OILES CORPORATION Q4 FY2025 earnings call

Overall Consolidated Performance

• Total consolidated revenue: 67.604 billion yen (-1.7% YoY, -0.1% vs mid-term plan)
• Total consolidated operating profit: 6.942 billion yen (-4.8% YoY, +21.8% vs mid-term plan), with an operating margin of 10.3%
• Profit attributable to parent shareholders: 6.308 billion yen (+15.2% YoY), driven by special gains from policy-held share sales and special tax deductions for wage increase promotion
• Full-year dividend increased 10 yen from prior forecast to 85 yen per share, driven by stronger-than-expected performance

Long-Term and Mid-Term Strategic Framework

• Long-term vision: OILES 2030 VISION focused on contributing to a sustainable society via core tribology and damping technology, plus exploring new technologies and new business lines while strengthening operational foundations
• Mid-term plan priorities: concentration on growth markets, productivity improvement via business reform and production technology advances, corporate value enhancement, and capital efficiency-focused financial management
• 2025 mid-term plan target: 8%+ ROE; 2030 vision target: 10%+ ROE and 15%+ operating margin. 2025 actual ROE hit 8.4%, exceeding the mid-term target

Segment Mid-Term Progress

• General Bearing Equipment: Targeting 16.7 billion yen revenue and 1.7 billion yen operating profit by 2026. Focused on expanding in high-growth electronics (air bearing sales are growing in Japan and China) and renewable energy markets, with ongoing new product development in North America, India, and China
• Automotive Bearing Equipment: Targeting 36.3 billion yen revenue and 3.8 billion yen operating profit by 2026. Prioritizing expansion in India, with ongoing design-in activity for non-Japanese local automakers and planning for a second local factory to increase production capacity
• Structural Equipment: Targeting 13.5 billion yen revenue and 1.2 billion yen operating profit by 2026. Prioritizing sales to the growing infrastructure renewal market (an estimated 460,000 of Japan's 730,000 bridges will be over 50 years old by 2034, driving demand for seismic retrofitting). A seismic isolation certification factory has started operations in Taiwan to expand overseas sales
• Construction Equipment: Targeting 6.5 billion yen revenue and 0.56 billion yen operating profit by 2026. Maintaining share in the new construction market while prioritizing the growing renovation and maintenance market driven by demand for longer building lifespans

Corporate Base and Capital Management

• New business creation: Exploring external co-creation based on existing intellectual property, with an ongoing internal idea solicitation program
• Operational improvement:推进 digitalization across all factories and has started using generative AI to improve productivity
• Human capital management: Conducting regular employee engagement surveys, expanding training programs including external secondments, and implementing office reforms to improve communication and productivity
• Capital strategy: Continued reduction of policy-held listed shares (2025 market value down 8.5% YoY). Planning 200 billion yen in total capital expenditure over the 2024-2026 three-year period, including large testing equipment for structural equipment and a new Indian factory for automotive bearings
• Shareholder returns: 2025 total payout ratio (dividend + share buybacks) hit 87.9%, with a dividend payout ratio of 40.8%

1. General Bearing Equipment: Revenue of 14.83 billion yen, operating profit of 1.133 billion yen. Both revenue and profit exceeded prior year and mid-term plan targets, driven by recovering demand for bearings for molding machines and machine tools, and expanded sales to semiconductor manufacturing equipment and renewable energy segments. This segment accounts for ~21.9% of total consolidated revenue.
2. Automotive Bearing Equipment: Revenue of 33.804 billion yen, operating profit of 3.363 billion yen. Both revenue and profit exceeded prior year and mid-term plan targets, despite production stoppages at some domestic Japanese automakers, from expanded sales to both Japanese and non-Japanese customers in North America, China, and India. This segment accounts for ~50% of total consolidated revenue.
3. Structural Equipment: Revenue of 11.311 billion yen, operating profit of 1.956 billion yen. Both revenue and profit declined year-over-year due to project delays from labor shortages for multiple scheduled construction projects, but operating profit still exceeded mid-term plan targets. Bridge products for highways and Shinkansen projects remained solid. This segment accounts for ~16.7% of total consolidated revenue.
4. Construction Equipment: Revenue of 5.938 billion yen, operating profit of 0.391 billion yen. Both revenue and profit declined year-over-year: while sales of window operators for building renovation projects grew, sales of new construction and residential products fell. This segment accounts for ~8.8% of total consolidated revenue.

• Full-year FY2026 (March 2026) consolidated guidance: 71.2 billion yen revenue (+5.3% YoY, flat vs mid-term plan), 6.4 billion yen operating profit (-7.8% YoY, +0.8% vs mid-term plan), 4.7 billion yen profit attributable to parent shareholders (-25.5% YoY). Guidance incorporates projected exchange rates of 144.87 yen/USD and 19.90 yen/CNY, and accounts for North American tariff impacts
• Segment guidance for FY2026:
  • General Bearing Equipment: 15.6 billion yen revenue, 1.3 billion yen operating profit, 8.3% operating margin. Management expects stable demand for production machinery, with growth driven by semiconductor and renewable energy focused expansion
  • Automotive Bearing Equipment: 34.7 billion yen revenue, 3.1 billion yen operating profit (down from 3.363 billion yen FY2025), 8.9% operating margin. Operating profit decline reflects expected North American tariff impacts; management expects global automotive production to decline 0.5% YoY, and will prioritize EV/autonomous driving product development and non-Japanese customer expansion in India and China
  • Structural Equipment: 12.6 billion yen revenue, 1.4 billion yen operating profit (down from 1.956 billion yen FY2025), 11.1% operating margin. Operating profit decline reflects a lull in large projects and higher depreciation from recent capital expenditure, but management notes the business is building a more stable profit base less dependent on large projects
  • Construction Equipment: 6.46 billion yen revenue, 0.54 billion yen operating profit, 8.4% operating margin. Management will prioritize expansion in the renovation market to offset declines in new construction starts
• Dividend guidance: Full-year FY2026 dividend maintained at 85 yen per share
• The full mid-term plan (ending FY2026) remains on track to hit its target of 75 billion yen total revenue and 7.35 billion yen operating profit

• Persistent high macro uncertainty: global monetary tightening, downward risks to the Chinese and broader global economy, unstable international geopolitical conditions, and uncertainty around future U.S. policy
• North American automotive production downside: Near-term downside risk to production volume from inflation in H2 FY2026, plus ongoing negative impacts from North American tariffs
• European automotive market weakness: Continued low demand due to inflows of Chinese EVs and persistent inflation, with additional downside risk from production cuts tied to North American tariffs
• Thai automotive market stagnation: 2024 production volume dropped sharply from prior year, and management expects stagnation to continue at 2024 levels in FY2026
• Construction sector headwinds: Declining new construction starts, rising labor and material costs, and ongoing project delays from industry-wide labor shortages
• Uncertain outlook for the Chinese general bearing market: Growth in semiconductor and hydropower projects is expected in H2, but overall outlook remains uncertain due to U.S. tariff impacts

The provided transcript does not include a transcribed question and answer section from this earnings call.