TAKARA STANDARD CO.,LTD. Q4 FY2025 earnings call

Financial & Shareholder Return Updates

• Full year 2025 results beat initial guidance: revenue +1.8% above forecast, operating profit +7.8% above forecast, net profit +14.3% above forecast
• The company achieved the top combined market share for its three core kitchen/bath/vanity product categories in Japan for the first time
• Revised ROE targets: raised the 2027 March (mid-term plan final year) target from 7% to 8%, and the 2031 March target from 8% to 10%; 2025 March actual ROE is 5.8%
• New shareholder return policy: Increased payout ratio from 40% to 50%, announced 22.0 billion yen in share repurchases over the 2026-2027 March fiscal years; 2025 March year-end dividend raised 23 yen to 50 yen per share, 2026 March full-year dividend planned at 100 yen per share; total payout ratio is targeted at ~130% for the two-year period, driven by net asset compression to hit the 8% ROE target
• Updated cash allocation: Funds from operating cash flow and non-core asset sales (policy holdings, idle real estate) will be allocated to growth investments and shareholder returns; the company will optimize cash holdings and working capital to improve capital efficiency

Domestic Growth Strategy

• Prioritize growth in the renovation market: The company estimates its current market share at 16%, with significant upside; will expand distribution to leading renovation players, establish specialized urban condominium renovation teams, and strengthen renovation-focused product lines leveraging the company's proprietary enamel technology
• Grow share in existing new construction segments: In high-share new construction multi-family, the company will expand bathroom share (where it is a later entrant with large room for growth); in new construction detached homes, the company targets further share growth from its current 20%+ level despite long-term industry volume decline
• Fukuoka Factory large-scale investment: Allocate 40.0 billion yen to expand enamel bathroom panel production capacity by ~1.5x compared to 2024 March levels, with full operation starting in April 2028; the investment is expected to add 20.0 billion yen in bathroom sales by 2031 March, and also support future overseas sales expansion

New Growth Initiatives

• Overseas expansion: Target 10.0 billion yen in overseas sales by 2030; opened the company's first overseas branch in Taiwan in April 2025 to strengthen local partner relationships and market intelligence; launched a global brand tagline "HORO YOUR LIFE" and opened official SNS accounts in China and Taiwan to build brand awareness
• New business development: Pursues open innovation and partnerships, has completed initial business matching for new ventures; explores new applications for the company's glass frit technology from enamel manufacturing, including denture materials, sintering additives, and thermal relaxation materials for electronic components via industry-academia collaboration

By end market segment:

1. New construction detached homes: 74.8 billion yen revenue, +6.3% YoY, 30.7% of total revenue
2. New construction multi-family homes: 84.5 billion yen revenue, +10.7% YoY, 34.7% of total revenue
3. Renovation market: 72.7 billion yen revenue, -5.3% YoY, 29.9% of total revenue

By product segment:

1. Kitchens: 149.0 billion yen revenue, +5.2% YoY, 61.2% of total revenue
2. Bathrooms: 55.7 billion yen revenue, +1.3% YoY, 22.9% of total revenue
3. Vanities: 28.6 billion yen revenue, +4.8% YoY, 11.8% of total revenue

Aggregate overall performance: Total revenue 243.3 billion yen (+3.7% YoY, 4th consecutive year of record revenue); operating profit 15.6 billion yen (+25.8% YoY); ordinary profit 16.0 billion yen (+25.1% YoY); net profit 11.0 billion yen (+16.7% YoY). Q4 2025 standalone operating profit grew 61.4% YoY, marking record operating profit for both Q3 and Q4. Operating cash flow reached 23.3 billion yen, and free cash flow reached 14.9 billion yen.

• 2026 March full year guidance: Revenue of 247.0 billion yen (+1.5% YoY), operating profit of 17.2 billion yen (+10.0% YoY), which would set new all-time records for both metrics; operating margin is targeted at 7%, with ROE of 6.7%
• The 2026 March growth outlook is driven by recovering renovation sales, continued new construction sales retention, ongoing cost rationalization and inventory compression to cut expenses
• The company confirmed it is on track to hit the revised 8% ROE target for the 2027 March mid-term plan final year, with both 2026 and 2027 March expected to deliver record revenue and profit

• Long-term industry downside: The new construction market faces structural volume decline from population decrease, alongside weakening consumer purchasing sentiment from rising housing prices and higher mortgage rates
• Renovation market headwinds: While long-term growth is expected from existing housing stock, near-term consumer sentiment weakness, persistent high raw material prices, and industry-wide labor shortage could pressure performance
• Raw material cost pressure: Prices for key inputs including resin, wood-based materials, and sourced finished goods remain elevated, creating ongoing margin pressure that requires continued cost cutting to offset

Q: What drove the strong performance of the new construction detached segment in 2025? / A: Two key factors drove growth. First, the company had restructured its sales organization to focus specifically on the detached market in recent years, which significantly improved its sales coverage and effectiveness. Second, the April 2025 mandatory energy efficiency standard changes for new construction pulled forward demand, which added to full-year sales in the period.

Q: What is driving the major revision of the company's financial strategy and shareholder return policy? / A: The company's share price has traded below book value for an extended period, and improving corporate value has become an urgent management priority. Feedback from investor engagement highlighted the opportunity to improve capital efficiency given the company's historically conservative balance sheet. Increasing shareholder returns and compressing net assets is a core part of accelerating progress to hit the 8% ROE target earlier.

Q: What is the company's strategy for future price adjustments? / A: The company will continue to monitor raw material cost trends and competitive market conditions. Price adjustments will be implemented gradually and selectively to balance passing along persistent cost increases with maintaining market share, rather than broad-based, large-scale price changes in the near term.

Q: What is the company's medium-term strategy for international expansion? / A: The company is moving at a deliberate pace, starting with entry to the Taiwan and Chinese markets where cultural proximity and existing demand for enamel products reduces risk. The near-term focus is on building brand recognition, establishing local distribution and operations infrastructure, rather than targeting rapid large-scale volume growth, with a long-term target of 10 billion yen in overseas sales by 2030.