LINTEC Corporation Q4 FY2025 earnings call

Overall 2024 Fiscal Year (Year Ended March 2025) Performance

• Lintec achieved full-year growth in both revenue and profit, with strong performance led by the Advanced Materials segment driven by surging generative AI-related demand. Consolidated sales totaled 315.978 billion yen, up 14.4% YoY; operating income was 24.562 billion yen, up 131.1% YoY; ordinary income was 26.09 billion yen, up 126.1% YoY; and net income attributable to parent shareholders was 14.476 billion yen, up 176.1% YoY.
• Overseas sales accounted for 63.9% of total consolidated sales in the period. Yen depreciation provided a positive 2.2 billion yen impact to overall operating income.

Printing Materials & Industrial Materials Segment Operations

• For Printing Information Materials: Domestic demand for adhesive products for seals/labels fell, led by lower food-related demand amid high inflation, while promotional label demand was also weak. Overseas, MacTac America posted an 11.6% increase in sales volume from the acquisition of a Canadian sales subsidiary, with solid performance also in China and ASEAN. Overseas sales accounted for 71.6% of the sub-segment total.
• For Industrial Materials: Domestic demand for automotive adhesive products and window films was weak due to lower vehicle production. Overseas, Madico (U.S.) saw strong demand for security window films, VDI reported strong sputtering film demand, and automotive adhesive products grew in India. Overseas sales accounted for 52.6% of the sub-segment total.

Electronic & Optical Materials Segment Operations

• For Advanced Materials: Semiconductor-related adhesive tapes and HBM manufacturing-related devices grew sharply on rising generative AI-related demand; multi-layer ceramic capacitor (MLCC) tapes also grew strongly on higher demand from smartphones and data centers. Overseas sales accounted for 74.5% of the sub-segment total.
• For Optical Materials: While OLED smartphone adhesive tapes performed solidly, sales fell sharply due to the impact of closing South Korean and Taiwanese subsidiaries.

Paper & Processing Materials Segment Operations

• For Paper: The paper business faced a very severe operating environment, with weak orders centered on the core envelope paper product line, and rising raw material and logistics costs. While clean paper and oil/water resistant paper performed solidly, demand for core products fell. The company recorded a 7.728 billion yen impairment loss on fixed assets related to paper production operations at its Mishima and Kumagaya plants.
• For Processing Materials: Release paper for electronic materials and release films for optical products grew on stronger smartphone demand, with additional growth in process paper for synthetic leather and carbon fiber composite materials for leisure use. Overseas sales accounted for 38.4% of the sub-segment total.

Capital Expenditure and Shareholder Return

• 2024 fiscal year capital expenditure totaled 20.6 billion yen, focused on expanding capacity for high-growth products, building mass production for EUV pellicles, expanding semiconductor device capacity, and installing environmental equipment. Annual dividend was set at 100 yen per share, resulting in a 47.2% consolidated payout ratio and 3.3% return on equity.

1. Printing Materials & Industrial Materials Segment: Total sales: 184.647 billion yen, up 9.3% year-over-year. Within the segment, Printing Information Materials sub-segment sales were 146.665 billion yen, up 10.1% YoY; Industrial Materials sub-segment sales were 37.981 billion yen, up 6.1% YoY. Operating income for the full segment was 5.462 billion yen, improving from an operating loss in the prior year. Revenue contribution to total consolidated sales: 58.4%.

2. Electronic & Optical Materials Segment: Total sales: 96.312 billion yen, up 30.3% year-over-year. Within the segment, Advanced Materials sub-segment sales were 85.008 billion yen, up 41.7% YoY; Optical Materials sub-segment sales were 11.303 billion yen, down 18.8% YoY. Operating income for the full segment was 18.505 billion yen, up 58.7% YoY. Revenue contribution to total consolidated sales: 30.5%.

3. Paper & Processing Materials Segment: Total sales: 35.019 billion yen, up 4.7% year-over-year. Within the segment, Paper sub-segment sales were 14.876 billion yen, down 3.0% YoY; Processing Materials sub-segment sales were 20.142 billion yen, up 11.1% YoY. Operating income for the full segment was 0.535 billion yen, up 514 million yen YoY. Revenue contribution to total consolidated sales: 11.1%.

The following guidance is for Fiscal 2025 (Year Ending March 2026):

• Consolidated sales are projected to reach 317.0 billion yen, a 0.3% increase YoY. Operating income is projected at 240.0 billion yen, a 2.3% decrease YoY. Ordinary income is projected at 240.0 billion yen, an 8.0% decrease YoY. Net income attributable to parent shareholders is projected at 180.0 billion yen, a 24.3% increase YoY (the increase reflects the absence of the prior year's large impairment charge).
• Segment-level guidance:
  • Printing Materials & Industrial Materials: Total sales of 186.5 billion yen (+1.0% YoY), operating income of 4.9 billion yen (-10.3% YoY). Growth is expected from expanded sales of eco-friendly products domestically and higher volume in the U.S. and ASEAN.
  • Electronic & Optical Materials: Total sales of 94.6 billion yen (-1.8% YoY), operating income of 17.8 billion yen (-3.8% YoY). Advanced Materials sales will grow slightly on continued AI-related demand for semiconductor tapes and MLCC tapes, but this is offset by a projected decline in HBM-related device sales after the prior year's peak; lower Optical Materials sales reflect the prior year's subsidiary closures.
  • Paper & Processing Materials: Total sales of 35.9 billion yen (+2.5% YoY), operating income of 1.3 billion yen (+143.0% YoY). The large improvement reflects lower depreciation after the prior year's impairment charge, and growth from expanded sales of high-functional paper and new coating capacity for process paper.
• Capital expenditure is planned at 17.0 billion yen, with depreciation projected at 12.9 billion yen and R&D spending projected at 11.1 billion yen. The annual dividend is planned to increase by 10 yen to 110 yen per share, resulting in a projected 41.2% consolidated payout ratio.
• A profit allocation adjustment between the parent and sales subsidiary for the Advanced Materials segment, made to comply with transfer pricing tax rules, is expected to reduce consolidated operating profit by 2.1 billion yen YoY.

• The paper business faces persistent weak demand for core envelope paper, as well as ongoing increases in raw material (pulp, chemicals) and logistics costs that pressure profitability.
• U.S. trade tariff policy creates uncertainty for global economic conditions and cross-border business operations.
• Sustained increases in raw material and fuel prices, logistics costs, labor costs, and depreciation costs from new production capacity act as downward pressures on overall profit.
• Domestic consumer demand remains weak due to the impact of high commodity price inflation, which pressures sales of consumer-facing products including food and beverage labels.

Q: What is Lintec's growth strategy for the paper business and how is it addressing low-profitability operations? / A: The core envelope paper line faces continued demand pressure from postage price hikes. Management plans to drive growth by expanding development and sales of high-value-added products including non-fluorine oil-resistant paper and other high-functional specialty paper products, and will continue optimizing underperforming production capacity following the prior year's impairment charge.

Q: What is the outlook for HBM-related device sales for fiscal 2025 (ending March 2025) and 2026 (ending March 2026)? / A: HBM-related device sales grew sharply in the just-ended 2025 fiscal year on strong generative AI-driven customer demand. Management expects HBM-related order volumes have passed the near-term peak, so sales of these devices will decline year-over-year in the 2026 fiscal year.

Q: What is the current status of EUV lithography pellicle development and commercialization? / A: The company is currently building out mass production capacity for EUV pellicles at its production facilities, and continues to work toward full commercial launch of the product line. No additional details on customer adoption or revenue timelines were provided.

Q: What is the outlook for the North American label market and what pricing actions is MacTac America taking? / A: Management expects moderate gradual growth in overall North American label demand. MacTac America has implemented price adjustments to offset rising input costs, which are expected to support segment profitability in the coming fiscal year.