CHORI CO.,LTD. Q4 FY2025 earnings call

• Overall Financial Performance

  • FY2025 March is the second year of the 3-year medium-term management plan, marking the midpoint of the plan.
  • Total consolidated revenue of 311.5 billion yen, an increase of 3.8 billion yen year-over-year.
  • Gross profit of 40.5 billion yen, up 1.8 billion yen year-over-year; operating profit of 14.5 billion yen, down 0.5 billion yen year-over-year due to increased SG&A (higher personnel, logistics and Osaka head office relocation costs).
  • Recurring profit of 16.2 billion yen, up 1.7 billion yen year-over-year; profit before tax of 16.3 billion yen, up 1.6 billion yen year-over-year; parent-attributable net profit of 11.7 billion yen, up 2.0 billion yen year-over-year, reaching over 10 billion yen for the first time and marking 4 consecutive years of record high profit.
  • Net interest-bearing debt remains negative at negative 22.4 billion yen; equity capital of 92 billion yen, up 10 billion yen year-over-year; equity ratio of 63%, with strong financial resilience against rising interest rates.

• Long-Term Vision and Strategic Framework

  • VISION2030 targets 400 billion yen in revenue and 20 billion yen in pre-tax profit, with the core goal of becoming a sustainable, innovation-driven enterprise that creates shared value for all stakeholders.
  • The 2023-2025 medium-term plan is built on three core strategies: driving global connected business operations, creating sustainable new business aligned with market changes, and advancing ESG-governed management, all enabled by DX-driven business and management transformation.

• Segment Strategic Updates

  • Textiles: Differentiated branded materials (led by BLUE CHAIN) now account for 50% of raw material sales; sustainable textile sales reached 22 billion yen, up 16% year-over-year. The Bangladesh sewing business expansion was delayed by political unrest, with reactivation starting in March 2025. The FY2026 strategy focuses on expanding the full value-chain Global One Stop Chori model, deepening BLUE CHAIN across the supply chain from raw materials to finished products, and accelerating global expansion leveraging Japan-based technological expertise.
  • Chemicals: The segment has advanced global talent development and market-in product development focused on pharmaceutical, agrochemical, semiconductor and electronics end-markets, with strengthened overseas site staffing. The FY2026 strategy focuses on optimizing group operations across key high-priority regions (China, Vietnam-led Southeast Asia, India), focusing on 7 niche high-value segments to build profitability, and developing next-generation business models in low-carbon, circular, bio-derived and healthcare-related materials. The company recently secured exclusive global distribution rights for an ionic liquid solution that reduces CO2 emissions in the electrolytic aluminum production process as a key new growth project.

• ESG and IR Progress

  • Established a Sustainability Promotion Committee with three working groups to formalize risk management, visible tracking of sustainable business, and aligned policies across the global group. Renamed SDGs products to sustainable products, and classifies all offerings into two core material categories: protecting the environment (GHG reduction, energy efficiency, circular resource use) and protecting livelihoods (food, apparel, health).
  • Expanded investor engagement: held two institutional investor earnings briefings, one retail investor event, and regularly updates English-language disclosures and integrated reporting; the corporate IR website received two industry awards in 2024.

• DX Transformation

  • Completed 3 years of preparation and 5 billion yen in investment for a new SAP core system, which went live in April 2025. The company is working to stabilize the system in the first quarter of FY2026, with the core goal of shifting individual sales know-how to organizational, data-driven capabilities to improve sales competitiveness.

• Independence from Parent Company

  • Parent company Toray holds 52% of voting rights; Chori maintains independent operational and strategic planning, while leveraging synergies from Toray's material development capabilities and group credit benefits to drive corporate value growth.

1. Textiles Segment: Revenue of 152.7 billion yen, an increase of 6.8 billion yen year-over-year, driven by growth in overseas operations in China and Vietnam. Segment profit of 7.7 billion yen, a decrease of 0.3 billion yen year-over-year, due to a post-pandemic demand reversal in men's apparel and uniform businesses that were strong in the prior year. This segment accounts for approximately 49% of total consolidated revenue.
2. Chemicals Segment: Revenue declined year-over-year due to continued overall market weakness, including oversupply from Chinese manufacturers and low-price competition in Southeast Asian markets. Segment profit of 8.9 billion yen, an increase of 1.2 billion yen year-over-year, of which 0.8 billion yen came from the reversal of bad debt provisions from prior period non-performing chemicals loans; underlying operations also saw strong performance from overseas businesses led by Singapore. This segment accounts for approximately 49% of total consolidated revenue before accounting for the Machinery segment's net presentation.
3. Machinery Segment: Reported revenue is only 0.9 billion yen due to agent transaction accounting treatment; the actual revenue scale on a gross receivable basis is approximately 25 billion yen. The segment recorded an increase in profit year-over-year due to the reversal of prior period foreign exchange loss impacts. This segment contributes less than 1% of reported consolidated revenue.

• For FY2026 March, the final year of the current medium-term plan, management forecasts total revenue of 330 billion yen and pre-tax profit of 16 billion yen. While the headline pre-tax profit forecast is lower than FY2025's result, this reflects the removal of one-off gains booked in FY2025, with underlying core business profit expected to increase.
• Shareholder returns: The FY2025 year-end dividend was increased by 20 yen from the original forecast to 81 yen, bringing the full year FY2025 dividend to 142 yen, in line with the 30% consolidated payout ratio target. For FY2026, management guidance maintains a continuous dividend increase policy, forecasting a full year dividend of 144 yen, a 2 yen increase year-over-year. The company's long-term dividend policy targets a 30% consolidated payout ratio and minimum 3.5% return on equity dividend rate.

• The Bangladesh sewing business expansion has experienced delays due to the impact of political unrest and a coup; the company is currently working to catch up on the project timeline after repositioning expatriate staff in March 2025.
• China's overall economic growth slowdown and oversupply of Chinese manufactured goods has created competitive pressure and weakened market conditions for Chori's operations in China and across Southeast Asia.
• Geopolitical risks from ongoing conflicts in Russia-Ukraine and the Middle East, as well as trade policy uncertainty related to US-China trade relations, create headwinds for the company's global cross-border supply chain operations.
• ROIC declined 1.3 percentage points year-over-year to 11.1%, due to lower operating profit and slower than expected absorption of increased equity capital, representing a key performance and capital efficiency challenge for management.
• The new SAP core system implementation has created initial operational disruption post-launch; stabilization and full adoption in the first quarter of FY2026 is a near-term operational priority.

Q: Chori identifies China as a priority market, but facing overproduction and intensifying competition, how should investors understand Chori's outlook for its China business? / A: China has long been Chori's core overseas strength, and the company will continue to leverage this existing advantage. Amid current US trade policy shifts, Chinese manufacturers are expanding into Southeast Asia, and Chori is partnering with these firms to support their export of Chinese-produced goods to European markets, creating new business opportunities. / A: The company also notes that customer BCP requirements are driving demand for diversified sourcing, so there is remaining room to grow new supply chain business with Chinese partners across the Asia region. Overall, Chori's China business is currently facing mild headwinds, with strong performance in sportswear domestic sales (textiles) and glass raw materials (chemicals) offsetting broader weakness. Going forward, the company will shift focus from serving Japanese markets out of China to expanding sales of Chinese-origin goods to third markets including Southeast Asia and Europe.