AZ-COM MARUWA Holdings Inc. Q4 FY2025 earnings call

Mid-Term Management Plan 2025 Retrospective

• Over the 3-year plan period, the compound annual growth rate (CAGR) was 16.1% for revenue, 8.2% for operating profit, and 8.4% for ordinary profit. By segment, 3-year CAGR was 9.3% for Last One Mile, 11.0% for EC Room Temperature Transportation, 36.4% for EC Room Temperature 3PL, 9.8% for Low-Temperature Food 3PL, and 7.9% for Pharmaceutical/Medical 3PL.
• Talent strategy: Exceeded hiring targets by shifting focus to mid-career recruitment, hiring a total of 3,062 employees (985 new graduates, 2,077 mid-career hires) over the 3-year plan. The company prioritizes talent retention and accelerated training to reduce time-to-productivity for new hires from 1 year to 3 months.

New Mid-Term Management Plan 2028 (FY2026 - FY2028)

• Core theme: Achieve transformation into a high-profit enterprise, defined as an ordinary profit margin of 7% or above, which the company considers appropriate for its scale with ongoing planned investment.
• The company focuses exclusively on retail sector logistics, prioritizing aligned growth with retail clients. Quantitative targets for FY2028 (final year of the plan): 280 billion yen in revenue, 20 billion yen in ordinary profit, 7.1% ordinary profit margin.
• Key strategic priorities:
  • Building a high-profit enterprise resilient to environmental changes, addressing broad-based cost increases across all input categories including labor and vehicle purchases.
  • Strengthening group functions: Support rapid growth of subsidiary Faiz Holdings, which has achieved top-tier scale in its segment in Japan, and expand the AZ-COM network member base (currently over 2,750 members, targeting 3,000, 5,000 and eventually 10,000 members) via faster payment terms and leadership training for partners.
  • Evolving operations via increased automation and robotics: Invest in technology-enabled, robotically optimized facilities (such as the newly opened Matsumotokiyoshi Cocokara center in Kyushu, which received positive industry feedback for its functional design and automation).
  • New business/new client development and existing business re-growth: Focus new development on low-temperature food and supermarket logistics, including exploring direct-to-retail produce distribution via a partnership with Kumamoto Daido Seika, a regional wholesale market operator; target supermarkets currently handling logistics in-house to capture new 3PL contracts. The new AZ-COM Matsubushi EAST center will begin full operations in October 2025, with a second adjacent building already planned, and includes base isolation and BCP storage functionality to meet client disaster preparedness needs.
• Functional priorities:
  • Data-driven management: Leverage AI and information platforms, prioritize input from younger employees on technology initiatives.
  • Expand BCP/emergency storage business: Only 12 Japanese prefectures remain unserved, and the company has secured early interest from the Tokyo metropolitan government for disaster preparedness storage at the Matsubushi center.
  • Shareholder returns: Increase the target dividend payout ratio from 30% to 40% to better align with investor expectations.

For the 2025 March fiscal year (FY2025), total company revenue was 208.37 billion yen, a 4.9% increase year-over-year (YoY). Operating profit was 10.969 billion yen, down 20.8% YoY; ordinary profit was 11.645 billion yen, down 19.7% YoY; net profit attributable to parent shareholders was 7.284 billion yen, down 20.1% YoY. Segment performance:

1. Last One Mile Business: Revenue up 2.9% YoY, underperformed against the planned double-digit growth target due to soft results in net supermarket related services.
2. EC Room Temperature Transportation and Delivery Business: Revenue down 10.3% YoY, due to unanticipated consolidation of large hubs as part of ongoing business scrap-and-build activities. The hub consolidation created a 2.787 billion yen negative impact on ordinary profit for FY2025.
3. EC Room Temperature 3PL Business: Revenue up 18.2% YoY, driven by growth in trunk transportation and other transport services, plus the opening of new dedicated centers and EFC facilities.
4. Low-Temperature Food 3PL Business: Revenue up 9.8% YoY, supported by new contracted business from Kansai region supermarkets.
5. Pharmaceutical and Medical 3PL Business: Grew steadily, supported by the opening of a new logistics center to accommodate business expansion of a major client drugstore chain.
6. MCC Management: The joint venture for Matsumotokiyoshi Holdings and Cocokara Fine integration logistics expanded coverage to the Tokai and Kyushu regions, with future planned expansion into the Kanto region.

• For FY2026 (ending March 2026), management forecasts: 220 billion yen total revenue (up 5.6% YoY), 11.9 billion yen operating profit (up 8.5% YoY), 12.0 billion yen ordinary profit (up 3% YoY), with 38.8% of ordinary profit expected in H1 and 61.2% in H2.
• The company forecasts negative impacts of 12.5 billion yen from portfolio adjustments (business exits/scale-downs) and 8.8 billion yen from existing volume declines, which will be offset by new growth initiatives to deliver net revenue growth.
• Planned capital expenditure for FY2026 is 27.686 billion yen, with 17 billion yen allocated to the AZ-COM Matsubushi EAST project, 3 billion yen to the AZ-COM MC Fukuoka center, and remaining allocation to vehicle investment.
• Key targets for FY2026: 5.5%+ ordinary profit margin, 12.3% ROE, with a target ROE of 15%+ for the full mid-term plan period, 10.4% CAGR for the 3-year plan, and 1.5 percentage points of margin improvement.

• Broad-based cost inflation: Rising labor costs (the 2024 labor market reform created a 0.611 billion yen negative impact on FY2025 profit, and starting entry-level salaries are expected to rise further industry-wide in coming years) and rising input costs for assets like vehicles are pressuring margins.
• Slow progress on price pass-through: Only 50-60% of the planned cost pass-through via price increases has been completed as of FY2025, requiring continued efforts in FY2026.
• Exposure to client-driven business changes: Client-requested business revisions in FY2025 created ~22 billion yen in lost revenue, leading to the full-year profit miss, the largest decline the company has experienced since its founding.
• Operational and strategic risks: Slow response to external environmental changes could create material adverse business impacts, and falling profitability remains a core risk to address amid persistent cost growth.

Q: The mid-term plan targets high CAGR for EC-related segments, including around 20% for Amazon-related business. Even with the one-time FY2025 decline from hub consolidation, can 20% annual growth for EC be sustained given slower reported growth for Amazon overall? / A: (Transcript cuts off before the answer is provided, but the question confirms investor focus on the sustainability of high EC segment growth targets.)

Q: What is the specific content of the "high value-added" services referenced in the new mid-term plan? / A: (Transcript does not include the full answer text in the provided excerpt.)

Q: What is the implementation timeline for TMS (Transportation Management System) rollout? / A: (Transcript does not include the full answer text in the provided excerpt.)

Q: What are key examples of planned technology investment for the business? / A: (Transcript does not include the full answer text in the provided excerpt.)