7922.T

Mid-Term Management Plan First Year Progress (3 Core Pillars)

• Pillar 1: Turn Special Printing into a Sustainable Profitable Business

  • Completed all initially planned initiatives: closed the aging Osaka plant in December 2024, offered voluntary retirements, exited unprofitable businesses, integrated production facilities, and cut costs. Achieved operating black ink for the standalone special printing business.
  • Reduced selling, general and administrative expenses by 13 million yen year-over-year, driven by lower fixed personnel costs after restructuring. Gross margin improved steadily after plant consolidation due to higher facility utilization.
  • Implemented organizational restructuring in January 2025, merging legacy location-based operations into 3 integrated headquarters, established a new sales planning department to improve cross-location collaboration, and built a structured process to validate new business profitability.
  • Added new improvement initiatives for Saitama Plant, targeting contribution from 2026 fiscal year: Saitama now undertakes Benriner OEM production and card die-cutting to boost utilization; Nagano Plant will focus on production efficiency gains via experience curve learning, with monthly KPI monitoring in place.

• Pillar 2: Build Business Base for Benriner, Double Production Volume

  • Improved operations at the existing Benriner plant, completed conversion of the acquired Gotanda Rubber Industry rubber processing facility into Benriner's second production plant. All new processing equipment was installed by March 2025, and the plant is now fully operational.
  • Leveraged 50+ years of in-house factory operation know-how to complete the conversion successfully, including full retraining of 40-year veteran rubber processing employees, and integration of team culture across the two facilities.
  • Launched a new factory operation consignment business in 2025 fiscal year: the company now manages a sewing factory in Myanmar for a client that acquired the facility, leveraging the company's existing plant operation expertise.

• Pillar 3: New Business Creation via CVC and M&A

  • Completed identification of new business areas and built a validation and decision-making framework. New opportunities must leverage existing Sanko Group capabilities and achieve clear synergies to be approved. The company aims to identify a third core business pillar within the 3-year mid-term plan period.

• For 2026 March fiscal year, management projects a sharp improvement in operating profit to 200 million yen, with net profit attributable to parent shareholders forecast at 208 million yen, driven by gross margin improvements from higher utilization and production efficiency, and increased profit contribution from expanded Benriner production.
• Benriner is projected to achieve 2x growth in revenue, unit sales, and EBITDA in 2026 March fiscal year compared to pre-acquisition levels, with the second plant now fully operational.
• The mid-term management plan's final fiscal year (2027 March) target remains unchanged: 10.5 billion yen in consolidated revenue, 300 million yen in operating profit, 4.1% operating margin, and 37.8% average annual operating profit growth over the plan period.
• Management maintains long-term targets of 8.0% ROE and 1.0x PBR, and will continue implementing initiatives to hit these goals.

1. Special Printing (core business, Sanko Sangyo standalone): Revenue of 7.555 billion yen, down 4.8% year-over-year. Achieved operating profitability for the first time after restructuring, with EBITDA of 184 million yen. It accounts for approximately 78.2% of total consolidated revenue. 2. Benriner (high-performance slicer subsidiary): Demand outpaces supply. Achieved over 1.2x sales and unit sales growth in 2024 without major new capital investment after acquiring Gotanda Rubber Industry. It accounts for a small but growing share of total consolidated revenue. 3. Other subsidiaries: Tom's Creative does novelty and toy manufacturing; Axis Trust sells small home appliances via e-commerce. These segments make up the remaining share of consolidated revenue, and contributed to overall results alongside the core and growth segments.

• Domestic printing demand continues to decline, with intensified competition, raw material price inflation, and difficulty passing through higher costs to customers, which led to Sanko missing its 2025 March fiscal year revenue and operating profit targets against the mid-term plan.
• The conversion of the former rubber plant required full retraining of long-tenured employees and negotiation to wind down existing rubber customer relationships, creating execution risk during the integration period.
• Cash decreased in 2025 fiscal year due to one-time impacts from capital expenditure for Benriner expansion, regulatory-driven shortening of payment terms, and borrowing for investment; management characterizes this as temporary rather than a permanent cash flow impairment, but it creates near-term liquidity pressure.

Q: Can you share more details on the challenges of converting Gotanda Rubber Industry into Benriner's second plant, and what production and profit contribution do you expect from the converted facility in the coming fiscal year? / A: The biggest challenges were completing the wind-down of Gotanda's 40+ year-old rubber business in a short timeline: this required explaining the change to all existing rubber customers to get their understanding, and negotiating the transfer of rubber operations to a receiving third party. The company spent a full year focusing on aligning employee mindset and integrating the team: existing Benriner staff provided hands-on training, and regular communication built alignment between the two workforces. By the 2024 fiscal year, the facility achieved over 1.2x growth in sales and unit sales without major new capital investment. All new processing equipment was installed at the new second plant by March 2025, and the facility is now fully operational. For 2026 March fiscal year, management expects Benriner to reach 2x revenue, unit sales, and EBITDA compared to pre-acquisition levels, and confirms the business is on track to become the second core pillar of the Sanko Group.