FUJI CORPORATION Q3 FY2025 earnings call

• Overall Consolidated Performance

  • The third quarter saw year-on-year revenue and operating profit decline: consolidated sales reached 93.565 billion yen (down 2.2% YoY), operating profit reached 9.788 billion yen, ordinary profit reached 11.174 billion yen, and net quarterly profit reached 8.449 billion yen (net profit grew due to increased gains on sales of investment securities).
  • Order amount totaled 83.293 billion yen (down 2% YoY), but grew 27% quarter-over-quarter from 25.7 billion yen in Q2 to 32.7 billion yen in Q3, with recovery signs centered on China and other Asian markets, and further growth is expected in Q4.
  • Positive gross profit drivers: +0.344 billion yen from increased sales volume, +0.165 billion yen from improved operating leverage with higher production volume, +0.141 billion yen from component cost improvements tied to increased NXTⅢ shipments. Negative gross profit driver: -1.657 billion yen from product mix, as higher average selling price markets (Japan, Europe/U.S.) saw lower sales while lower price China/Other Asia sales grew. SG&A: +0.421 billion yen for new model R&D after reaching key development milestones, +0.124 billion yen for personnel costs from workforce restructuring in Europe/U.S. amid market weakness, partially offset by -0.35 billion yen from other expense adjustments.

• Balance Sheet Updates

  • Total assets decreased 1.376 billion yen quarter-over-quarter, primarily from lower inventory assets. Total liabilities increased 6.055 billion yen, driven by higher equipment trade payables and unpaid corporate taxes after completion of the Okazaki factory reconstruction. Net assets decreased 7.432 billion yen, driven by treasury stock purchases and lower valuation differences on other securities. Ongoing treasury stock purchases from August are on track, reaching 2.72 million shares and 6.2 billion yen as of end-January 2025.

• Regional & Product Breakdown (Robot Solution Business)

  • Regional: China saw multiple new capital investments in smartphones and related components despite broader economic sluggishness; Vietnam and India led investment growth in other Asia; the U.S./North America saw minor recovery signs in automotive with new electronic tag investment in Mexico; Europe remains weak.
  • Industry: 85% of communications segment growth comes from Chinese smartphone investments in China/India; computer/server investment grew across Vietnam, China, and Taiwan; automotive demand is flat and stable outside Europe, driven by infotainment and smart rearview mirror products not tied to BEV/HEV trends; semiconductor related mounter investment grew for China, while Fasford Technology memory-related business declined; other segments saw growing electronic tag investment in Vietnam/Mexico and new capital investment for AI server power supplies.
  • Model: NXT model grew sharply on surging Chinese smartphone demand; while NXTR customer certification advanced for smartphone, semiconductor and SiP applications, broad-based sudden short lead time demand lifted NXT's share faster; Fasford Technology die bonder business declined.

1. Robot Solution Business: Order amount of 74.292 billion yen, sales revenue of 84.307 billion yen, operating profit of 11.87 billion yen, order backlog of 24.52 billion yen. It represents 90.1% of total company sales revenue. This segment saw year-on-year revenue and profit decline, driven by weak performance in the memory die bonder business at Fasford Technology, while mounter orders and sales grew quarter-over-quarter from the second quarter. 2. Machine Tool Business: Order amount of 7.273 billion yen (down 7.1% year-on-year), sales revenue of 7.641 billion yen (down 1.9% year-on-year), operating profit of 0.339 billion yen (returned to net profit). It represents 8.2% of total company sales revenue. The return to profit reflects successful results from ongoing structural reforms.

• Full-year 2025 March fiscal year consolidated guidance is revised downward: order amount and sales revenue are both cut by 6 billion yen from the August guidance, while operating profit is cut by 1.8 billion yen. Full-year orders and sales are now expected to be flat year-on-year.
• Robot Solution Business full-year guidance: order amount is revised downward by 5.5 billion yen, primarily due to delayed recovery of the memory market at Fasford Technology; sales revenue is revised downward by 6 billion yen, as continued cautious investment sentiment in the U.S. market offsets recovery in China and other Asia.
• Full-year dividend guidance is maintained at 80 yen per share, unchanged from prior guidance.

• Full-year recovery of the memory chip market, which drives Fasford Technology's performance, is slower than previously expected, pushing delayed recover into the next fiscal year and driving the full-year downward guidance revision.
• European automotive and general electronic demand remains weak, and the U.S. market continues to show cautious investment sentiment that has weighed on overall sales results.
• Uncertainty over trade regulations tied to the U.S. presidential election creates uncertainty for Chinese and Asian technology supply chains and capital investment plans.
• PBR trading below 1x with a strong balance sheet and large cash holdings creates corporate governance pressure and potential activist investor risk, which management has acknowledged and is actively discussing at the board level.

Q: How does management assess Q3 performance against plan, specifically for the mounter business excluding Fasford Technology? / A: While Fasford Technology remained sluggish, mounter orders and sales grew 30-40% quarter-over-quarter from Q2, indicating a steady partial recovery in mounter demand. Mounter performance was broadly in line with internal expectations, rather than significantly beating plan.

Q: What is the current outlook for NXTR's shipment share in the NXT series, and when will the 50% target be hit? / A: NXTR's share fell in Q3 due to surging short lead time demand for the already-certified NXTⅢ. Management expects NXTR to recover to 18% of total NXT series shipments in Q4, and the 50% target is now expected to be achieved in the first half of the next fiscal year, as customer certification continues to advance and more clients switch to NXTR for follow-up orders.

Q: What is the timeline for recovery at Fasford Technology, and why are current sales and profits weak despite existing order backlog? / A: Fasford Technology's memory-related business remains extremely weak, and management expects conditions to stay difficult through the first half of the 2025 fiscal year, with recovery starting in the second half. Weak current sales are not caused by order cancellations, but by customer-requested shipment delays, which will be recognized as revenue when shipments resume next fiscal year; profitability will return to black once sales volume recovers.

Q: What is the current state of demand recovery in China and other Asia, and how is the outlook trending? / A: Chinese local smartphone demand is very strong, with growing investment across AI server and automotive segments as well. Supply chain diversification out of China has driven strong capital investment in Vietnam, Thailand, Malaysia and Indonesia. Strong large order inquiries that began late last year have continued past the expected temporary Lunar New Year seasonal uptick, so management now expects the recovery to be sustained rather than transitory.

Q: How is FUJI positioned to capture AI-related market growth? / A: The most visible AI-related demand currently is for power supply and cooling components for AI servers, which has already generated new capital investment orders in Asia. However, FUJI is late to the market for large AI server substrate mounting equipment, and is working to recover market share. AI-related demand has not yet meaningfully driven broad-based capital investment that translates to large revenue increases for FUJI, though growth in AI devices for PCs and smartphones would play to FUJI's core strengths if demand emerges.