Chuo Warehouse Co.,Ltd. Q4 FY2025 earnings call

7th Mid-Term Plan (FY2022-FY2025) Retrospective

• Achieved 16.3% total revenue growth, 17.3% operating profit growth, 17% ordinary profit growth, and 17.4% net profit growth compared to FY2022, meeting all targets except net profit (missed due to unanticipated special losses from affiliate share sale and investment securities valuation losses)
• Completed key strategic initiatives: First large-scale M&A of Kyoto-based export packaging firm Tespack; new machinery division offering full installation/removal transport services; 3PL conversion of in-plant logistics for major clients to address client labor shortages; completed 100% LED conversion for all warehouse lighting
• Implemented operational reforms: Introduced packaged sales information systems (replacing legacy in-house tools); consolidated common administrative work into 2 centralized centers to free up branch resources; implemented personnel system reforms and conducted employee engagement surveys to improve performance
• Completed capital market initiatives aligned with Prime Market requirements: Implemented share buybacks, 1-on-1 meetings, restricted stock incentive plans for employee stock ownership, revised shareholder benefit programs, and disclosed regular updates for capital cost and stock price aware management

8th Mid-Term Plan ("NEXT CS-100", aligned with 100th company anniversary in 2027)

• Core vision: Become a company that delivers new value to customers and society through specialized expertise and execution capability, with 6 core strategic priorities:
  • Build new revenue models through continuous expansion into growth areas: Scale recycled raw material logistics (beyond PET resin to auto parts and home appliance recycling) and expand logistics for imported chemicals that are no longer produced domestically
  • Expand domestic and international logistics networks: Complete new warehouse construction in Ama City (Aichi Prefecture) to expand the Tokai region sales area; expand three-way trade focused on Southeast Asia; pursue additional M&A opportunities after successful first acquisition
  • Improve profitability through appropriate pricing and continuous operational efficiency improvements
  • Strengthen information systems and secure next-generation IT talent to replace legacy COBOL-based in-house systems
  • Maintain a sound financial structure and implement capital strategy focused on capital efficiency, with clear 170 billion yen total cash allocation over the plan period
  • Strengthen sustainability initiatives: Advance TCFD-aligned disclosure and environmental load reduction, and improve employee engagement to reduce turnover
• New dividend policy: Adopted a progressive dividend policy, maintaining or increasing the prior period dividend per share based on consolidated business performance and financial health. 2026 March full year dividend is planned at 38 yen per share.

1. Domestic Logistics Business: Operating revenue of 22.484 billion yen (5.5% YoY increase), operating profit of 2.56 billion yen (15.8% YoY increase). Contributes approximately 80% of total company revenue. 2. International Freight Business: Operating revenue of 5.192 billion yen (3.3% YoY increase), operating profit of 0.498 billion yen (4.1% YoY increase). 3. Real Estate Leasing Business: Operating revenue of 0.356 billion yen, operating profit of 0.153 billion yen, flat year-over-year. This segment is a small but stable contributor of rental income from the hotel Kadensho in Kyoto. Total consolidated operating revenue for the full year was 27.84 billion yen (5.0% YoY increase), total operating profit was 2.189 billion yen (13.2% YoY increase).

• 2026 March full year (first year of the 8th Mid-Term Plan): Guidance calls for 2.4% YoY revenue growth to 28.5 billion yen, 2.7% YoY operating profit growth to 22.5 billion yen, 0.7% YoY ordinary profit growth to 24.5 billion yen, and 13.3% YoY net profit growth to 18 billion yen. Guidance is deliberately conservative due to high macroeconomic uncertainty, with a focus on reliable delivery.
• 8th Mid-Term Plan (ending 2028 March) targets: 31.5 billion yen operating revenue, 2.5 billion yen operating profit, 2.65 billion yen ordinary profit, 7.9% operating margin, 8.4% ordinary margin, and 5.0% ROE. Targets reflect continued challenging market conditions and a focus on maintaining current margin levels.
• Total planned cash outlay over the 8th Mid-Term Plan period is 170 billion yen, with 120 billion yen allocated to capital investment including new warehouse construction, system investment, personnel cost increases (including salary adjustments), existing facility upgrades, and M&A.

• Macroeconomic risks: Persistent geopolitical instability, slowing Chinese economy, and uncertainty from US trade policy have created ongoing global economic instability
• Industry cost and labor risks: Rising fuel and energy costs, widespread industry labor shortages driving wage inflation, and continued pressure from the 2024 trucking labor cap regulation
• Competitive risks: Intense competition for recycled PET raw material has driven sharp price increases, forcing a temporary shift to virgin resin imports in FY2025
• Internal operational risks: Legacy in-house COBOL-based systems lack sufficient open-system IT talent, requiring planned investment and hiring to modernize infrastructure

Q: What are the drivers and outlook for segment margin for domestic logistics and international freight, which are around 10% currently? / A: The main driver of recent margin expansion in domestic logistics is successful passing through of cost increases to customers via price revisions. Management will continue to focus on pushing appropriate pricing to maintain margin levels amid ongoing cost pressures in both business segments.

Q: Which countries are the main targets for Chuo Warehouse's planned three-way trade expansion? / A: The primary focus is on Southeast Asian markets, aligned with shifting supply chain patterns resulting from recent trade policy changes. Management sees unmet demand for third-country trade logistics services in this region as new supply chains are established.

Q: What types of companies does Chuo Warehouse target for future M&A? / A: Management prioritizes targets that can expand the company's service offerings or geographic network, aligned with the 8th Mid-Term Plan's growth goals. Any transaction will be pursued only after rigorous due diligence to ensure it adds long-term value to the business.