IBOKIN Co.,Ltd. Q4 FY2024 earnings call

Core Strategic Direction

• Maintain the existing strategy focused on leveraging イボキン's one-stop service strength across three core segments: demolition, environmental, and metal. Position the geographically flexible demolition business as the primary growth engine, with balanced resource allocation to expand the geographic footprint of the environmental and metal businesses.

Demolition Business Growth Initiatives

• Focus on building reliability through large project execution capability: continue developing and accumulating technical know-how for large demolition projects, with a specific focus on expanding wind power plant demolition (the firm has already completed demolition of 1 offshore wind turbine and over 80 onshore turbines, building significant specialized expertise).
• Add an additional ultra-large demolition heavy machine: the 2023-introduced first unit saw higher-than-expected utilization, leading to insufficient capacity for high demand. The second unit, 1.5x more capable than the first, is scheduled for introduction in summer 2025, and will further improve worker safety by reducing high-altitude manual work, shorten project timelines, and increase capacity for larger projects.
• Improve proposal and documentation capabilities to target direct large project awards, which historically were dominated by major general contractors with demolition firms acting as subcontractors. The firm aims to build documentation capabilities matching major general contractors to win direct contracts.
• Expand sales locations: the newly opened Osaka branch has already delivered strong results, and the firm is evaluating additional branch openings in other major Japanese cities.
• Strengthen execution capacity: fully acquired 株式会社ミツエ in January 2025, which strengthens the firm's Hyogo Prefecture execution capacity, adds expertise in large commercial building demolition, brings additional heavy machinery fleet, and enables in-house asbestos removal work previously outsourced, creating significant synergy with existing group capabilities.

Environmental & Metal Business Stable Growth Initiatives

• Core focus is geographic expansion and strengthening via a newly established sales planning department.
• Expand dedicated environmental and metal staff at existing new locations such as the Osaka branch, following initial market entry via the demolition business.
• Secure an additional new yard to complement the high-utilization Hanshin facility in Amagasaki.
• Actively pursue M&A in the environmental and metal business segments, in addition to prior M&A activity focused on demolition.
• Strengthen sales capability to target more demolition-derived urban scrap, which accounts for the majority of domestic scrap supply versus one-third from processing plants.

Enabling Initiatives

• Prioritize talent recruitment and development, with recruitment set as a key performance indicator, to support business expansion.
• Increase investment in advanced technology including remote operation and autonomous operation R&D to transform the industry from labor-intensive to knowledge-intensive.
• Develop and pilot a service to quantify and report CO2 emission reduction contributions from イボキン's recycling and demolition work to client firms, to meet growing client demand for carbon neutrality related information.
• Strengthen the Tokyo and Osaka branches via headcount increase as a near-term priority, while evaluating additional new branches in other markets.

1. Demolition Business: Revenue increased 10.9% year-over-year to 2.532 billion yen, accounting for 26.2% of total consolidated revenue. Growth was driven by progress and completion of large-scale demolition projects including wind farm demolition work. The segment maintains a solid backlog of outstanding orders including additional large projects. 2. Environmental Business: Revenue increased 20.6% year-over-year to 2.097 billion yen, accounting for 21.7% of total consolidated revenue. While industrial waste treatment contracted volume was flat year-over-year, growth came from increased non-ferrous metal handling and higher selling prices in recycled resource sales, leading to both higher revenue and profit. 3. Metal Business: Revenue increased 8.4% year-over-year to 5.026 billion yen, accounting for 52.1% of total consolidated revenue. Growth was driven by higher scrap processing volume at in-house facilities, increased direct delivery of scrap from large demolition projects, and rising non-ferrous metal market prices, leading to both higher revenue and profit. Total consolidated revenue for the full year 2024 was 9.656 billion yen, up 11.5% year-over-year.

• Full year 2025 (December fiscal year) guidance: expects 8.7% year-over-year revenue growth to 10.5 billion yen, 0.3% year-over-year operating profit growth to 0.8 billion yen, 0.4% year-over-year ordinary profit growth to 0.826 billion yen, and 7.1% year-over-year net profit growth to 0.557 billion yen, maintaining a mild increase in revenue and profit. Management expects price increases from the recent inflationary period to stabilize in 2025, and corporate demand for equipment updates to gradually recover.
• Iron scrap price outlook: the large decline in H2 2024 is expected to hold steady at current levels in 2025, with a medium-term upward trend driven by global shift to electric arc furnaces for decarbonization.
• Non-ferrous metal price outlook: no further price increases are expected for 2025 after multi-year upward trend.
• 2026 medium-term target: 11.5 billion yen in revenue and 0.9 billion yen in operating profit, and management confirms the plan remains on track as of the earnings call.
• Dividend guidance: expects a 32 yen per share dividend for 2025, same as 2024. The firm maintains a policy of targeting a 30% payout ratio over time, with a 20% baseline, while prioritizing internal reserve accumulation for future growth and balance sheet strength.

Iron scrap prices experienced a sharp decline in Q3 2024, and continued volatility in global metal markets could impact revenue and profit performance for the metal and environmental segments. In addition, rising labor costs from wage level revisions and increased depreciation costs from new capital investment put downward pressure on margins, which offset some of the revenue growth in 2024. The fragmented nature of domestic scrap supply means the firm faces ongoing competition to source scrap, requiring continued sales investment to secure new supply. No other material operational risks or failures were discussed in the available transcript.

Q: Why is 2025 operating profit guided to be nearly flat year-over-year, despite revenue growth, and is the majority of projected revenue growth from the ミツエ acquisition? / A: The flat profit guidance stems from planned investment to integrate and improve ミツエ after acquisition, including spending on equipment, internal systems, and brand PR that was not fully completed from prior branding initiatives. ミツエ is projected to contribute less than 0.5 billion yen in annual revenue, with remaining revenue growth coming from existing イボキン operations.

Q: What is the current and planned count of qualified demolition supervisors in the group after the ミツエ acquisition? / A: The group currently has 9 Class 1 demolition construction management technicians, for a total of 31 qualified supervisors across all certification levels. ミツエ adds 1 additional Class 1 technician, and management expects 4 more Class 1 technicians to gain certification in 2025. The long-term target is 100 qualified construction managers by 2033.

Q: What are the plans and expected investment for the new yard to support the metal and environmental businesses? / A: Management is currently evaluating candidate locations in the Kansai region near the existing high-utilization Amagasaki Hanshin facility to capture synergy. While no specific timeline or final investment amount has been set, management expects the total investment will be in the hundreds of millions of yen, and is building internal reserves to prepare for the investment.

Q: What regions and business segments does イボキン target for future M&A? / A: For scrap and waste business segments, the firm prioritizes Kansai region companies with existing facilities, to maximize synergy with the firm's existing network. For the demolition business, which already operates nationwide, the firm does not limit candidates to specific regions and evaluates opportunities across Japan.