HOKKAN HOLDINGS LIMITED Q4 FY2025 earnings call

Overall Consolidated Performance

• Full year 2025 March fiscal year achieved increased revenue and profit: total consolidated revenue of 92.4 billion yen (+1.6% YoY), operating profit of 4.5 billion yen (+2.6% YoY), ordinary profit of 5.1 billion yen (+2.7% YoY), and net profit attributable to parent company shareholders of 3.2 billion yen (+20.0% YoY). Performance benefited from progress in cost pass-through, factory expense compression in the container segment, and logistics cost reduction in the filling segment, offsetting rising labor and transportation costs.

Organizational Restructuring

• The company has begun preparations for a merger of Hokkan Holdings, its core subsidiary Hokkai Can Co., Ltd., and Nihon Canpack Inc. in April 2027. This restructuring aims to improve the speed of decision-making, enable greater talent mobility, maximize human capital, achieve cost reduction through improved efficiency, and enable more focused and efficient allocation of management resources across the group. The merger agreement is targeted for December 2025, with further details to be shared after preparation is completed.

Overseas Project Adjustment (Indonesia)

• The construction of the new Banyuasin plant at Hokkan Deltapack Industri, the company's Indonesian subsidiary for beverage container manufacturing and filling, was delayed due to delayed local construction permit approval. The company revised the project scope to align with updated market trends: the planned cup beverage filling line is under re-review, and the company will instead install PET bottle and PET gallon bottle molding equipment and dedicated drinking water filling lines to capture expected growth in the Indonesian drinking water market. The revised plant is scheduled to start operations in December 2025, with total capital expenditure reduced from the original 1.6 billion yen to 1.5 billion yen.

Capital Expenditure

• Total capital expenditure for 2025 March fiscal year was 10.9 billion yen: 2.7 billion for the container segment (including relocation of milk powder can and aerosol production equipment), 1.6 billion for the filling segment (including warehouse construction), and 6.1 billion for the overseas segment (including production line expansion at Hokkan Indonesia and beverage packaging equipment acquisition at Hokkan Deltapack Industri). Depreciation expense for the year was 6.1 billion yen.

Shareholder Returns and Policy Holding Share Reduction

• The company set a dividend policy for the VENTURE-5 mid-term management plan targeting a consolidated payout ratio of 35% or higher, annual dividend per share of 45 yen or higher, with a long-term target of 100 yen annual dividend per share by the end of the 2027 March fiscal year. For 2025 March fiscal year, the annual dividend per share is 93 yen (70 yen year-end dividend). For 2026 March fiscal year, the annual dividend per share is planned to remain 93 yen (30 yen interim, 63 yen year-end), maintaining the 35%+ payout ratio target.
• The company has a formal policy to reduce policy-held shares, targeting a holding ratio of 10% of consolidated net assets by the end of March 2027. The holding ratio decreased from 18.7% to 16.4% year-over-year after the disposal of 4 listed stocks in the prior fiscal year, and the company is currently progressing with partial sales of 2 additional holdings. The board of Hokkan Holdings has opposed a shareholder proposal to add a policy-held share reduction clause to the company articles of incorporation, stating that current ongoing reduction efforts under board oversight are sufficient.

• Container Business: Revenue of 31.3 billion yen, a 0.9% decrease year-over-year; operating profit of 1.0 billion yen, a 34.8% decrease year-over-year. Revenue contribution: 33.9% of total consolidated revenue.
• Filling Business: Revenue of 39.4 billion yen, a 3.4% increase year-over-year; operating profit of 3.5 billion yen, a 21.1% increase year-over-year. Revenue contribution: 42.6% of total consolidated revenue.
• Overseas Business: Revenue of 17.9 billion yen, a 5.7% increase year-over-year; operating profit of 1.2 billion yen, a 0.9% increase year-over-year. Revenue contribution: 19.4% of total consolidated revenue.
• Other: Revenue of 3.6 billion yen, an 11.7% decrease year-over-year (driven by the divestment of the cosmetics manufacturing and sales business in the prior year); operating profit of 0.6 billion yen, a 78% increase year-over-year (driven by increased orders for machinery and molds from automotive equipment upgrades). Revenue contribution: 3.9% of total consolidated revenue.

• For the 2026 March full fiscal year, management guides consolidated revenue of 99.0 billion yen, operating profit of 4.7 billion yen, ordinary profit of 4.8 billion yen, and net profit attributable to parent company shareholders of 3.2 billion yen. Net profit is expected to be roughly flat compared to the 2025 March fiscal year actual result of 3.262 billion yen, with the 1.9% stated year-over-year decline being a technical difference rather than a meaningful drop.
• Capital expenditure for 2026 March fiscal year is planned at 11.6 billion yen, with 2.9 billion for the container segment (plastic product equipment expansion), 4.0 billion for the filling segment (own warehouse construction), and 4.1 billion for Indonesian overseas investment. Depreciation expense is expected to be 6.6 billion yen.
• For the mid-term management plan VENTURE-5, 2025 March fiscal year revenue missed plan but operating profit exceeded plan, with operating profit margin already exceeding the full plan target for 2026 March fiscal year. 2026 March planned revenue is still below the original VENTURE-5 target, but operating profit is expected to meet the plan target due to ongoing structural reforms to improve profitability.
• For the final 2027 March fiscal year of VENTURE-5, management targets 6.1 billion yen consolidated operating profit, operating profit margin over 5%, D/E ratio below 0.6x, and ROE of 6.5%.

• Macroeconomic risks: Sustained price increases are weighing on consumer sentiment, reducing private consumption. Continued high interest rates in Western markets, uncertainty over the Chinese economic outlook, and shifting US policy have increased global recession risks, leaving the overall outlook highly uncertain.
• Industry-specific risks: In the soft drink industry, consumer buying restraint after broad necessity price cuts has pressured demand for coffee and fruit drinks, leading to industry demand slightly down year-over-year. In the food canning industry, prolonged shortages of marine raw materials (such as mackerel) have reduced industry output.
• Domestic market risks: Japan's shifting population demographic structure and mature core business markets create long-term structural challenges that require group-wide responses.
• Project execution risk: The Indonesian new plant project has already experienced delays from permit approval issues, requiring scope revision.

Q: The analyst observes that while material and energy costs have been passed through in container business price hikes, processing fees have likely not increased, similar to peer container manufacturers. What is the actual status of processing fee pass-through?

A: The full answer is not included in the provided transcript. The question confirms a key market focus on the company's ability to pass through all cost increases to maintain margins.

Q: What is the current outlook for beverage-related demand in Indonesia?

A: The full answer is not included in the provided transcript. The question highlights investor focus on the growth outlook of the company's key expansion market.