PACIFIC INDUSTRIAL CO.,LTD. Q4 FY2025 earnings call

2024 Full Year Core Results

• Full year consolidated sales reached 206.1 billion yen: positive impact from yen depreciation was offset by lower sales volume, leading to a slight year-over-year decline. Operating profit came in at 13.6 billion yen, a 0.7 billion yen decline year-over-year, as cost savings from continuous improvement efforts could not fully offset headwinds from lower volume, lower selling prices, higher material costs, and rising labor and overhead expenses.
• Q4 2024 saw a recovery: sales grew 6% year-over-year to 54.8 billion yen, and operating profit jumped 1.3 billion yen year-over-year to 4.6 billion yen, driven by recovering vehicle production volumes and continued yen depreciation. Sales and profits have trended upward since Q3 2024 after declines following Q4 2023.

Mid-Term Management Plan (NEXUS-26, ending FY2026) Progress

• Overall progress toward 2026 final targets is on track, despite external headwinds affecting near-term performance. Both revenue/expansion initiatives and non-financial foundational projects are proceeding as planned.

Capital and Share Price Conscious Management

• The company prioritizes ROE and PER improvement: ROE improvement focuses on strengthening business profitability and improving investment efficiency, with all new investment projects evaluated based on investment turnover and hurdle rates aligned to cost of capital. PER improvement focuses on expanding disclosure of both financial and non-financial strategies (including digital and human capital strategies) to help investors understand the company's growth path, and reducing business risk via advancing sustainability management.

Segment-Specific Operational Progress

• Press & Resin Business: The company is leveraging its ultra-high tensile steel technology to expand orders for new electric vehicle (EV) products and existing components. The Higashi-Ōgaki press plant (launched two years ago) is on track to reach full capacity utilization this fiscal year. Growing new orders in the U.S. are driving a press plant expansion and new press equipment installation. Resin products for EV batteries are seeing steady overseas expansion, with wheel decoration components for the Indian market launching in FY2025. While near-term EV policy adjustments from automakers have created uncertainty, the company views long-term EV growth as unchanged and will adjust capacity expansion to match actual demand. The company has also prioritized strengthening relationships with key global clients, focusing on global cost reduction, quality improvement, and CO2 reduction, earning multiple awards from clients for overseas operations. Dedicated support teams for each overseas location improve communication, resolve issues early, and spread Japanese operational best practices across the group.
• Valve Business: Growth opportunities from expanding EV and plug-in hybrid markets are driving global development and sales expansion of EV-specific valves. A new valve factory under construction since last year will start operations in May. The company has already secured orders for a newly developed relief valve for EV battery packs, with customer shipments starting this fiscal year, and is working to expand adoption across more clients. For tire pressure monitoring systems (TPMS), the company launched new easy-to-install cap-style TPMS for the Japanese domestic aftermarket: the new product allows user self-installation and connects to smartphone apps, addressing low adoption of traditional hard-to-install valve-style TPMS in the non-mandated Japanese market, with the goal of growing domestic TPMS demand.
• New Business: The company is developing new non-mobility product lines focused on solving social issues. Six new products launched in 2024, including an energy visualization tool for factories, BLE-type transportation quality monitoring sensors, and an upcycled disaster prevention mat made from urethane scrap (which has received high industry recognition for social impact). The company will continue developing new products and businesses, leveraging both internal resources and open innovation.

Cross-Functional Strategic Initiatives

• Digital Strategy: Built around three pillars: DX/digital transformation, human capital development, and cybersecurity. The company is pursuing smart factory goals to improve operational efficiency, rolling out in-house developed digital systems across global locations including QR code product verification and digital production manuals to drive standardization and efficiency gains.
• Human Capital Strategy: Targets a 60% positive response rate in employee engagement surveys by 2026 (70% by 2030). Engagement has already improved 7.5 percentage points from prior surveys via targeted initiatives: more direct dialogue between executives and employees, building psychologically safe workplaces via hierarchical training and team discussions, expanding learning opportunities via web training and AI tools with internal new business challenge projects, and improving workplace environments, compensation, and evaluation transparency. The company aims to create a positive cycle of higher engagement driving business growth and higher enterprise value.
• Sustainability: The company updated its materiality framework to add nature conservation and employee engagement in response to changing external conditions. It has received external recognition for its efforts, including a top A-list ranking CDP for climate change, Japan's first

2024 Full Year (Fiscal 2025 ending March 2025):

1. Press & Resin Business: Net sales of 148.6 billion yen, operating profit of 8.1 billion yen. Revenue contribution: 72.1% of total consolidated sales.
2. Valve Business: Net sales of 57.2 billion yen, operating profit of 5.5 billion yen. Revenue contribution: 27.8% of total consolidated sales.

2025 Full Year (Fiscal 2026 ending March 2026) Forecast:

1. Press & Resin Business: Forecast net sales of 146.7 billion yen (down from 2024 due to yen appreciation), forecast operating profit of 10.4 billion yen (up from 2024 due to increased sales volume). Revenue contribution: 72.6% of total forecast consolidated sales.
2. Valve Business: Forecast net sales of 55.0 billion yen (down from 2024 due to yen appreciation), forecast operating profit of 2.7 billion yen (down from 2024 due to TPMS product mix changes). Revenue contribution: 27.2% of total forecast consolidated sales.

By Region 2024 Full Year: Japan: 68.4 billion yen sales, 5.4 billion yen operating profit; Europe & Americas: 100.0 billion yen sales, 5.1 billion yen operating profit; Asia: 37.6 billion yen sales, 2.6 billion yen operating profit.

guidance actually:

• Near-term automotive demand uncertainty, including recent automaker EV strategy adjustments that create near-term volatility in EV component demand
• Recent yen appreciation creates negative revenue and profit translation impact for the company's large overseas sales base
• Rising labor costs from wage increases and higher material/overhead expenses put pressure on margins
• U.S. trade tariff policy changes have not been incorporated into the 2025 full year forecast; while the majority of the company's Japan-to-U.S. component exports are to Japanese automakers, the company will monitor policy developments closely
• EV market growth could be slower than the long-term baseline expectation if adoption trends shift

The Q&A section is not included in the provided earning call transcript.