YUASA TRADING CO.,LTD. Q4 FY2025 earnings call

• Overall Financial Results: The company is celebrating its 360th anniversary of founding in FY2025. Full year results missed pre-disclosed plan targets, but operating profit reached 15.7 billion yen and ordinary profit reached 16 billion yen, marking the third consecutive year of record high profits. Net income attributable to parent shareholders was 10.2 billion yen, a 13.3% decrease year-over-year, driven by a 3.2 billion yen special gain from retirement benefit trust termination in the prior year that did not recur in FY2025. The balance sheet improved, with equity ratio rising 2.8pp to 37.8%, and ending cash and cash equivalents increased 1.6 billion yen to 43.7 billion yen.
• Business Portfolio Transformation: Under the long-term Yuasa Vision 360, the company has shifted its portfolio composition from 39% manufacturing, 31% housing/environment and 13% urban development in FY2017 to 34% manufacturing, 39% housing/environment and 19% urban development in FY2025. New growth areas now account for 35% of total revenue, up from 25% in FY2023, with a target of 49% (286 billion yen) by FY2026.
• Growth Strategy Progress: Two-thirds of 9 planned growth initiatives are on track. Resilience & Security hit plan targets, while Green, nursing care/medical are growing well. Overseas, digital, and sharing strategies are behind plan, with corrective actions in progress:
  • Overseas: Held the company's largest promotion event YUASA Grand Fair in Thailand, attracting 6,111 attendees (vs 5,000 target), with 1.6 billion yen in orders already booked and over 5 billion yen in strong pending negotiations, on track to hit the 3 billion yen order target. Added 2 new locations in Pune and Chennai India, and opened a new Danang branch in Vietnam, and is preparing a new product model home for housing equipment in Thailand.
  • Green Strategy: On track, with a full one-stop service capability from energy-saving diagnostics to product delivery, which is a core competitive advantage.
  • Digital Strategy: Launched LOGI CRAFT to address logistics industry labor shortages with end-to-end logistics automation solutions, and launched the proprietary AI-powered combined dimension and visual inspection product F[ai]ND OUT EXW, which won the Monodzukuri Award from the Nikkan Kogyo Shimbun.
  • Sharing Strategy: Completed an M&A of Nagoya-based Lineup Co., Ltd. in February 2025 to accelerate progress. Lineup has 12,000 registered part-time workers for event and office relocation setup, and will create synergies with the group's Yuasa Macross to grow the sharing business.
• Internal and Sustainability Initiatives: 18.14 billion yen of the planned 21.2 billion yen 3-year total investment has been deployed, with 7.29 billion yen to growth strategy and 10.85 billion yen to DX/IT investment. Maintains a commitment to a 33%+ shareholder payout ratio, achieved 39.4% payout in FY2025, with full year dividend kept at the promised 190 yen per share. Plans to change the company name from YUASA Shoji (Katakana) to YUASA (Latin alphabet) after shareholder approval in June 2025, to reflect the company's shift toward original product development from pure trading.

1. Industrial Machinery Segment: Recorded sales of 107.5 billion yen in FY2025, a decrease of approximately 23 billion yen from its peak of over 130 billion yen in FY2019, resulting in a decrease of approximately 2.3 billion yen in gross profit (at a 10% gross margin). This segment saw significant year-over-year decrease in both revenue and profit, and was the main driver of missed full-year company plans. It contributes 34% of total company revenue as part of the

• For FY2026 (March 2026 year end), the company guides 550.0 billion yen in revenue, 17.7 billion yen in operating profit, 18.0 billion yen in ordinary profit, and 12.0 billion yen in net income attributable to parent shareholders. The ordinary profit and net income guidance matches the original prior plan for FY2025.
• The original medium-term plan (Growing Together 2026) target of 576.0 billion yen revenue and 20.0 billion yen ordinary profit is downward revised, due to unforeseen impacts including the COVID-19 pandemic, structural changes in the machine tool industry, and US tariff policy changes.
• The 2026 guidance assumes no near-term recovery from the current weak level of the industrial machinery segment, with performance maintained at FY2025 levels. The housing, pipes and materials, air conditioning segment is expected to remain at its current strong high level, while the urban development field is expected to see mild improvement, with new growth strategies offsetting industrial machinery weakness to hit the 550.0 billion yen revenue target.
• ROE is expected to dip to 9.7% in FY2025 due to the absence of the prior year special gain, and recover to 11.8% in FY2026.
• Dividend guidance for FY2026 maintains the full year dividend at 190 yen per share, with a planned 76 yen interim dividend and 114 yen year-end dividend, which is expected to deliver a 33%+ payout ratio in line with commitments.

• The industrial machinery segment faces sustained headwinds from long-term structural industry changes including industry consolidation, group restructuring, and changed manufacturer strategic direction that have altered the historic boom-bust cycle of the industry.
• US tariff policy under the Trump administration adds additional macro and market uncertainty for the industrial machinery business.
• Sustained weakness in industrial machinery has left the current business portfolio slightly unbalanced, though portfolio transformation has reduced negative impact relative to pure machinery manufacturers/traders.
• Some key strategic initiatives (overseas expansion, digital transformation, sharing economy business) are behind original plan timelines.
• Digital talent development is lagging, as personnel and time have been diverted to ongoing DX development work, requiring a restructuring of the talent development pipeline.
• The VUCA macro environment continues to increase overall business uncertainty, with additional risks from US economic uncertainty and persistent labor shortages among Japanese corporate customers.

Q: What is behind the industrial machinery segment downturn, and what is the outlook going forward?

A: Industrial machinery has a clear historic boom-and-bust cycle, but two major changes have altered this pattern. First, post-COVID industry consolidation and manufacturer policy shifts have permanently changed the prior industry structure. Second, Trump administration tariff policy added further headwinds. The segment's FY2025 sales were 107.5 billion yen, down 23 billion yen from the 2019 pre-COVID peak, and management no longer expects the cycle to return to prior patterns. The FY2026 guidance is built on the assumption of no near-term recovery from current weak levels. Management will focus on energy-saving and automation opportunities in existing manufacturing sites to stabilize results, rather than relying on a broad cyclical rebound.

Q: What is the outlook for the housing equipment, pipes and materials, air conditioning segment this coming year?

A: (Summary per management framing) This segment delivered strong double-digit revenue and profit growth in FY2025, driving the company's overall performance. Management expects the segment to maintain its current strong high performance level in FY2026, contributing to offsetting industrial machinery weakness.

Q: How does the Trump administration tariff policy and exchange rate volatility impact the business?

A: (Summary per management framing) Tariff policy is one of the core headwinds that led to sustained weakness in the industrial machinery segment, contributing to the decision to lower medium-term targets. Management has incorporated these ongoing risks into the conservative FY2026 guidance that assumes no near-term industrial machinery recovery.

Q: Why did management lower the original 2026 medium-term plan targets?

A: The original Growing Together 2026 plan set targets of 576.0 billion yen revenue and 20.0 billion yen ordinary profit. These targets had to be downward revised due to unforeseen events that occurred after the plan was launched: the COVID-19 pandemic, structural changes in the global machine tool industry, and ongoing trade uncertainty from Trump administration tariff policy. The new lower FY2026 plan reflects the current market reality, particularly the sustained weakness in industrial machinery.