8081.T

Mid-Term Management Plan (ES・C2025) Update

• The 5-year mid-term plan entered its final year, with ROE reaching 8.2% which meets the 8%+ target, while strengthening profitability remains the core unmet goal. The entire group will focus on improving profitability via solution business expansion and cross-segment collaboration to hit full-year targets.
• Cash allocation has prioritized aggressive investment aligned with basic strategy: original solution development and M&A to strengthen presence in high-growth fields, plus internal capability building including personnel system reform and ERP system refresh. The company will continue balancing growth investment with attractive shareholder returns.

Strategic Growth Initiatives

• High-growth segment organizational restructuring: Combined defense and medical businesses into the new Defense & Medical Business Department in October 2024 to concentrate management resources. Defense business supplies control equipment and radars as a partner of prime contractors for the Japanese Ministry of Defense, and expands solutions for defense facilities; medical business focuses on expanding sales territory for electronic medical devices in the Kanto and Chubu regions, and adds automation solutions for labor shortages at medical sites.
• New transformer business partnership: Signed a sales agency agreement with DAIHEN Corporation to secure a stable supply chain after a former core partner revised its business strategy. The partnership enables expanded transformer sales, product portfolio expansion, and strengthened collaboration in grid storage batteries, fast chargers, and robot-related businesses, while opening up new previously inaccessible sales channels.
• Automated warehouse solution expansion: Responding to growing efficiency demand from logistics industry pressures (2024 logistics labor shortage and EC market growth), the company is expanding robotic automated warehouse solutions that improve storage density and reduce picking errors, and plans to expand its proposal scope for diverse customer needs.
• Customer event: The third consecutive Kanaden Private Exhibition will be held December 3-4, 2024 at the company headquarters, themed "DX and AI Opening a Bridge to a Sustainable Future", with a focus on DX/AI solutions and co-hosted limited seminars with partner companies.

Balance Sheet and Cash Flow

• The company has a seasonal pattern where revenue recognition for Building Equipment and Infrastructure is concentrated at fiscal year-end, so total assets and liabilities are lower in interim periods. Interim total assets decreased by 8.803 billion yen to 80.277 billion yen, driven by lower trade receivables and trade payables.
• Operating cash flow generated 1.984 billion yen in inflows, supported by 1.825 billion yen pre-tax profit and reductions in receivables and inventory. Investing cash flow had 0.229 billion yen in outflows mostly for purchases of tangible fixed assets. Financing cash flow had 0.882 billion yen in outflows mostly for dividend payments. Ending cash and cash equivalents stood at 17.15 billion yen.

Portfolio Strategy

• The two-axis portfolio strategy targets scale expansion in higher-margin FA System and Information & Telecommunications Devices businesses, and margin improvement in lower-margin Infrastructure and Building Equipment businesses, with targeted initiatives for each segment based on their characteristics.

• Full-year 2026 March fiscal year overall guidance is unchanged from May's announcement: total revenue projected at 135 billion yen (up 7.4% YoY), operating profit 5.7 billion yen (up 26.7% YoY), ordinary profit 5.7 billion yen (up 20.5% YoY), and net profit 3.9 billion yen (flat YoY, due to a 1.123 billion yen special gain booked in the prior year).
• Segment-level guidance revisions:
  1. FA System Business: Slightly lowered revenue and profit guidance due to slower-than-expected recovery of supply chain inventory adjustment, but will continue capturing automation and IoT-related capital investment.
  2. Building Equipment Business: Maintained original sales guidance, but revised down profit guidance after H1 lower profitability from large projects; the company will work to improve profitability alongside expanding proposal scope via the integration of the video system division.
  3. Infrastructure Business: Raised both sales and profit guidance, driven by solid recovery in railway operator capital investment and steady progress on government/defense-related large projects.
  4. Information & Telecommunications Devices Business: Raised full-year guidance, as first-half performance was stronger than expected driven by solid growth in electronic devices for OA equipment, despite anticipated weakness in industrial power devices.
• Dividend guidance: The company adopted a new progressive dividend policy starting this fiscal year, which rules out dividend cuts in principle and targets maintaining or increasing dividends annually. The full-year dividend is projected at 72 yen per share, a 2 yen increase from the prior fiscal year.

1. FA System Business: Revenue of 25.526 billion yen (up 11.1% YoY), accounting for 41.4% of total consolidated revenue; ordinary profit of 0.928 billion yen (down 19.3% YoY).
2. Building Equipment Business: Revenue of 6.044 billion yen (up 12.7% YoY), accounting for 9.8% of total consolidated revenue; ordinary loss of 0.138 billion yen.
3. Infrastructure Business: Revenue of 15.088 billion yen (up 55.4% YoY), accounting for 24.5% of total consolidated revenue; ordinary loss of 0.055 billion yen.
4. Information & Telecommunications Devices Business: Revenue of 14.998 billion yen (up 9% YoY), accounting for 24.3% of total consolidated revenue; ordinary profit of 0.988 billion yen (up 26.6% YoY). Total consolidated revenue for the interim period: 61.657 billion yen (up 19% YoY); ordinary profit 1.807 billion yen (up 18.1% YoY); net profit attributable to parent company shareholders 1.198 billion yen (up 34.4% YoY).

• Ongoing supply chain inventory adjustment pressure, with slower-than-expected recovery weighing on the core FA business, where weak performance dragged down segment profit despite revenue growth.
• External macro risks: Slowing Chinese economic growth that reduces demand for industrial electronics products, elevated resource and energy prices, and potential negative impacts from US tariff increases, creating continued overall operational uncertainty.
• Large low-margin projects in Infrastructure and Building Equipment segments pushed both segments into ordinary loss in the first half, highlighting ongoing profitability challenges for lower-margin business lines that are the focus of the company's portfolio improvement strategy.

No Q&A section was included in the provided transcript.