Maruzen Showa Unyu Co.,Ltd. Q4 FY2025 earnings call

Core 2025 March Fiscal Year Results

• Achieved a record high operating profit, with growth driven by expanded transactions with existing shippers and optimized pricing to improve profitability. Results missed the original opening guidance after a planned 3PL contract was canceled due to the shipper exiting its business, but still delivered year-over-year revenue and profit growth.
• Net income saw only a small increase: a 2.619 billion yen gain from selling cross-held policy shares was offset by a 2.67 billion yen impairment charge on underperforming overseas subsidiaries.
• Operating cash flow increased year-over-year, driven by higher profit and lower accounts receivable from a calendar effect. Cash outflows for investing increased due to purchases of land for a new headquarters and a new Western Japan warehouse, plus spending on the new core system construction. Cash outflows for financing increased due to higher dividends and new share repurchases for shareholder returns.

8th Mid-Term Management Plan (prior 3-year plan ending FY2025 March) Review

• Quantitative targets: Final year targets of 165 billion yen in revenue, 16.5 billion yen in ordinary profit, and 8.5% ROE were not met (actual results: 144.5 billion yen revenue, 15.7 billion yen ordinary profit, 7.7% ROE), but the period still delivered consecutive record revenue and profit growth. Investment plans for capital expenditure, DX, and M&A also did not reach original targets, due to macroeconomic headwinds including high construction material costs and slower customer production from the Ukraine war and yen depreciation.
• Key completed achievements:
  • Expanded 3PL revenue from new projects with existing customers and new agribusiness-focused projects
  • Advanced the development of a new core enterprise system, delivered efficiency gains from RPA, and fully launched the Kawasaki Training Center to expand corporate training for employee development
  • Launched new sprout-inhibiting agricultural product storage services in Ibaraki (adding to the existing service in Hokkaido), to build out a national agricultural product distribution network using RO-RO ferry service
  • Expanded inter-corporate collaboration for logistics efficiency and decarbonization: launched a joint crop protection product distribution pilot with two partner firms, joined government working groups for logistics industry transformation, and won an industry award for a successful modal shift collaboration project
  • Strengthened human capital development: expanded training volume yearly, launched new strategic talent programs focused on 3PL proposal development and on-site problem solving

9th Mid-Term Management Plan (FY2025-FY2027) Core Strategy

• Positioned as a period of business model transformation to adapt to industry changes including driver shortages, new logistics regulations, rising construction costs, and accelerated industry consolidation. The company aims to become a "logistics partner that creates customers' future through technology and on-site expertise."
• Key priority initiatives:
  • Revenue Growth: Shift from custom single-client 3PL to industry-focused 3PL + shared logistics proposals; focus growth on high-potential sectors where the company has existing expertise: industrial machinery, hazardous materials, and agricultural products; continue to expand cargo collection on the Tokyo-Nagoya major trunk route leveraging the company's hazardous materials handling strengths; grow global logistics through tighter collaboration between overseas subsidiaries and external partners to capture more client demand for international logistics
  • Strengthen Business Competitiveness: Standardize 3PL services by industry and expand in-house physical logistics operations; expand owned vehicle fleets to secure stable transport capacity for post-2024 industry regulation compliance, and develop new hubs for the differentiated hazardous materials and agricultural product segments; expand overseas logistics hubs to grow global logistics; promote mechanization and labor saving for on-site operations to maintain efficiency and quality
  • Transform Corporate Foundation: Consider establishing a dedicated M&A and hub development team and revising incentive structures to accelerate investment activity; promote M&A and strategic alliances to strengthen competitiveness; continue to prioritize talent recruitment and development; launch the new core enterprise system during the plan period and build a digital logistics platform to enable shared distribution services; strengthen company-wide sales promotion systems and tools; advance ESG and sustainability initiatives across all business areas
• 3-year plan allocation: 400 billion yen total for capital expenditure including DX investment, 10 billion yen allocated to M&A. Targets for the final 2028 March fiscal year: 176 billion yen revenue, 18.5 billion yen ordinary profit, and 9-10% ROE. Cash flow allocation: expected 53 billion yen in operating cash flow plus 10-12 billion yen from investment security sales and existing cash reserves; allocations include 10 billion yen for M&A, 40 billion yen for capital expenditure, and 13-15 billion yen for shareholder returns

Shareholder Return Policy

• The company has never cut dividends since listing, and FY2025 March will mark the 11th consecutive year of dividend increases: a full-year dividend of 170 yen per share, a 40 yen increase from the prior year. The 3-year average payout ratio target was raised from 30% to 35% or higher, and the company will consider opportunistic share repurchases in addition to stable dividends. The company will continue to reduce cross-held policy share holdings. Management aims to sustainably maintain PBR above 1.0, and will strengthen IR activity to improve market recognition.

For the 2025 March fiscal year, consolidated net sales totaled 144.572 billion yen, operating income totaled 14.648 billion yen, and net income attributable to parent shareholders totaled 9.804 billion yen, achieving both higher revenue and profit compared to the prior year. All business segments saw year-over-year revenue and profit growth, with no major changes to overall revenue contribution share year-over-year:

1. Logistics Business (main segment): Saw large profitability improvements, with positive performance spillovers to other business lines. Sub-segment performance:
   • Motor Truck Transportation: Increased revenue from strong demand for IT equipment and motor-related products, plus increased volume from existing shippers.
   • Port Transportation: Increased revenue from higher import/export cargo volume, and increased handling of power generation raw materials following a recovery at major power generation manufacturers.
   • Logistics Related Services: Increased revenue from higher precision equipment handling in packaging revenue, plus increased coastal shipping revenue driven by the same power generation sector recovery.
   • Warehousing: Slight revenue decrease, as higher handling volume from existing shippers (including the power generation sector recovery) was offset by the end of COVID-19 related special demand that boosted prior year results.
2. On-site Work & Mechanical Cargo Handling: Increased revenue and profit from higher stainless steel product handling volume plus price adjustments.

• For the 2026 March fiscal year, management forecasts 153 billion yen in total revenue (+5.8% year-over-year) and 16 billion yen in operating income (+9.2% year-over-year), which would set a new all-time record for both metrics. Ordinary profit is forecast at 16.5 billion yen (+4.6% YoY), which would extend the streak of consecutive annual ordinary profit growth to 13 years dating back to the 2014 March fiscal year. Net income attributable to parent shareholders is forecast at 12 billion yen (+22.4% YoY), driven by the absence of the large overseas subsidiary impairment charge recorded in FY2025.
• Logistics segment growth is expected to come from higher volume with existing customers and new 3PL project wins: a new alcohol 3PL project has already launched, and the company is actively pursuing a new pharmaceutical sector 3PL contract. The overall demand for logistics outsourcing remains strong, and management expects this trend to continue.
• The FY2026 March full-year dividend is planned at 170 yen per share, split into an 80 yen interim dividend and 90 yen year-end dividend, keeping the annual payout stable at the new higher level set for FY2025.

• U.S. tariff policy creates macro uncertainty: while Maruzen Showa Unyu does not handle large volumes of automotive products, so direct impacts are currently expected to be minor, the broad supply chain ripple effects from tariff changes on the large automotive industry are hard to predict, creating an unquantifiable indirect risk.
• Slow progress on profitability improvement at overseas subsidiaries has already led to material impairment charges in FY2025, and continued underperformance represents an ongoing operational and financial risk.
• High construction material and logistics operating costs continue to pressure margins; management plans to offset this pressure with price adjustments, but there is no guarantee that full cost pass-through will be achieved.

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