TACHIKAWA CORPORATION Q4 FY2024 earnings call

• Overall Financial Performance

  • Total consolidated revenue was 41.407 billion yen, up 0.2% year-over-year, as growth in the core decoration segment offset declines in the other two segments. Gross margin increased 0.5 percentage points year-over-year due to product price hikes implemented to counter persistently high raw material prices.
  • Operating profit was 4.361 billion yen (+7.8% YoY), ordinary profit was 4.376 billion yen (+1.1% YoY), and net profit attributable to parent company shareholders was 2.802 billion yen (+3.5% YoY), even after recording impairment losses on underutilized welfare facilities, as investment gains on securities sales offset the charge.
  • Fuji Gear was fully consolidated via share swap in October 2024, which increased equity by 6.969 billion yen and lifted the equity ratio to 83%, up approximately 10 percentage points from the prior period.

• Mid-Term Management Plan Progress (Fiscal 2023-2025,

1. Indoor and Outdoor Decoration Products Segment: Revenue was 34.835 billion yen, up 1.5% year-over-year, accounting for 84.1% of total consolidated revenue. Operating profit was 3.701 billion yen, up 6.2% year-over-year. This performance was achieved despite a sharp decline in single-family housing starts, driven by expanded sales of high-value products (Home Tacos electric series, Airle dimmable fabric blinds), price hikes on core aluminum blinds, and increased average order value from value-up proposals for renovation projects, partially offset by higher personnel costs from employee benefit improvements.
2. Parking Lot Equipment Segment: Revenue was 3.065 billion yen, down 3.6% year-over-year, accounting for 7.4% of total consolidated revenue. Operating profit increased sharply year-over-year to 425 million yen, as lower revenue from new construction projects (due to lagged impact of reduced orders during the COVID-19 pandemic) was offset by higher share of higher-margin renovation, modification and maintenance sales.
3. Speed Reducer Segment: Revenue was 3.506 billion yen, down 7.8% year-over-year, accounting for 8.5% of total consolidated revenue. Operating profit fell 30.2% year-over-year to 234 million yen, driven by slowing recovery in machine tool orders that reduced general-purpose product sales and inventory adjustments at major customers that cut custom product sales. The segment acquired a battery-powered AC servo motor business in January 2024 and launched sales under the Fuji Gear brand in April 2024 to drive future growth.

1. For the final year of the current mid-term plan (Fiscal 2025), consolidated revenue is not expected to reach the original plan target, but all profit targets are expected to be achieved, with the possibility of recording a record high profit on the back of additional planned price adjustments.
2. Growth investment allocation under the mid-term plan has been increased from the original 4.6 billion yen to 5.9 billion yen, to fund expanded product line expansion and development infrastructure, and exploration of strategic alliances to expand business scope.
3. Shareholder return allocation has been increased from the original 2.8 billion yen to 4.0 billion yen. The company accelerated dividend growth: the 2024 year-end dividend brings a planned 10 yen annual increase, with a 2025 annual dividend forecast of 55 yen per share, targeting a sustained total payout ratio of 50% or higher.
4. Research and development spending is expected to increase from the prior 600 million yen level going forward, following the launch of the new technology research building.

• Long-term industry headwinds: Domestic housing starts are on a sustained declining trend, projected to fall below 700,000 units by 2030, which will pressure overall unit sales volume for the core decoration business.
• Construction cost inflation: The relocation of the Sapporo production facility was delayed from 2025 to June 2027 due to soaring material and labor costs, requiring ongoing cost control measures to avoid project overspending.
• Lagged project cycle impact: The parking lot equipment segment is still working through lower orders from the COVID-19 period, with low new construction revenue expected until 2026.
• PBR below 1.0: The company's price-to-book ratio remains below 1.0, driven by low financial leverage after full consolidation of Fuji Gear and a below-average price-to-earnings ratio, requiring ongoing balance sheet optimization and investor communication to address.
• Persistently high raw material prices: Sustained elevated raw material costs limit further margin improvement, forcing the company to focus on top-line growth to expand total profit.

Q: Why is Tachikawa Blind's profitability higher than many industry peers? / A: Management attributes high profitability to two core strategies: consistent expansion of high-value-added, high-margin products starting from the 2012 Perfect Silky line, and strict internal pricing rules that avoid indiscriminate discounting even for large non-residential projects, eliminating large profit differentials between residential and non-residential sales. Second, the company implemented a sustained, thorough review of selling, general and administrative costs after the 2008 Global Financial Crisis, cutting annual SG&A from over 15 billion yen to below 13 billion yen. For example, sample catalog costs were cut in half from 1.4 billion yen to 600-700 million yen via production optimization, scrap material reuse, and distribution volume rationalization. A cross-functional profit improvement committee continues to embed a profit-focused culture across the company. Looking forward, the company will maintain current margins and grow total profit by expanding its business scope to grow top-line revenue.

Q: What is the market environment for the indoor/outdoor decoration segment, and what is the company's strategy going forward? / A: The housing market, which makes up 65% of segment revenue, is seeing faster-than-expected decline in housing starts (below 800,000 units in 2024, projected to fall to 700,000 by 2030), while non-residential construction floor space is expected to remain solid, with large projects coming online from 2027-2028. The company's core strategy is to grow revenue despite shrinking unit volume via continued price adjustments and expanded sales of high-unit-value growth products: panel partitions for medical/long-term care facility conversions driven by subsidy programs, residential electric products benefiting from mandatory energy efficiency requirements, and dimmable fabric products that can capture share from the curtain market. Medium-term, the company is exploring strategic alliances, including potential partnerships with interior contractors to expand sales volume and add complementary window treatment products. It is also investing in new product development, including perovskite solar cells, self-powered devices, IoT-enabled electric products, and sustainable materials, often in partnership with startups.

Q: What is the outlook for the parking lot equipment segment? / A: New construction revenue for the core Puzzle Tower multi-story parking system is currently depressed because new projects take 2-3 years from order to completion, and orders fell during the COVID-19 pandemic due to construction delays for hotels and redevelopment projects. Management expects this low point to last through next fiscal year, with order activity already improving due to recovering inbound demand, and new construction sales expected to recover starting in 2027. Beyond new construction, the company is actively pursuing higher-margin renovation and modification demand, including adding portable EV charging boxes to existing facilities and launching new value-added features such as AI-powered automatic gate systems, to maintain revenue and profit in the near term.