FP CORPORATION Q4 FY2025 earnings call

Overall Financial Performance

• 15 consecutive years of revenue growth achieved. Total consolidated revenue hit 235.628 billion yen (106.1% YoY), operating profit 18.471 billion yen (112.4% YoY, 103.8% of plan), ordinary profit 18.451 billion yen (110% YoY, 102.5% of plan), and net profit attributable to parent shareholders hit a record high of 12.486 billion yen (106.5% YoY, 103% of plan).
• Capital expenditure came in at 16.112 billion yen vs a planned 15 billion yen, with depreciation expense of 14.751 billion yen vs a planned 14.8 billion yen.

Product Innovation and Sustainability

• Developed three new plastic reduction technologies: low-foaming large sushi tubs cut plastic use by over 50% (shipping volumes up 1.6x in 6 months), fully redesigned prepared food containers cut average plastic use by over 10% (expected annual reduction of 680 tons), and the new "cold-resistant PPiP-talc" material cuts plastic use by 25% while maintaining required cold-resistant impact strength for frozen food and healthcare food applications.
• Expanded the "Store to Store" closed-loop recycling program, with 111 partner companies and 3,173 stores signing cooperation agreements; target to reach over 200 partner companies within 2 years.
• Increased CO2 reduction rate of eco-trays from 30% to 37% after powering all three recycling facilities with solar energy; achieved the target of reducing more CO2 via eco-products than total scope emissions one year early (209,000 tons of CO2 reduced vs 179,000 tons emitted).

Infrastructure and M&A Integration

• Completed a nationwide logistics network after relocating 30% of production capacity from Fukuyama to a new Kansai hub, now covering 85% of Japan's population within a 100km radius of production/distribution sites.
• Successfully integrated acquired packaging distributors by standardizing core systems, rationalizing operations via group logistics infrastructure, and expanding into the small restaurant segment via EC platform "Pack Market"; the success of this integration model has made FPCO a preferred acquirer for succession-less distributors in the industry, with additional small distributor acquisitions in progress.

Financial Strategy and Shareholder Return

• Maintains a progressive dividend policy with a target consolidated payout ratio of 40%, and has not cut dividends in 10 consecutive years. If FY2026 plans are achieved, the payout will increase to hit the 40% target.
• Medium-term financial plan (FY2026-FY2028) targets annual capital expenditure of 20-25 billion yen, funded primarily by operating cash flow with leveraged financing used for incremental large projects; the company aims to improve ROE gradually and hit medium-term targets of 300 billion yen in total revenue and 30 billion yen in ordinary profit.

1. Own-manufactured products: 180.77 billion yen in revenue, 105.3% year-over-year growth, accounting for 76.7% of total consolidated revenue. Adjusted sales volume reached 100.8% year-over-year after accounting for one less operating day and product mix shift to integrated-fit containers. 2. Group distribution subsidiary (FPCO Interpack): 28.4 billion yen in revenue (up from 17.5 billion yen at group acquisition), operating profit grew to 850 million yen from 270 million yen 6 years prior, with labor productivity reaching 167% of 2019 levels. 3. Overseas subsidiary LSSPI (Malaysia): Sales volume grew over 10% year-over-year, but margins were pressured by 40% higher electricity costs, with price pass-through progressing gradually and the business returning to recovery in early 2025. 4. Differentiated proprietary products (exclusive to FPCO) account for 68% of total product revenue, while undifferentiated commodity products account for only 32%. Eco-products currently make up 51% of total product sales.

• Full year FY2026 (ending March 2026) guidance: total revenue 245.3 billion yen, ordinary profit 19.6 billion yen (11.5% YoY growth), net profit attributable to parent shareholders 13.17 billion yen. Management confirms guidance is deliberately set at a conservative level.
• Capital expenditure guidance for FY2026 is 19.5 billion yen, with planned depreciation of 14.8 billion yen.
• Guidance factors: +5.5 billion yen contribution from price adjustments and product mix improvement, -0.9 billion yen negative impact from raw material price increases, -3.45 billion yen negative impact from higher labor, logistics, and eco-PET raw material costs.
• Management maintains the medium-term target of reaching 300 billion yen in total revenue and 30 billion yen in ordinary profit by FY2028.
• Proprietary product revenue share is targeted to increase further from the current 68% to build full market differentiation.

• Uncertainty around raw material and energy prices: current crude oil and naphtha prices are on a downward trend below $60/bbl, but it is unclear if this trend will continue; electricity costs have doubled from historical averages over the past 3 years, and further increases in input costs would require additional industry-wide price pass-through.
• Weak consumer demand: since the start of 2025, most Japanese supermarkets have seen same-store sales volumes decline to 95-96% of prior year levels as consumption stagnates, even with overall revenue up due to price increases; wage growth in 2025 may not be sufficient to drive a material rebound in consumer demand.
• Delays in colored tray recycled feedstock expansion: the new DIC de-inking plant that is expected to increase eco-tray production by 30% is not yet operating at full capacity, and will undergo modifications after Golden Week 2025, meaning the 30% expansion target will take additional time to achieve.
• Construction cost inflation for the new oriented polypropylene (OPP) sheet plant in Ibaraki: construction costs are 30-50% higher than when the company built the Kansai production hub, putting pressure on project investment costs.
• Overseas operation risk: acquired Malaysian subsidiary LSSPI faces outsized electricity cost increases (40% higher) that have pressured near-term margins, with price pass-through progressing slower than expected.

Q: Why is the 2026 fiscal year guidance viewed as conservative by the market, and can you confirm management's stance? / A: Management explicitly confirms the guidance is deliberately conservative for two core reasons. First, while current crude oil and naphtha prices are declining, there is high uncertainty around whether this downward trend will persist through the full fiscal year. Second, FPCO has completed three price adjustments over the past three years that will carry over to FY2026, but management is unwilling to build an assumption of lower raw material prices into guidance given how challenging price increases are for the sales organization. Management chose to avoid overestimating results to prevent negative surprises if market conditions shift.

Q: What progress has the company made passing price increases through to customers amid ongoing input cost inflation? / A: FPCO led the Japanese food container industry through three consecutive price adjustments over three years, with the third round fully completed by October 2024. The industry's generational shift has allowed younger sales teams to implement these changes successfully, and packaging distributors have also thanked FPCO for leading the initiative to enable industry-wide price pass-through. Management states that if raw material and energy costs rise further in the future, FPCO will again lead the industry to implement additional price pass-through successfully.

Q: What is the company's strategic roadmap for the new oriented polypropylene (OPP) sheet business? / A: FPCO has ordered the first stretching line for a new OPP plant in Bando City, Ibaraki, with detailed design completion expected by November 2025. The new OPP material creates a uniquely strong, transparent, moldable container that does not require additional painting, and the plant is already designed to accommodate a second production line due to strong inbound customer interest. FPCO expects the new material to also have applications in civil engineering and construction materials, and will finalize the go-to-market strategy for this new business line by the plant's 2027 opening, including the timing of the second line investment and potential partners.