9028.T

• Market Context

  • New vehicle demand has been severely depressed, with a more than 20% year-over-year decline in new vehicle manufacturer prime contracting volume, exceeding initial expectations. Nissan Motor accounts for 8.7% of Zero's current sales revenue; management notes that risk diversification across business segments saved the business from viability issues that would have occurred if Zero were still reliant solely on Nissan.
  • Used vehicle registrations increased in Q1 but declined in Q2, and new vehicle export volumes declined year-over-year in both quarters, while used vehicle export volumes increased year-over-year in both quarters.

• Operational Improvement Initiatives

  • Sales Quality: The company is working to expand service coverage to meet all customer demand for tire-related vehicle services (including currently unaddressed demand for immobilized vehicle/accident vehicle transport), and launched on-site operations at USS Tokyo and USS Yokohama (Japan's largest auto auction operators) in January 2026, with a joint operational structure of staff from Japan Relief, on-site management by Souing, and overall coordination by Zero. The company holds quarterly strategic meetings with USS and USS Logistics to resolve issues, and will consider acquisitions of new businesses to meet emerging demand for tire-related vehicle services.
  • Logistics Quality: Driver retention is prioritized, with driver turnover included in transport company CEO performance evaluations, and driver salary systems restructured to reduce turnover. The company is conducting a full review of ocean shipping routes to optimize cost efficiency, simplified vehicle scratch inspection standards to reduce driver burden and cut customer complaint volumes, restructured the headquarter safety management system, and is systemizing operational processes via digital investment. The company also evaluates optimal carrier car count per location, avoiding automatic replacement of retired vehicles.
  • Human Resource & Brand Quality: The company increased public relations activity, publishing regular content focused on drivers to raise public awareness of vehicle transport work and improve recruitment branding. It is addressing high early-career driver turnover, and launched hospitality training for last-mile delivery drivers covering personal grooming, communication, and key process steps to improve overall service quality. It has also restructured salary systems to improve base pay and provide clear career progression paths to boost employee motivation.
  • Financial Quality: The company completed the review of shareholder return policy, and is pursuing ROIC-focused management, exiting or reviewing all businesses that do not meet return expectations, and prioritizing profit over top-line sales growth. The company achieved listing maintenance requirements in August 2025.

• Mid-term Strategic Plan (3-year plan, currently at midpoint)

  • The plan targets consolidated sales revenue above 150 billion yen and operating profit above 10 billion yen by plan completion. 1 project (shareholder return policy review) is completed, 11 projects are in progress, and management will prioritize back-half initiatives to build customer-exceeding service quality and become the top player in the industry. Management is reviewing existing legacy Nissan-centered depot locations (including adjusting for the announced closure of Nissan Oppama Plant), and working to optimize costs and build a framework for appropriate pricing.

• Second Half of Mid-term Plan Priorities

  • Break down internal silos to strengthen group-wide collaboration and capture untapped business opportunities, rebuild a appropriate price structure that reflects actual costs (involving both price increases and decreases as needed), review role allocation between Zero and partner companies across regions, transport types, and vehicle categories, adjust depot location and layout to adapt to post-2024 problem working time restrictions, push forward group-wide centralized recruitment and prioritize development of frontline leadership talent that can become future executive leadership, and maintain active IR activity to deliver consistent dividends to shareholders.

• Full-year 2026年6月期 operating profit guidance is maintained at 10.3 billion yen, unchanged from the original target, despite a 0.5 billion yen year-over-year decline in H1 operating profit and 3.1 billion yen year-over-year decline in H1 sales revenue. Management noted H1 results were broadly in line with budget expectations.
  • H1 operating profit came in at 4.4 billion yen, so the company needs to achieve at least 5.9 billion yen in operating profit in the second half to hit the full-year target.
  • Management expects the historical trend of higher revenue and profit in the second half (typically 40:60 or 45:55 H1:H2 split) to hold, with the March auto sales peak driving second half growth.
  • Key drivers of expected second half profit growth include: cost and efficiency improvements from the ocean transportation route review, which is expected to deliver hundreds of millions of yen in annual profit gains, and the elimination of radiation inspection fee costs that adds another hundreds of millions of yen in profit compared to 2025年6月期.
  • The 3-year mid-term management plan targets consolidated sales revenue above 150 billion yen and operating profit above 10 billion yen by plan completion, and remains on track with 18 months remaining.

Total 2026年6月期上期 consolidated sales revenue is 65.8 billion yen. Breakdown by segment:

1. Domestic Automotive Related Business: Accounts for approximately 50% of total sales revenue (around 32.9 billion yen). Sales revenue decreased by approximately 0.7 billion yen compared to the 2025年6月期 second quarter, primarily due to a large decline in the new vehicle market centered on Nissan Motor, and delayed reallocation of transportation capacity from declining new vehicle business to used car/leased vehicle transportation. Within this segment, used car sales revenue and profit increased due to focused margin-focused activities, and the acquisition of Zero Plus Maintenance added maintenance-related business to the segment.
2. Human Resource Business: Accounts for 18% of total sales revenue (11.844 billion yen). The segment saw sales revenue increase after streamlining unprofitable/unprofitable contracts and centralizing recruitment at Japan Relief, which enabled higher hiring of drivers and dispatched staff. However, operating income turned negative due to increased costs from minimum wage hikes and a one-time impairment charge from exiting the unprofitable "Unten.com" logistics-job matching service. This impairment is expected to be transitory.
3. General Cargo Business: Accounts for 5% of total sales revenue (3.29 billion yen). The segment performed very well, with growth from launching new warehouse business, repurposing a vacated CKD project warehouse for third-party use via subsidiary Kyukura, and steady performance from port cargo handling.
4. Overseas Related Business: Accounts for 26% of total sales revenue (17.108 billion yen). Sales declined year-over-year due to early exhaustion of Malaysia's annual 35,000-unit used car import quota (AP) in H1 calendar 2025, which left unsold vehicles held as inventory at end-December 2025, pushing revenue recognition to January 2026 after new AP quotas were issued. This sales decline is temporary, and the lost revenue has already been recovered after January 2026. China's Dongfeng Nissan posted higher shipment volumes than 2025年6月期, driving sales growth in that region.

• Operational Safety Incidents

  • Two consecutive carrier car fires occurred in August and September 2025, affecting the same model from the only domestic manufacturer of this vehicle type. A full inspection of all 54 units of this model was completed, and the company will replace all 54 units with new vehicles gradually (to avoid disrupting transport operations) and conduct impairment accounting as replacements are completed. The cause of the fires is not yet confirmed, but there is potential for underlying structural issues with the model. The company will not operate any carrier cars that cannot be confirmed safe, and is working with the manufacturer to implement improvements and prevent recurrence. Temporary inspection and replacement costs have pressured H1 profits.
  • In October 2025, a Zero Plus Chubu carrier car collided with a limited express train on JR Takayama Line. There were no fatalities but there were injuries, and the company established a railroad crossing accident countermeasure headquarters to re-train all employees on emergency response and safe driving procedures. Management noted this incident could have threatened company survival and has re-emphasized the core principle of safe delivery of customer vehicles.

• Market & Operational Risks

  • New vehicle demand is severely depressed, particularly for core customer Nissan Motor, which has created a large year-over-year sales decline in the core domestic automotive segment that has not been fully offset by shifting capacity to other vehicle types.
  • The 2024 working time restrictions have forced the adoption of divided labor for vehicle transport, increasing per-shipment costs as different workers handle vehicle collection, loading, and driving. Carrier car purchase and maintenance costs have also increased, and the large 1 billion to 2 billion yen scale salary system overhaul has increased annual company costs, though it has already reduced driver turnover.
  • The company is investing 1.5 billion to 2 billion yen across the 3-year mid-term plan in system development, with over half already invested. The 5-year depreciation schedule for these investments creates near-term profit pressure that management accepts for long-term competitiveness.
  • Used car joint transportation is far more complex and difficult to implement than new vehicle joint transportation, presenting a major barrier to industry-wide efficiency gains.

Q: What concrete new services do you expect to launch within the current mid-term management plan as part of your effort to exceed customer expectations, especially in areas related to USS and other adjacent vehicle businesses?

A: Management notes that Zero currently lags behind consumer-focused companies in launching new services, and customer conversations reveal many unmet needs. Examples of potential new services include paid storage for vehicles that customers want held before delivery (with Zero currently used as free de facto parking, which can be monetized), and expanding the same-day/next-day delivery model already operated by subsidiary Zero Plus IKEDA to the entire company. Management plans to rapidly develop and launch these new services within the current mid-term plan period.

Q: What changes have you seen in employee motivation and behavior after the salary system overhaul and new education/training initiatives?

A: Zero changed its salary structure from splitting fixed annual bonus into 16 monthly installments to 12 monthly installments, which increased base monthly salary, raised overtime pay bases, and significantly increased retirement benefits. Base salaries for drivers and general staff have increased 1.2x to 1.3x, a major change that has increased company costs significantly. A performance-linked bonus system for regular employees has also been introduced, and contract/ dispatched staff get performance evaluations from center managers, with high performers offered paths to regular employment, professional driver career progression, and step-by-step progression from small vehicle to large trailer driving. These changes have already improved frontline employee motivation.

Q: What is your approach to new depot construction, relocation, and expansion, particularly in the context of post-2024 working time regulation changes?

A: Zero originally located all depots on Nissan property when it was exclusively a Nissan transporter, and this legacy layout is no longer optimal now that Nissan represents less than 10% of sales. Large-scale auto auction hubs like USS Tokyo are far larger than any manufacturer depot and have very high cargo volumes with variable demand that require new depot approaches. Management is currently creating a new logistics map to identify where cargo originates and terminates in the current market, and notes that working time restrictions mean historic routes (e.g. Kawasaki to Nagoya) can no longer be completed same-day, requiring new hub depots in the Tokaido corridor between Tokyo and Osaka. The company is currently evaluating optimal locations one-by-one, and will consider both owned depots and partner depots, with concrete progress expected in the second half of the current fiscal year.

Q: How does Zero and the Japan Land Transportation Association view the Japan Automobile Manufacturers Association's new initiative to improve finished vehicle logistics efficiency as part of its "7 New Challenges" agenda?

A: The Japan Land Transportation Association was founded by auto manufacturers, and Zero is the only independent major finished vehicle transporter with no capital ties to auto manufacturers. JAMA's proposal to eliminate empty return loads by improving backhaul utilization is an interesting discussion that the association welcomes, but finished vehicle logistics is more complex than the simple proposal suggests: many vehicles are transported multiple times (to install optional equipment after factory completion before delivery to dealers), so empty backhaul is not easily eliminated. The Japan Land Transportation Association has already requested a discussion meeting with JAMA, building on prior discussions after 2025 legal changes affecting new vehicle transport. Potential industry-wide efficiency projects like building a shared hub between Toyota (Nagoya-centered output) and Nissan (Kanto-centered output) at their midpoint are interesting possibilities, and the association is open to exploring all potential efficiency improvements, with further updates to come as discussions progress.

Q: What is the timeline for establishing a joint transportation system, and what benefit will it bring to industry efficiency and profits?

A: First, the definition of "joint transportation" needs to be clarified, as it already exists in some forms (e.g. Nissan transporting new vehicles from Sendai to Morioka, then backhauling Toyota new vehicles from Morioka to Sendai, which is already operational). The model JAMA proposes (backhaul after delivery to dealers) is the most complex version of joint transportation. New vehicle joint transportation is relatively feasible, but used vehicle joint transportation is far more complex and difficult. The association believes that starting with shared industry hub facilities (like the Toyota model in Hokkaido, where multiple manufacturers use a single shared hub for dealer pickup, eliminating last-mile delivery to multiple small dealer locations) is the best first step, which would deliver clear efficiency improvements. Any efficiency gains need to be reinvested back into the industry or passed to drivers rather than entirely passed to manufacturers as lower cost to have sustained positive impact.

Q: Will Zero pursue M&A diversification into non-vehicle related areas like EC logistics?

A: Zero will remain focused exclusively on tire-related (vehicle-adjacent) businesses, and has no plans to enter general cargo or EC logistics. The company will only expand into adjacent vehicle-related businesses that match customer requests for new services, and may pursue M&A to acquire capabilities in these areas, working with partners where appropriate to build viable customer-focused business models.

Q: What is the background for the expected large profit increase in the second half of 2026年6月期?

A: H1 results were in line with plan, and Zero is targeting 5.9 billion yen in operating profit for the second half. Key drivers of the year-over-year profit increase include efficiency improvements from the ocean route review (which will deliver hundreds of millions of yen in profit) and the elimination of radiation inspection fees that Zero stopped paying starting July 2025, which also delivers hundreds of millions of yen in profit compared to the prior year. These pre-prepared initiatives are expected to deliver the planned profit increase.