NAKAMOTO PACKS CO.,LTD. Q4 FY2025 earnings call

• Overall Financial Results:
  • Consolidated revenue hit an all-time high of 49.132 billion yen, up 10.8% YoY for the 9th consecutive year of record revenue. Consolidated operating profit reached 2.871 billion yen, up 58.2% YoY (an increase of 1.055 billion yen YoY), also a record high. ROE recovered to 10.9%, returning to 3-year-ago levels, and equity ratio stands at 48.3%, with a strengthened financial base.
• M&A and Joint Ventures:
  • Completed the full acquisition of MICS Chemical, renamed it Nakamoto Advanced Film, which delivered 0.2 billion yen in recurring profit in its first 11 months as a subsidiary. The company produces thin high-barrier food packaging that extends shelf life and reduces plastic use, aligned with growing demand for long-term food preservation.
  • Launched the joint venture RN Smart Packaging with Ricoh in 2023 to develop low-environmental-impact functional packaging. Label-less thermal top seal is seeing expanding adoption at convenience stores, and barrier-coated paper RESC has secured its first sales and growing inquiries from overseas customers.
• Operational Improvement:
  • Is replacing its 30-year-old core enterprise system across the group, with most subsidiaries already completed. The replacement enables overall production optimization, end-to-end SCM improvement, real-time data access, paperless operations, and data-driven DX improvement to address labor shortages and boost efficiency.
• Strategic Growth for IT/Industrial Materials:
  • The company is focusing growth on semiconductor manufacturing materials, automotive/consumer electronics, data center components, and secondary battery electrode materials, leveraging its in-house production equipment modification capability to deliver fast turnaround from prototyping to mass production. It plans to establish market leadership in contract processing for these sectors by 2030.

1. 食品関連: Revenue of 31.283 billion yen (up 9.2% YoY), gross profit of 4.365 billion yen (up 52.5% YoY), contributed 64% of total revenue and 51% of total gross profit. Growth was driven by strong demand for food packs for dairy, frozen foods, and agricultural products, plus full-year contribution from the acquired Nakamoto Advanced Film.
2. IT・工業材関連: Revenue of 8.991 billion yen (up 33.1% YoY), gross profit of 1.773 billion yen (up 18.8% YoY). Growth came from strong performance in smartphone, semiconductor, electronic component packaging applications, plus a recovery in automotive interior materials, plus spot and prototype sales for next-generation battery-related products.
3. 生活資材関連: Revenue of 4.258 billion yen (down 9.4% YoY), gross profit of 1.690 billion yen (up 1.2% YoY). Revenue declined due to reduced TV shopping airtime for compression storage bags, but higher-margin proprietary products offset the decline to deliver profit growth.
4. 建材関連: Revenue of 1.908 billion yen (down 6.8% YoY), gross profit of 0.268 billion yen (down 8.7% YoY). Wallpaper printing remained solid, but orders for coated functional building materials for detached homes declined amid a slowing housing market.
5. 医療・医薬関連: Revenue of 1.568 billion yen (up 11.7% YoY), gross profit of 0.331 billion yen (up 28.6% YoY). Growth was driven by strong demand for medical packaging bags and growing overseas demand for patch-related products.

• For the full year 2026 February period, the company guides revenue of 52.0 billion yen, operating profit of 3.025 billion yen, recurring profit of 3.1 billion yen, and net profit attributable to parent shareholders of 2.011 billion yen.
• The mid-term management plan 2024 (final year 2026 February) has revised the revenue target 3.0 billion yen upward to 52.0 billion yen, while keeping the recurring profit target unchanged at 3.1 billion yen, maintained on a conservative basis to ensure target delivery. The 50.0 billion yen long-term revenue target is on track to be achieved in 2026, and a new 3-year plan and updated long-term targets will be disclosed shortly.
• Capital expenditure for 2026 February is planned at 1.95 billion yen, focused on the new IT/industrial materials factory site, installation of a test coater machine, and continuing core system upgrades.
• Dividend guidance: Full year 2025 dividend is raised to 34 yen per share (up 2 yen from prior guidance), bringing full-year cumulative dividend to 66 yen (up 2 yen). A further 2 yen increase to 68 yen cumulative dividend is planned for 2026, extending the 10-year consecutive progressive dividend streak.

• Rising manufacturing input costs (ink, solvents, electricity, gas, logistics) continue to pressure margins, which the company plans to offset through cost reduction initiatives.
• The housing market slowdown driven by higher interest rates and rising construction material costs is reducing demand for building materials, pressuring the segment's revenue and profitability.
• High-tech growth sectors (IT/industrial materials, semiconductors, batteries) face rapid market fluctuations, creating demand uncertainty for new capacity investments.
• Top seal adoption expansion is delayed compared to initial plans, as it requires customers to make expensive equipment investments and modify production processes, pushing profitability for the JV out 1 year from initial targets.
• Trade tariff policy changes create uncertainty for automotive and industrial supply chains, though the company has already prepared for potential disruptions including shifting production to Vietnam.

Q: Why was the 2026 mid-term sales target raised but recurring profit kept unchanged at 3.1 billion yen? Is there weak performance in any segment or the RN joint venture? / A: Management set the profit target conservatively to ensure delivery. No major negative trends exist: tariff issues have not impacted performance to date, smartphone production volumes remain stable, and the company is actively offsetting housing market weakness in building materials. The plan aims to sustain 2025's ~2.9 billion yen recurring profit base while driving further growth, so the conservative target reflects a commitment to hitting the goal. RN Smart Packaging is on track to move toward net profit in 2026, and will not repeat 2025's loss. (419 characters)

Q: What is the adoption outlook and timeline for top seal packaging? / A: Top seal adoption is progressing at convenience stores, with commercial adoption already achieved for frozen meal applications that do not require automatic steam vents. However, adoption is running ~1 year behind initial plans, as customer adoption requires multi-million yen investments in new packaging equipment and changes to production processes, which was not fully anticipated early on. The other core RN product, RESC barrier cardboard, has already secured commercial sales and strong overseas inquiries. (398 characters)

Q: What synergies are expected from Nakamoto Advanced Film beyond revenue addition in coming years? / A: In the first year, the biggest benefit was elimination of public listing-related costs for the former MICS Chemical. From 2026, sales synergies will grow: Nakamoto Advanced Film specializes in co-extruded vacuum nylon bags, while Nakamoto Packs focuses on laminated bags, so the combined sales team can now offer both product lines to all existing customers of both firms, expanding the total addressable market for each. Technical synergies from combined R&D are expected to materialize in 2 years, and will be disclosed once ready. (401 characters)

Q: What is the timeline for the new IT/industrial materials factory, and how is risk hedged for the volatile high-tech sector? / A: Land acquisition is progressing, and the in-house built test coater machine will be installed within 2026, with prototype sales contribution expected in the second half of the year. To hedge industry volatility risk, the company is adopting a phased approach: it will first install the test coater to develop prototypes and secure orders, only moving to full mass production capacity investment once demand is confirmed. This avoids large upfront losses from unproven projects. (367 characters)