Hakudo Co.,Ltd. Q4 FY2025 earnings call

• Core Business Performance and Results Review

  • Achieved double-digit year-over-year revenue and profit growth, driven by domestic market share expansion from steady strategy execution, increased sales to the semiconductor manufacturing equipment sector amid growing generative AI demand, and higher product selling prices.
  • Both standard stocked items and made-to-order custom items grew revenue, with standard stocked items seeing 9.4% sales volume growth and 3.4% selling price increase year-over-year.
  • Revenue composition for the three prioritized growth industries increased year-over-year, with all industry segments recording full-year revenue growth.
  • The previous mid-term management plan missed profit and revenue targets, primarily due to prolonged slowdown and delayed recovery in the semiconductor manufacturing equipment industry (which accounts for ~40% of total revenue), and rising costs (labor, freight, materials) that were not fully offset by productivity improvements. Strengths from the prior plan included growth in automotive and aerospace segments, and achievement of the overseas revenue ratio target.

• Digital and Customer Base Expansion

  • Expanded Hakudo Net Service, growing available SKUs from ~84,900 to ~155,000, with cumulative registered customers reaching ~14,900 companies and ~30,000 individual users. The company will continue improving service convenience to expand its customer base.

• Growth Sector Expansion

  • Identifies semiconductors, automotive, and aerospace & defense as core growth sectors, with all three recording consistent sales growth from 2021 baseline levels.

• Overseas Business Expansion

  • Rolling out customized "EC Package" e-commerce services (similar to domestic Hakudo Net Service) across international markets: fully launched in Thailand, in pilot testing with selected customers in the US, scheduled for launch at Vietnamese investment target Oristar Corporation in the current fiscal year, and in preparation at Malaysian and Indonesian agents. The company will also expand sales focusing on aerospace-grade materials in South Korea, Taiwan, India, and the Philippines.
  • In the US, the company is expanding beyond existing thin sheet sales to add cut thick plate and cut round bar sales to grow the business.

• Sustainability Initiatives

  • Already achieved the 2030 CO2 emission reduction target (42% reduction from 2020 levels) ahead of schedule through initiatives including solar panel installation at factories and electric vehicle adoption for corporate use. Maintains a broad range of sustainability activities including community contribution and employment creation via the company-owned farm.

• New 3-Year (2025-2027) Mid-Term Management Plan

  • Positioned as the STEP phase of the company's HOP-STEP-JUMP roadmap toward its 100th anniversary in 2031, with targets of 104.1 billion yen in total revenue and 6.0 billion yen in ordinary profit by FY2027.
  • Three core strategic pillars: 1) Business growth via business evolution: deepen core business through digital service expansion, enhanced processing capabilities, factory and SCM reform, and expand into high-growth sectors and overseas markets; 2) Strengthen management base via human capital development, improved governance, and DX-driven operational reform, with new organizational departments added in April 2025 to support these goals; 3) Advance sustainability management, with a new target of 60% CO2 emission reduction from 2020 levels by 2027.
  • Total planned investment of 6.0 billion yen over the 3-year plan, allocated as ~2.2 billion yen for production capacity expansion, ~0.7 billion yen for system investments, ~2.0 billion yen for M&A, and ~0.3 billion yen for sustainability investments.

Geographic segments: 1. North America Segment: Despite overall group revenue growth, the segment reported a year-over-year profit decrease due to continued economic downturn and stagnant capital investment. 2. China Segment: Year-over-year business performance improved compared to the prior fiscal year. 3. Other (Hakudo Thailand) Segment: Business conditions remained strong through the full fiscal year. Product segments: 1. Aluminum products: Revenue increased 19.2% year-over-year, driven by rising demand from the semiconductor manufacturing equipment sector for generative AI and Chinese market demand. 2. Other metals: Revenue increased 26.2% year-over-year, boosted by sales of new optical-related products in China. Overall consolidated revenue was 66.41 billion yen, a 16.0% increase year-over-year, with all overseas segments recording revenue growth. Overall gross profit was 10.573 billion yen (+14.1% YoY), and ordinary profit was 3.214 billion yen (+12.9% YoY). Total overseas revenue accounted for 15.4% of consolidated revenue in FY2025 March.

• FY2026 March term: Expects continued revenue and profit growth despite a highly unstable external environment, driven by market share gains from strategic initiatives. The unstable current raw materials market conditions are not factored into the forecast, but selling price increases from June 2025 price revisions (both from material suppliers and Hakudo) are included.
• Dividends: FY2025 March full-year dividend was increased by 4 yen from the initial forecast to 89 yen per share. FY2026 March full-year dividend is forecast at 94 yen per share, calculated in line with the company's 45% full-year payout ratio target.
• New mid-term plan (2025-2027): Targets 104.1 billion yen in total consolidated revenue and 6.0 billion yen in ordinary profit by the end of the plan period in FY2027. Targets 18.7 billion yen in overseas revenue to grow the overseas revenue ratio, and maintains a 45% payout ratio shareholder return target.

• Raw material prices (aluminum, copper, stainless steel) are currently experiencing high volatility, paired with large exchange rate fluctuations; the company will continue to closely monitor market trends.
• The semiconductor manufacturing equipment industry has seen partial recovery driven by generative AI and Chinese investment demand, but has not yet achieved a full recovery due to continued weak memory chip demand. The industry outlook remains highly uncertain due to recent interest rate increases, exchange rate volatility, and geopolitical risks.
• Geopolitical risks from changes in US trade policy (including tariff changes from the Trump administration) have created a highly unstable external operating environment, with delayed recovery in the semiconductor sector adding uncertainty to performance.
• The company's high revenue exposure to the semiconductor manufacturing equipment industry (~40% of total revenue) is a key risk, as prolonged slowdown in the sector led to missed targets in the prior mid-term plan. The new plan prioritizes reducing this dependency via expansion into automotive and aerospace sectors.

The full question and answer exchange content was not included in the available transcript, only the topics of discussion are noted: 1) Future capital investment plans, 2) Saitama Factory new facility launch.