory adjustment is complete, with recovery in data center investment supporting steady growth. Semiconductor segment sales are expected to be flat year-over-year, with growth in probe card cleaning products offsetting continued low industry utilization rates. For general abrasives, the company expects automotive inventory adjustment to conclude in the first half, and will launch a pilot production line for IH powder coating-enabled abrasive products to develop new offerings.
• Contract Service Business guidance: Contract coating and slitting is expected to remain focused on prototype projects through FY2026, with mass production ramp-up not expected until FY2027 at the earliest. The company is reallocating excess line capacity to existing product manufacturing to maintain stable utilization and profitability. Contract polishing processing is expected to achieve sales growth from expanding high-value-added CMP (chemical mechanical polishing) orders, with planned capital investment in new CMP and measurement equipment. While mass production contribution will be limited in FY2026, the company is building end-to-end contracting capability including pre- and post-processing steps to grow its foundry service business for advanced materials such as GaN and diamond substrates.
• The company plans to continue improving cost structure via automation and labor saving from DX and e-commerce expansion, while increasing investment in human capital.

Mipox operates two core segments: Product Business and Contract Service Business. 1. Product Business (manufacturing and selling abrasive films): This segment saw significant revenue growth, driven entirely by high-tech related products. High-tech related products (split into HDD, optical fiber, and semiconductor categories) achieved substantial year-over-year revenue growth, supported by strong demand for data center infrastructure from U.S. optical network buildout and generative AI expansion. All three high-tech sub-categories maintained high sales levels; while HDD saw a temporary Q4 decline, overall demand remains solid. Semiconductor consumables (led by probe card cleaning sheets) performed well, even without high-priced wafer polisher sales this period. General abrasive products maintained stable, steady sales. The Product Business as a whole drove the entire company's operating profit growth thanks to the higher margin profile of high-tech products. 2. Contract Service Business (provides outsourced processing services): This segment saw an overall revenue decline and ended the full year with a segment operating loss. Within the segment, contract polishing processing (focused on next-generation semiconductor and general abrasive processing projects) achieved large revenue growth, with growth accelerating in the second half driven by demand for advanced material processing. However, the contract coating and slitting business, which focuses on services for consumer electronics (PC, tablet, smartphone) products, saw a sharp revenue decline due to weak end-product demand, customer specification changes, and a continued reliance on low-volume prototype projects, which offset growth in contract polishing and pulled the entire segment into a net loss. Segment profit declined further in the second half of the fiscal year alongside the revenue drop.

• Geopolitical and trade policy uncertainty (particularly from U.S. policy changes) creates unpredictable demand and supply chain volatility, and the company cannot fully insulate itself from sudden shifts in global trade rules driven by foreign political actors.
• While current industry signals from Mipox's customers are broadly positive for high-tech demand, the market is vulnerable to sudden shifts from external events, so the company does not take an overly optimistic outlook for continued high growth.
• Generative AI is still in an early stage of development, and clear long-term use cases and demand trajectories have not yet been finalized, creating uncertainty for the trajectory of data center-related demand.
• Raw material and energy costs are expected to remain elevated, creating ongoing margin pressure that requires flexible pricing adjustments with customers.
• The contract coating and slitting business has taken longer than expected to achieve mass production customer wins, limiting near-term profitability for the Contract Service segment.

The provided transcript does not include a question and answer section.