SINANEN HOLDINGS CO.,LTD. Q4 FY2026 earnings call

• Overall Fiscal 2025 Performance

  • The company achieved lower revenue but higher profit, with recurring profit of 4.4 billion yen, the highest level since the holding company transition in 2015. This result came from comprehensive restructuring of the power business, which eliminated the prior-year large reverse spread loss and delivered a 3.8 billion yen gross profit improvement. The full year operating profit was 4.0 billion yen, up 4.7 billion yen from the prior year negative 0.7 billion yen, returning to solid black ink.
  • The company strengthened its balance sheet: self-capital ratio improved to 52.1% from 49.1%, operating cash flow turned positive 10.5 billion yen from negative 0.9 billion yen, and short-term debt was substantially paid down, leaving ending cash and cash equivalents at 11.7 billion yen, up slightly year-over-year. The company wrote down negative assets early to improve balance sheet health as part of mid-term plan restructuring.

• Core Growth Strategies

  1. Domestic Business Infrastructure Restructuring
  • The company will merge four core BtoC and BtoB operating subsidiaries into a single new entity, Shinanen Co., Ltd., effective April 2026. The four companies have a combined 1,000 employees and overlapping similar operations, so the merger will consolidate management, headquarters, administrative and sales structures, cutting duplicated management costs. The holding company will also integrate its operations with the merged entity's headquarters to further reduce overall group management costs.
  • Short-term benefits include administrative cost reduction, expanded service menus, improved operational agility and better customer support. Long-term, the merger enables cross-service integration to support the retail service strategy, expanding from pure energy supply to broader full-life-cycle building services including housing equipment and maintenance.
  • An internal cross-functional task force manages integration, and additional integration costs are expected to be limited.
  1. Retail Service Strategy Enhancement
  • The strategy covers individual, corporate and local government customers, aiming to deliver full local services rooted in regional communities. Key goals include integrating group operations across regions to deliver high-quality unified customer services, leveraging existing regional networks to expand service offerings, and transitioning the company from a pure energy supplier to a broad provider of services needed by local communities and society.

• Shareholder Return

  • Following the 2025 fiscal year performance recovery, the company raised the annual dividend by 15 yen to 90 yen per share, meeting a 31% payout ratio. For fiscal 2026, the company maintains a planned 90 yen per share dividend, retaining a stable dividend policy with a 30% target payout ratio, balancing shareholder returns, financial health and growth investment.

For the 2025 March full year, total consolidated sales were 317.1 billion yen, down 31.1 billion yen year-over-year.

1. Energy Solution (BtoB) business: Revenue of 220.4 billion yen, down 32.1 billion yen (12.7%) year-over-year. This segment contributed 69.5% of total company revenue. The decline was caused by a scheme change in the power business that reduced sales volumes after exiting loss-making positions. Operating profit for this segment recovered sharply, turning to black from a large prior-year deficit, driven by the power business restructuring.
2. Energy Wholesale/Retail Related (BtoC) business: Revenue of 75.3 billion yen, flat year-over-year, holding steady performance. This segment contributed 23.8% of total company revenue. It contributed a small incremental gain to overall operating profit in the period.
3. Non-energy business: Revenue of 21.1 billion yen, up 0.6 billion yen year-over-year. This segment contributed 6.7% of total company revenue. Growth was led by the share cycle and building maintenance businesses, though the segment recorded a 0.2 billion yen operating profit decline, with profitability improvement a key priority.

• For the 2026 March full fiscal year, management forecasts total revenue of 367.3 billion yen, operating profit of 4.4 billion yen, and recurring profit of 4.9 billion yen, representing another year of increased revenue and profit.
• Segment forecasts: BtoC business will see slight profit growth from strengthened LP gas and petroleum operations and expanded customer base; BtoB business expects a slight profit decline after accounting for lower spot power and petroleum revenues even as it continues to grow high-voltage power and expand petroleum sales; non-energy business expects profit growth driven by higher share cycle utilization, improved profitability and expanded building maintenance contracts.
• Management expects limited impact from merger-related integration costs in fiscal 2026.
• The company projects over 6.0 billion yen in operating cash inflow, which will be allocated first to maintain 30%+ payout for stable shareholder returns, then to organic growth investment in priority areas including house care, logistics efficiency, power and share cycle, with flexible capacity for M&A, strategic investment and additional shareholder returns.
• The medium-term target (for the 2028 March fiscal year, the 100th anniversary of founding) is 10.0 billion yen in recurring profit and 8% ROE. Management also targets a sustained PBR above 1.0x, driven by capital efficiency focused management. The company has a medium-term goal of raising the payout ratio to 40% over time, linked to achievement of the ROE target, and will consider broader total shareholder return metrics including TSR and total payout going forward.
• Non-energy business is expected to grow steadily, while the expanded integrated energy plus additional services portfolio will be the main driver of growth toward the medium-term profit target.

• External risks: Unstable crude oil prices driven by geopolitical disruption and changing US trade policy create persistent uncertainty and ongoing inflation pressure that affects the energy market outlook.
• Operational risks: While the shift to market-linked power pricing eliminated the large reverse spread risk that caused prior-year losses, continued energy market volatility could create profit fluctuation.
• Integration risks: Merging four separate companies carries potential execution risks for system integration and alignment of differing personnel policies, though management expects limited additional costs and has established a dedicated task force to manage integration.
• The non-energy segment currently lags on profitability, and failure to improve performance could weigh on overall group results.

Q: Why did BtoB sales decline 12.7% year-over-year, is this a structural or temporary trend, and what customer churn risk exists from the shift to market-linked pricing?

A: The 2023 power business suffered large closing losses from prior fixed-position trading, so the company restructured to a fully market-linked scheme to eliminate the deficit. This required reducing the size of the legacy position, which caused the 2025 sales decline, a one-time adjustment. Going forward, sales are expected to gradually increase under the new scheme. Management had worried about customer churn from price pass-through, but the higher transparency of market pricing was well received by customers, so churn risk did not materialize, and the company will continue providing stable, detailed service under the new scheme.

Q: What are the medium and long-term benefits of the four-company merger beyond near-term cost cuts?

A: Near-term, cost cutting is the most accessible benefit, but the merger also improves overall business efficiency by aligning operations across the previously segmented companies. It enables simultaneous, multi-faceted business expansion through cross-service coordination, with immediate benefits including expanded service offerings, better agility and improved customer support. Long-term, the merger enables the shift from point-solutions focused on energy wholesale to broad cross-service expansion, integrating energy, housing equipment and building maintenance to build full life-cycle building service businesses aligned with the retail service strategy.

Q: What segment will drive growth to hit the 2028 medium-term target of 10 billion yen recurring profit and 8% ROE?

A: Energy related businesses will remain the core driver of growth, with the current balance between BtoC and BtoB not expected to change meaningfully. The key driver of growth will be expanding service scope beyond pure energy supply, through the retail service strategy. The company will grow into a broader regional service provider offering energy plus building maintenance, housing equipment and other related services aligned with local customer needs. Non-energy businesses like share cycle are expected to grow steadily, while the expanded integrated energy-plus-services portfolio will be the main contributor to hitting the profit target.

Q: What is the role of low-synergy non-core businesses like IT systems and share cycle within the group?

A: The IT system business is actually a core enabler for energy and retail operations: subsidiary Minos develops custom systems to manage and improve efficiency for energy delivery and sales operations, creating clear direct synergy with core energy business. For share cycle, the business aligns with the retail service expansion strategy: share cycle stations will be used as new customer touchpoints for broader group services, so long-term, the business connects directly to the group's strategic expansion of retail service presence.