TOYO Corporation Q2 FY2025 earnings call

• Overall Positioning

• This fiscal year is the first year of the mid-term management plan "TY2027", positioned as a year of upfront investment to hit 2027 target goals. Lower sales and profit this half are within management expectations, with sales and profit projected to be concentrated in the second half this year compared to historical trends.
• Gross profit margin hit 42.4% this quarter (42.8% cumulative first half) due to low-margin large projects, with significant improvement expected in the second half.
• Balance sheet: Seasonal high transaction volume increased receivables, payables, and short-term borrowings by 2 billion yen.

• New Business Development

• トヨタテクニカ is supporting SkyDrive (developer of flying cars) by supplying aircraft safety and durability evaluation equipment (electric propulsion system test benches, endurance wind tunnel facilities), building a certification test alliance with US partners, and developing proprietary test management tools to commercialize test support services. The firm will continue supporting SkyDrive's type certification efforts, with demo flights scheduled for Osaka-Kansai Expo in August 2025.

• Sustainability and ESG

• Joined a private-sector seaweed bed regeneration and conservation organization in Shin-Kamigoto Town, Nagasaki Prefecture, and supported the area to receive J-Blue Credit carbon credit certification via joint monitoring of regeneration progress. The firm will continue contributing to conservation by developing more accurate quantitative measurement technologies.
• Registered as a participant in the UN Global Compact in April 2025, committing to comply with 10 principles on human rights, labor, environment, and anti-corruption to strengthen alignment with global standards.
• Earned a CDP B score (third highest out of 8 tiers) for climate change action for the second consecutive year, targeting an A- score or higher by the 2027 September term.

• Shareholder Returns

• Adopted a new 3-year dividend policy of 5% or higher dividend on equity (DOE) to support stable continuous dividend growth regardless of single-year earnings volatility caused by large project timing and revenue recognition delays. The interim dividend is set at 30 yen per share as initially projected, with a full year dividend target of 69 yen per share (an all-time high, marking 8 consecutive years of dividend increases). Management targets 10 consecutive years of increases through the mid-term plan period. Share buybacks will be considered as appropriate, balanced against growth investment needs.

Overall company total sales reached 17.376 billion yen, a 2.992 billion yen decrease year-over-year (YoY), and operating profit reached 1.396 billion yen, a 1.927 billion yen decrease YoY. All segments saw revenue decline compared to a strong prior year period, with performance broadly in line with initial plans:

1. Advanced Mobility Business: Domestic electrification-related and vibration/noise measurement performed strongly, but sales and segment profit dropped sharply YoY due to no large AD/ADAS development projects being recorded this period. Multiple large AD/ADAS projects are scheduled for the second half.
2. Decarbonization/Energy Business: Sales were lower than the strong prior year period, but low-temperature measurement, magnetic measurement, and electrochemical measurement systems outperformed initial plans. Segment profit declined due to increased selling, general and administrative expenses (SG&A) from investments in the new secondary battery business.
3. Information Telecommunication/Information Security Business: While network performance test products for major domestic carriers declined, in-house developed SYNESIS packet capture devices grew, and service provider cybersecurity projects were solid. Improved sales mix and optimized human resources led to increased segment profit.
4. EMC/Large Antenna Business: Sales declined YoY due to lower opening order backlog. Segment profit dropped sharply due to the revenue decline and new product development expenses recorded this period.
5. Other Business (Marine/Defense, Software Development Support): Marine/Defense saw increased sales from growth in infrared cameras and underwater communication devices, but reported a segment deficit due to conservative upfront booking of costs for a large received order. Software Development Support had increased sales from solid game and automotive-related demand, but segment profit declined due to extreme yen depreciation against the British pound and increased SG&A for new business expansion. Overall Other Business sales were nearly flat YoY.

Total orders hit a half-year record of 24.135 billion yen, up 37% YoY, and total order backlog reached 23.791 billion yen, up 51.3% YoY. By segment: Advanced Mobility orders grew sharply driven by vibration/noise measurement and EV charging demand; Decarbonization/Energy orders grew driven by hydrogen-related (fuel cell, water electrolysis evaluation equipment) demand, with backlog flat YoY; Information Telecommunication/Information Security orders and backlog grew driven by packet capture devices and cybersecurity demand; EMC/Large Antenna orders and backlog grew sharply driven by large projects from automakers and auto parts manufacturers; Marine/Defense (within Other Business) orders and backlog grew sharply, with 4.7 billion yen in defense-related orders this quarter including a 2.7 billion yen award for an information-gathering ROV (underwater drone).

• Management maintains the initial full-year 2025 September term guidance: 33 billion yen total sales, 2.4 billion yen operating profit, 2.4 billion yen ordinary profit, and 1.75 billion yen net profit. First half performance is broadly in line with projections, with stronger performance expected in the second half.
• Full-year orders are projected to significantly exceed prior year levels, with strong first half order growth building a pipeline for future revenue and profit. The TY2027 mid-term plan targets 45 billion yen in total sales and 4.5 billion yen in operating profit by 2027, which management remains on track to achieve.

• Policy changes and market developments under the new US Trump administration may cause delays for US-bound projects and reduce profits due to new tariffs. Management will continue to monitor these risks alongside exchange rate movements closely.

No formal question and answer section was included in the provided earnings call transcript.