OILES CORPORATION Q4 FY2026 earnings call

• Company Overview

  • Oiles will celebrate its 75th anniversary in March 2027, has 15 consolidated subsidiaries, approximately 2,600 employees, and holds around 3,600 industrial property rights cumulative.
  • 4% to 5% of total annual sales is allocated to research and development, a higher proportion than peer competitors in the industry.
  • The company operates a global supply network with 6 production bases across 5 countries in Asia and North America, with the second Indian plant scheduled to start operations in February 2027.
  • The company's core technologies are tribology (the study of controlling friction, wear, and lubrication) and damping (vibration energy absorption/control technology), which are applied across all three business segments.

• Key Competitive Strengths

  • Market-creating orientation: The company inherits the founding philosophy of "contributing to society through technology", focusing on solving customer and social challenges through technological innovation, and continuously pursues development of world-first products and solutions.
  • Diversified business portfolio: The company operates across automotive, energy, construction, and electronics industries, with balanced revenue across segments that reduces reliance on any single industry and improves resilience to market fluctuations. All core businesses align with social goals of environmental improvement and public safety enhancement.
  • Long-term accumulated core technology: The large portfolio of industrial property rights and high R&D investment reflect the results of decades of technology development.
  • High-capability workforce: The company has specialized talent across technology, sales, and quality functions, with proprietary systems including TDS (Technical Direct Sales, which pairs sales and technical teams to solve customer problems) and EK (sales research, which performs system evaluation close to actual operating conditions) that support business expansion.

• Recent Operational Progress

  • In the general bearing segment, demand for Oiles' OAB air bearings (which use an air layer to create non-contact operation, near-zero friction, and ultra-high precision) is growing rapidly in the semiconductor manufacturing equipment sector. The company is expanding sales channels in both Japan and China, and targets to double 2023-based sales by 2026.
  • In the automotive bearing segment, the company is expanding sales in overseas markets, particularly targeting new orders from local non-Japanese automakers. It is investing 5.5 billion yen to build the second Indian plant, which has 2.8 times the land area of the first plant, to meet growing demand in the fast-growing Indian market. The plant will also help capture new demand from vehicle electrification, which has generated new needs for customized bearing products. Oiles' small and lightweight bearings also support vehicle weight reduction to extend EV cruising range.
  • In the seismic isolation and vibration control segment, the company is investing 3.7 billion yen in capacity and capability upgrades at its only dedicated plant, the Ashikaga Works, to address growing demand from urban redevelopment, new data center construction, and upcoming large-scale infrastructure renewal for aging bridges (39% of bridges are over 50 years old as of 2024, and this will rise to over 63% by 2034). In January 2025, the company signed a license agreement with a local Taiwanese firm for manufacturing and sales of vibration control devices, expanding into the Taiwanese market.
  • In the smoke exhaust and ventilation window device segment, the business is operated by subsidiary Oiles ECO Co., Ltd., which develops products focused on disaster prevention, energy saving, and user comfort, with offerings for both commercial buildings and residential properties. The segment's products have been adopted by major landmark facilities including Tokyo Big Sight.
  • The company launched the internal new business proposal program "Souzou Kaigi" in fall 2024 to develop a fourth core growth business. The program collects employee ideas through workshops and seminars, develops approved proposals into new business projects aligned with the medium-term plan's goal of new technology and business creation.
  • The company is strengthening public relations and advertising activities to improve external brand recognition and internal employee engagement, including corporate TV commercials, full-page advertisements in the Nihon Keizai Shimbun, and introduction of an internal web newsletter. The company also held a themed lecture at the Osaka-Kansai World Expo focused on its seismic isolation technology, with archived content available on its official website.

For the 2025 March fiscal year, Oiles Corporation reported total group net sales of 67.6 billion yen, with an overall overseas sales ratio of 38%. The breakdown by segment is as follows:

1. Automotive bearings: 33.8 billion yen in sales, accounting for 50% of total group revenue.
2. General industrial bearings: Approximately 13.52 billion yen in sales, accounting for 20% of total group revenue.
3. Seismic isolation and vibration control devices: Approximately 10.14 billion yen in sales, accounting for 15% of total group revenue.
4. Smoke exhaust and ventilation window opening/closing devices: Approximately 10.14 billion yen in sales, accounting for 15% of total group revenue. For the 2024 fiscal year (April 2024 to March 2025), the company achieved operating profit of 6.94 billion yen, with an ROE of 8.4%, meeting the medium-term plan's target threshold. The operating profit margin has remained above 10% for the past two years.

• Long-term vision: Oiles 2030 VISION aims to contribute to a sustainable society through core friction, wear, and vibration control technology plus additional innovation, with 2030 targets of 15%+ operating profit margin and 10%+ ROE.
• Medium-term plan (fiscal 2024 to fiscal 2026): The plan maintains the original target of 75 billion yen in total sales, 7.35 billion yen in operating profit, and 8%+ ROE for the 2026 fiscal year. The company remains committed to achieving these targets. For the 2025 fiscal year, the company downward revised its full-year earnings forecast due to facility issues at the Ashikaga Works, but maintains that the overall corporate growth base remains solid, supported by cost control and performance offset from other business segments.
• Shareholder return guidance: The annual dividend is planned to remain at 85 yen per share for both the 2025 March fiscal year and 2026 March fiscal year, with a target consolidated payout ratio of 40% or higher. The company has conducted treasury stock repurchases for three consecutive years from 2023 to 2025, and will continue to conduct repurchases flexibly based on internal reserves and market conditions, positioning shareholder return as a core management priority.

• Facility operational issues: Equipment problems at the Ashikaga Works (the only dedicated production site for seismic isolation and vibration control devices) led to a downward revision of full-year 2025 fiscal year earnings, though the company notes the impact is contained and offset by other businesses.
• Automotive industry transition: While the company views the shift from internal combustion engine vehicles to EVs as a net opportunity, a faster-than-expected transition could create near-term demand declines for legacy bearing products if the company cannot scale new product output quickly enough.
• Infrastructure aging: While aging infrastructure creates large renewal demand, it also reflects broader infrastructure market stagnation that could lead to uneven demand growth over the medium term.

Q: With the ongoing shift from gasoline vehicles to EVs in the automotive industry, is there a risk of sales declines for Oiles?

A: There is no need for concern. As shown in recent performance trends, our sales have not declined—they have actually grown. The transition to full electrification will not happen overnight; the market will shift gradually through hybrid vehicles, so demand for internal combustion engine bearings will remain for the foreseeable future. At the same time, electrification has created new demand for bearings in motors, water pumps, compressors, and air suspensions for new energy vehicles. For Oiles, the transformation of the automotive industry is not a threat—it is a new growth opportunity.

Q: Oiles has a high equity ratio. What is the priority order between growth investment, treasury stock repurchases, and shareholder returns?

A: Growth investment is the clear top priority. We will actively invest to strengthen competitiveness in high-growth areas including the electronics market (specifically semiconductor manufacturing equipment), renewable energy (hydropower and wind power), and overseas automotive markets (India and China). Shareholder returns via dividends and flexible treasury stock repurchases remain core priorities after funding required growth investments.

Q: Oiles has had increased media exposure recently. Are you actively strengthening PR activities, and what are the goals?

A: We are indeed actively strengthening external PR to improve brand recognition and also boost internal employee engagement. Current activities include advertisements in the Nihon Keizai Shimbun, corporate commercials on TVer, and a sponsorship agreement with the Tokai University long-distance ekiden team in our home Shonan region. We also use our official character "Osbee" (with a bearing-shaped body and a seismic isolation device-shaped tail) in shareholder documents, briefing materials, and our website to make the company more approachable for retail investors and the general public. We will continue to communicate our business and strengths clearly through multiple channels going forward.