5707.T

Overall Financial Performance Summary

• For the 9-month cumulative period ending Q3 FY2025, the company achieved 90.1 billion yen in revenue, 4.0 billion yen in EBITDA, and 1.7 billion yen in net profit, turning cumulative net profit to black driven by improving market conditions and business restructuring. Q3 single-quarter results hit 36.3 billion yen in revenue, 3.9 billion yen in EBITDA, and 3.1 billion yen in net profit, with asset sale gains offsetting one-time losses from business restructuring.
• The planned withdrawal from unprofitable businesses this fiscal year has been completed, and operational disruptions to lead and silver smelting in the first half of the fiscal year have been resolved.

Business Restructuring Plan Progress

• Smelting (Core Business): Lead production has recovered from first-half operational issues; a scheduled maintenance and equipment inspection is planned for March to prevent recurrence and support stable production. The company is increasing the share of secondary raw materials such as used batteries to optimize raw material composition and improve profitability, and is adjusting sales premium settings. Silver raw material sourcing has generally progressed smoothly amid strong global ore demand, and both lead and silver are positioned as core profit pillars.
• Environmental Recycling: The company is working to optimize raw material costs for its core product zinc oxide, and improve profitability by building brand value for its 100% recycled raw material product line.
• Metal Recycling: Withdrawal from zinc smelting is progressing smoothly, and the introduction of a melting furnace is under active review.
• Electronic and Functional Materials: Electronic materials are implementing gradual product price increases, while functional materials are expanding overseas sales channels to improve market access and grow overall earnings.

Operational and Capital Base Improvements

• To address rising ore purchase costs driven by silver price increases, the company signed a new 10 billion yen commitment line and overdraft facility on January 30, expanding total available liquidity from 5 billion yen to 15 billion yen to secure sufficient working capital for volatile silver prices.
• For Tokyo Stock Exchange Prime Market listing maintenance: After falling below the 10 billion yen circulating market capitalization requirement at the end of March 2025 and entering an improvement period, the average circulating market capitalization as of February 10, 2026 reached 19.7 billion yen, which meets the requirement, and the company will continue implementing measures to maintain listing eligibility.

Strategic Priorities

• Management explicitly prioritizes building a profit base that does not rely on short-term market tailwinds, and will continue advancing business structure review, site-led improvement initiatives, strict adherence to safe and stable operations, talent development, and organizational strength building. The company aims to transition to a sustainably profitable business model starting from this quarter's return to profitability and upward guidance revision.

• FY2025 (ending March 2026) Full Year Guidance: The company upwardly revised full-year guidance from the November 2025 downwardly revised level, to 123.0 billion yen in revenue, 6.1 billion yen in EBITDA, 3.5 billion yen in ordinary profit, and 2.7 billion yen in net profit. Compared to the November guidance, ordinary profit and net profit are expected to improve by over 90%. The revision reflects three key factors: positive contribution from higher silver prices, embedding of company-wide transformation, and realization of gains from restructuring including asset sales. The guidance uses a conservative set of Q4 assumptions: 64 USD per ounce of silver and an exchange rate of 156 JPY per USD. The EBITDA upgrade breakdown: 1.1 billion yen in additional profit from market factors (higher silver prices and weaker yen), 1.4 billion yen in additional profit from silver price increases on assets held for sale as part of zinc smelting restructuring, offset by 0.5 billion yen in negative factors to reach the 6.1 billion yen full-year EBITDA target.
• Post-FY2025 Guidance: From FY2026 onward, the company will continue optimizing raw material mix (flexibly adjusting the blend of ore and secondary raw materials) and reviewing sales premiums to fully capture full-year profit contributions from initiatives launched this fiscal year. While accounting for expected market and exchange rate volatility, the company will gradually transition to a repeatable profit structure with reduced reliance on market conditions, continuing stable operations, focused resource allocation, strict cost variance management to structurally absorb risks. External volatility such as TC/RC changes will be smoothed through adjustments to raw material composition, recovery rates, and sales premiums to build consistent, sustainable earnings.
• Long-Term Targets (reaffirmed from 2024 business restructuring plan): The 5-year restructuring plan remains on track, with FY2027 being the second year of the plan. The company targets 5.2 billion yen or higher in ordinary profit for FY2027, and 7.4 billion yen in ordinary profit by FY2030 (ending March 2030).

1. Retreat/Restructuring Segment: Total cumulative company revenue decreased from 97.3 billion yen to 90.1 billion yen year-over-year due to this segment's winding down, with total negative impact on revenue of 7.2 billion yen. 2. Core/Growth Segment: Cumulative revenue reached 82.4 billion yen, an increase of 16.4 billion yen year-over-year, driven primarily by rising silver prices, accounting for 91.45% of total cumulative company revenue. 3. Smelting Segment (within core business): Q3 FY2025 EBITDA reached 2.5 billion yen. The resolution of operational issues from Q1-Q2 enabled increased production and sales, which combined with rising silver prices drove the strong improvement. 4. Metal Recycling Segment: Q2 FY2025 EBITDA was 0 billion yen, primarily due to reduced zinc withdrawal costs. Q3 FY2025 EBITDA improved to 1.5 billion yen, as silver contained in assets sold as part of the zinc smelting withdrawal gained from silver price increases. Company-wide cumulative EBITDA for the first three quarters was 4.0 billion yen, and company Q3 single-quarter EBITDA was 3.9 billion yen.

• The company's business remains highly sensitive to external environment fluctuations, and silver prices have recently seen extremely high volatility: after spiking to 118.45 USD per ounce on January 29, 2026, it fell to 81.98 USD per ounce on February 2, and is currently trading in the 75-80 USD per ounce range, with very large intraday swings making future price prediction extremely difficult.
• TC/RC rates have remained at historically low levels driven by strong Chinese ore demand, adding persistent margin pressure to smelting operations.
• Rising silver and metal prices create balance sheet impacts: while unrecognized unrealized gains on inventory increase, hedging transactions (used to mitigate price volatility) generate deferred hedging losses that are recognized upfront on the balance sheet, leading to a temporary reduction in net equity. This impact will reverse as inventory is sold and unrealized gains are realized to offset hedging losses.
• The company has already secured sufficient liquidity to address working capital pressure from rising silver prices, but sustained extreme price volatility could still create cash flow challenges if not managed properly.

Q: Regarding the quarterly cumulative profit mentioned on page 5, can you explain in detail the factors driving the change in company-wide profit from Q2 to Q3, broken down by market factors, volume increases and other categories?

A: We do not disclose separate disaggregated numbers for the smelting segment, so we cannot provide specific granular breakdowns. That said, we can share high-level drivers: From Q1 to Q2, hedging activity created a timing mismatch between hedging profit/loss and actual lead/silver sales, so even though results improved sequentially, the business did not reach profitability. From Q2 to Q3, the operational troubles that caused production and sales delays were resolved, so production and sales returned to normal, and sales volume caught up to the already recognized hedging positions. In addition, the large rise in silver prices was a strong positive factor. For the metal recycling segment, EBITDA went from 0 to 1.5 billion yen, as we are selling unused equipment and remaining concentrate during the zinc smelting withdrawal process; these assets contain silver, so the silver price increase contributed most of this positive result. In summary: for smelting, the key gains came from increased production after recovering from operational issues and favorable silver market conditions, for metal recycling, the main driver was gain on asset sales impacted by higher silver prices.

Q: Can you share an approximate breakdown of how much of the profit improvement comes from the better silver market, versus how much comes from internal improvements in productivity and operational efficiency?

A: As noted on page 13 of our materials, every 1 USD per ounce increase in silver prices generates 50 million yen in annual profit impact. In addition to this market effect, we also saw a material contribution from the recovery of production levels after resolving operational issues. You can find production volume details in the Appendix on page 26 for reference.