MABUCHI MOTOR CO.,LTD. Q2 FY2025 earnings call

First Half 2025 Financial Results

• Overall net sales were nearly flat year-over-year, down 0.4%. Operating profit grew 32.2% year-over-year to 1.6 billion yen from selling price/product mix improvement, 1.0 billion yen from manufacturing fixed cost reduction, and 0.4 billion yen from lower raw material prices.
• Ordinary profit fell 40.4% year-over-year due to foreign exchange impacts, but beat the initial first half forecast by 1.5%. Interim net profit attributable to parent shareholders fell 28.5% year-over-year, but beat the initial forecast by 16.2%. The effective tax rate dropped 9.7 percentage points year-over-year due to yen appreciation impacts on overseas subsidiary retained earnings and non-taxable negative goodwill gains.
• Sales volume rose 0.1% year-over-year, while production volume fell 4.6% year-over-year. Operating cash flow worsened by 2.5 billion yen year-over-year due to lower pre-tax profit; investment cash flow saw lower fixed asset acquisition spending; financing cash flow saw higher spending from treasury stock purchases.

Capital Strategy & Shareholder Returns

• Added a 10%+ ROE target as a new financial metric for the 2030 Management Plan to improve capital efficiency and drive corporate value growth.
• Expanded planned strategic investment from 25.0 billion yen (for 2024-2026) to 70.0 billion yen to 80.0 billion yen over 2024-2030, utilizing financial leverage to accelerate growth via M&A and partnerships.
• Updated dividend policy: Starting this fiscal year, if prior period ROE is below 8% or PBR is below 1x, and the 4% DOE maximum payout is lower than a 50% payout ratio, the company will set a minimum 50% payout ratio, exceeding the 4% DOE cap. The 2025 full year dividend is planned at 78 yen per share, marking a second consecutive year of record high dividends.
• A 7.0 billion yen treasury share purchase (4.6 million shares maximum) is ongoing, with 4.7 billion yen completed in H1, and the remaining 2.3 billion yen to be completed by end-September 2025. An additional 19.0 billion yen treasury share purchase (12.0 million shares maximum) will run from October 2025 to September 2026. A 2-for-1 stock split is planned for January 1, 2026 to improve liquidity for retail investors.
• 2025 planned payout ratio is 58.7%, with a total payout ratio of 129.3% assuming one quarter of the additional 19.0 billion yen treasury purchase is completed this fiscal year.

Strategic M&A & Business Expansion

• Acquired a precision molding manufacturer with extensive high-precision gear expertise (Mabuchi OB Gear System) as a subsidiary in April 2025, to combine its gear technology with Mabuchi motors to capture growing motor unit demand.
• Acquired Mabuchi Microtec in July 2025, which adds a broad lineup of industrial motors to expand sales across the three focus "M" segments: Mobility, Machinery, and Medical. Mabuchi Microtec has new products for robot gripper applications, to enable total solution offerings in the Machinery segment.
• Received an "AA" MSCI ESG Rating in August 2025, the first time the company has earned this top tier rating.

1. 2025 First Half:

• Automotive Electrical Equipment (Medium Motors): Demand for parking brake and valve motors was solid, but overall segment sales declined year-over-year due to phase-out of old-generation power window motor products and yen appreciation impacts. The segment came in 2% below plan in volume and 7.3% below plan in revenue.
• Automotive Electrical Equipment (Small Motors): Mirror and door lock motor sales increased year-over-year, but the overall automotive electrical equipment segment declined year-over-year, included in the 7.3% revenue miss against plan above.
• Life & Industrial Equipment: The segment increased sales year-over-year. While the company narrowed low-margin orders for home appliance, tool, and beauty products, health and medical product sales remained solid. The segment came in 0.8% above plan in volume and 6.6% above plan in revenue.

1. 2025 Full Year Planned:

• Automotive Electrical Equipment (Medium Motors): 72.7 billion yen (down 6.8 billion yen from initial plan)
• Automotive Electrical Equipment (Small Motors): 75.8 billion yen (down 2.1 billion yen from initial plan)
• Life & Industrial Equipment: 44.4 billion yen (up 4.0 billion yen from initial plan) Total planned full year revenue is 193.0 billion yen, so the automotive segments contribute ~77% of total planned revenue, and the Life & Industrial segment contributes ~23% of total planned revenue.

• Full year 2025 net sales are forecast at 193.0 billion yen, down 1.6% year-over-year. The guidance reflects a conservative outlook for the second half accounting for potential auto production slowdown from US tariff policy uncertainty, despite strong customer forward forecasts for automotive products.
• Full year operating profit is forecast at 21.6 billion yen, down 0.2% year-over-year. 5.8 billion yen in expected gains from selling price/product mix improvement are offset by 3.1 billion yen in higher costs from increased R&D investment and personnel expansion for medium-term growth, plus lower sales volume.
• Full year ordinary profit is forecast at 22.3 billion yen, down 31.3% year-over-year due to expected foreign exchange losses. Full year net profit attributable to parent shareholders is forecast at 16.5 billion yen, up 28.6% year-over-year. US tariff impacts are not included in the current full year guidance.
• Full year sales volume is planned down 2.9% year-over-year, and production volume is planned down 3.7% year-over-year, with production volume cut 0.8% from the initial forecast while sales volume remains unchanged from the initial forecast. Second half automotive sales volume and revenue are expected to see a slight year-over-year decrease due to lower auto production and yen appreciation, though the typical seasonal increase from Q2 to Q3 is still expected, matching historical trends.
• For Life & Industrial Equipment, full year sales revenue is expected to increase year-over-year, driven by newly consolidated group companies from recent M&A, even as sales volume falls slightly from the profit-focused order narrowing strategy.
• 2025 full year capital expenditure is planned at 13.2 billion yen, down from the initial plan due to foreign exchange impacts, with 9.1 billion yen for labor-saving and new product production equipment, and 1.2 billion yen for R&D facilities. Depreciation is planned at 12.6 billion yen, down 1.5 billion yen year-over-year due to impairment of Poland Mabuchi assets. R&D expenditure is planned at 8.1 billion yen, up 1.1 billion yen year-over-year due to increased R&D headcount for growth initiatives.

• Uncertainty around US tariff policy: While the company's motors are not classified as automotive/automotive parts under current US tariff rules, and Mexican-made motors are currently exempt under USMCA, there is uncertainty around future trade policy changes. Approximately 14-15% of US-bound exports are shipped from China, with the remaining split roughly evenly between Mexico and Vietnam. Current expected total exposure is ~300 million USD if current rules hold, but the company will re-assess the full impact after intergovernmental negotiations conclude. The company plans to pass any applicable tariff costs to customers and is currently negotiating this with customers.
• Geopolitical and macroeconomic uncertainty: Rising uncertainty from US trade policy and global geopolitical risks has increased overall economic outlook uncertainty, with global auto production expected to be flat or slightly down year-over-year for 2025.
• Rare earth export regulation risk from China: Neodymium, the key rare earth used in the company's motors, is not subject to current Chinese export restrictions. The company has already secured sufficient inventory for all other rare earth materials needed for near-term operations, so supply disruption risk is considered low at this time.
• Foreign exchange risk: Ongoing yen appreciation has negatively impacted reported revenue and profits, and the current full year guidance assumes an exchange rate of 145 JPY/USD for the second half.

No formal question and answer section was included in the provided transcript.