TACHIKAWA CORPORATION Q4 FY2025 earnings call

2025 Fiscal Year Full-Year Consolidated Results

• Total company revenue reached 42.623 billion yen, up 2.9% year-over-year; operating profit was 4.411 billion yen, up 1.2% year-over-year; ordinary profit was 4.629 billion yen, up 5.8% year-over-year; net income attributable to owners of the parent hit a record high of 3.239 billion yen, up 15.6% year-over-year, driven by gains on sales of policy-held shares and fixed assets, as well as a lower effective corporate tax rate.
• The prior 2023-2025 mid-term management plan achieved increased revenue and profit across the three-year period: revenue missed the target due to a larger-than-expected decline in housing starts, but ordinary profit and net income exceeded targets thanks to improved profitability from price adjustments, with net income reaching a new record high.
• Balance sheet adjustments: The company sold unused land and low-significance policy-held shares, recorded impairment losses on underutilized employee dormitories to compress total assets. While asset reduction efforts proceeded, total assets increased by approximately 3.9 billion yen overall due to higher cash and deposits from operating cash inflow and asset sales, and higher valuation of investment securities from rising stock prices. Net assets increased by approximately 3.3 billion yen driven by higher valuation gains on securities and strengthened shareholder returns.
• Cash flow: Operating cash flow was 4.522 billion yen, increasing sharply year-over-year, with cash generation aligned to 2025 profit levels. Investment cash flow had a net decrease of 3.293 billion yen, driven by around 800 million yen in capital expenditure for base improvement, 3 billion yen in surplus cash allocated to bond purchases and time deposits, offset partially by around 700 million yen in proceeds from asset sales. Financing cash flow had a net decrease of around 1.1 billion yen, primarily from shareholder dividend payments, with cash outflows increasing annually as dividends have grown. Cash and deposits increased by 137 million yen year-over-year.

Long-Term Vision and New 2026-2028 Mid-Term Management Plan

• Long-term vision through 2030: Become a company that contributes to society by improving living environments, grows revenue by creating new markets through growth strategies, and provides meaningful work for employees. The 2026-2028 plan is themed "Creating Comfortable Living", focused on market creation, growth investment, and social contribution to raise corporate value.

Core Strategic Initiatives: Manufacturing and Market Creation

• Indoor and Outdoor Decoration Products Business: Prioritize development of light-adjusting fabric products, motorized products, and panel partitions, and expand exterior product offerings aligned with growing energy conservation demand. Advance pre-development at the 2024-opened technology research building to create new demand. Expand digital promotion, test new sensory marketing that stimulates all five senses to boost purchasing intent, enter new exhibition channels such as rental housing fairs to expand markets, and leverage the newly opened 2026 Shinjuku Showroom to stimulate demand from a broad customer base. The 2028 revenue target is 38.2 billion yen (6.3% increase from 2025) and operating profit target is 4.105 billion yen (10.1% increase from 2025).
• Reducer Business: Leverage core custom design technical capabilities to capture growing demand from automation and labor reduction in logistics warehouses and factories for AGVs and industrial robots. The battery-powered servo motor business acquired in 2024 is well-suited for medium and large AGVs, and the company will expand set sales of reducers and servo motors to open new demand, while prioritizing custom-made reducers for specific use cases. The 2028 revenue target is 4.05 billion yen (12.4% increase from 2025) and operating profit target is 245 million yen (18.4% increase from 2025).
• Parking Lot Equipment Business: Promote the high-spec Beyond model that accommodates the growing number of high-clearance vehicles to win orders from redevelopment and high-rise condominium projects, and the low-cost Puzzle Tower model to meet cost-focused demand. Pursue cross-sales partnerships including alliances to open new demand, and promote value-added technologies such as full-space EV charging systems and auto gate close systems to win orders from both new construction and existing property renovation projects. The 2028 revenue target is 3.6 billion yen (17.0% increase from 2025) and operating profit target is 500 million yen (4.9% increase from 2025).
• Overall 2028 consolidated targets: Revenue 45.85 billion yen (7.6% increase from 2025), operating profit 4.85 billion yen (9.9% increase from 2025), ordinary profit 5.0 billion yen (8.0% increase from 2025), net income 3.5 billion yen (8.0% increase from 2025). The company also plans to pursue M&A and new alliances during the plan period to expand new business areas, capture renovation demand, expand product offerings, and further boost top-line growth.

Growth Investment

• DX Investment: Focus on two themes: DX for production system strengthening and DX for sales quality improvement. Plans to construct a new fabric production building in Niigata with the latest production lines to advance smart factory transformation for quality improvement, labor saving, and automation; will transition analog parts procurement management to AI-based management. For sales, will digitalize sales activities and customer management to enable data-driven analysis of activity performance to advance sales sophistication; will accelerate DX while strengthening information security.
• Human Capital Investment: Identified as a core priority for the plan, with the goal of boosting employee engagement by nurturing autonomy and pursuing meaningful work, and measuring employee work satisfaction. Based on a company-wide employee survey, the company will reform human resources policies (adjusting compensation and performance evaluation, strengthening recruitment and training, improving working conditions) and business operations (auditing operations and reforming processes) to improve employee satisfaction and capability, strengthen organizational power, and create a positive cycle that supports strategy execution.
• Social Contribution and Sustainability: Maintain the existing target of 30% reduction in CO2 emissions by 2030 compared to 2021 levels, and continue to advance efforts to reduce environmental load. Participate in the Present Tree forest regeneration project, making donations proportional to wooden blind sales, and participate as a bronze partner in the GREEN × EXPO 2027 International Horticultural Exposition to be held in Yokohama in 2027, providing funding and products.

Capital Efficiency and Shareholder Return Policy

• Current status analysis: The company estimates its cost of capital is between 5.5% and 6.0%, while 2025 ROE was 5.9%, which does not yet exceed the cost of capital. As of after the new mid-term plan announcement, PBR has risen to above 0.90 times, up from 0.70 times at the end of 2025. Key structural issues: net profit margin has risen to 7.6%, but total asset turnover is only 0.65x, below peer levels, indicating excessive assets relative to sales; equity ratio is very high at 83.0% with financial leverage of only 1.20x, so improving capital efficiency is the core challenge.
• New targets: Achieve PBR of 1.0x or higher as early as possible, and achieve ROE of 7.0% or higher by the 2028 fiscal year, with a longer-term target of 8.0%. Initiatives will focus on: (1) improving net profit margin by expanding existing business and expanding the business territory through M&A and alliances; (2) improving asset and capital efficiency through active use of existing cash, continued sale of salable assets, strengthened shareholder returns, and increased use of interest-bearing debt; (3) strengthening IR activities to improve PER, the market expected valuation multiple.
• New shareholder return policy: Maintain the existing progressive dividend policy, add a new DOE framework with a minimum DOE of 4.0%. For 2026, the full-year dividend per share will be 120 yen, up sharply from 70 yen in 2025, with a projected payout ratio of 70% or higher. The company will consider share repurchases alongside dividends to reduce equity capital, based on the business environment and shareholder structure. The company has not cut dividends for 16 consecutive years through 2025, and increased dividends for 8 consecutive years, with plans to continue increasing dividends over the next three years.
• Cash allocation for 2026-2028: Total available funds of 230 billion yen, combining 145 billion yen in projected operating cash, proceeds from asset sales, and existing cash holdings. Allocation: 45 billion yen for maintenance investment (e.g., aging equipment upgrades), 90 billion yen for growth investment (including new fabric production building, smart factory transformation, Hokkaido production/logistics base relocation and integration, M&A and alliance investment), 95 billion yen for shareholder returns (dividends and share repurchases).
• Balance sheet management: To improve capital efficiency, the company will strengthen shareholder returns to limit further growth of equity capital, consider debt financing for large growth investment projects to reduce the relative equity ratio, and actively use borrowed funds for growth investment to boost revenue and profit and improve profitability.

1. Indoor and Outdoor Decoration Products Related Business: This segment accounts for 80% of total company revenue. In fiscal 2025, it achieved revenue of 35.944 billion yen, a 3.2% increase year-over-year, and operating profit of 3.727 billion yen, a 0.7% increase year-over-year. While overall unit sales fell below the previous year due to declining housing starts, product renewal and accompanying price adjustments for core fabric products drove revenue and profit growth. 2. Parking Lot Equipment Related Business (operated by consolidated subsidiary Fuji Hensokuki): Revenue and profit both increased year-over-year. Growth was driven by increased construction of hotels and condominiums due to inbound tourism demand, which lifted medium-term orders for the company's large multi-story parking device Puzzle Tower, and solid performance in renovation projects for existing properties. Successful price negotiations to offset sustained raw material cost increases also improved profit margins. 3. Reducer Related Business (operated by consolidated subsidiary Fuji Hensokuki): Revenue increased year-over-year, but profit decreased. Revenue growth came from the gradual recovery of machine tool demand that boosted sales of general-purpose products, and expanded orders for custom products from new customer development and sales conversion efforts for servo motor suppliers amid growing demand for industrial AGVs. However, rising material costs and increased outsourcing costs due to labor shortages offset manufacturing cost reduction efforts and led to a year-over-year profit decline.

• 2026 December fiscal year (first year of the new mid-term plan) consolidated guidance: While a decline in unit sales is expected due to market conditions, the full impact of 2025 price adjustments in the indoor/outdoor decoration business will drive growth. Consolidated revenue is projected at 43.5 billion yen, up 2.1% year-over-year; operating profit is projected at 4.5 billion yen, up 2.0% year-over-year; ordinary profit is projected at 4.7 billion yen, up 1.5% year-over-year; net income is projected at 3.28 billion yen, up 1.2% year-over-year. The expected decline in first-half net income is due to the large one-time gain on asset and share sales recorded in the prior year first half, which created a high base effect.
• The 2026-2028 mid-term plan maintains the 30% CO2 emission reduction target by 2030 unchanged, and maintains the commitment to 3 consecutive years of dividend increases.
• New capital efficiency targets set: Achieve PBR 1.0x or higher as early as possible, ROE 7.0% or higher by 2028 fiscal year (with 8.0% as a longer-term target), representing an upward improvement from the 2025 5.9% ROE.

• Long-term industry risk: The company's core indoor/outdoor decoration business faces a sustained declining trend in housing starts driven by population decrease, which creates structural headwinds for unit sales growth.
• Macro and cost risks: Continued labor shortages from population decrease, sustained raw material price increases, and natural disaster risks are all identified as material business risks.
• Capital market and performance risk: Current 2025 ROE of 5.9% has not yet exceeded the company's estimated 5.5%-6.0% cost of capital, and PBR is still below 1.0x, so failure to improve capital efficiency could lead to continued undervaluation by the market.
• Operational risk: The core challenge of excessive total assets and low capital efficiency (low total asset turnover, overly high equity ratio) remains unaddressed, requiring sustained balance sheet adjustment to improve returns.

The question and answer section lists six scheduled question topics, but no full question or answer content is provided in the transcript: 1.

Q: Countermeasures for changes to TOPIX constituent selection criteria, A: No content provided 2.

Q: "Market creation" in the new mid-term management plan, A: No content provided 3.

Q: Profit improvement impact from M&A, A: No content provided 4.

Q: DOE target level for shareholder dividends, A: No content provided 5.

Q: Expected profit contribution from AI-driven efficiency improvements, A: No content provided 6.

Q: Possibility of changing the PBR 1.0x or higher capital policy target, A: No content provided