Artience : Presentation Briefing transcript of First Three Quarters of FY2025 Results Briefing

About this update from Artience Co.ltd

Financial Results Briefing for the First Three Quarters Fiscal Year Ended December 31, 2025 Presentation (Transcript) Date/time: Nov. 21, 2025, 1:00pm - 2:00pm (Japan time) Presenters: Hiroyuki Hamada, Director Vice President, General Management, Corporate Division Takeshi Arimura, Operating Officer in charge of IR and GM of Finance & Accounting Department Kengo Kochiya, Senior GM, Corporate Planning Div. Masaki Nagatsubo, Executive Director of TOYOCOLOR CO., LTD. Presentation Material: https://ssl4.eir-parts.net/doc/4634/tdnet/2678145/00.pdf TRANSLATION: This is a transcript of Financial Results Briefing for the First Half of the Fiscal Year Ended December 2025, held on Nov.21, 2025, Questions & Answers session. This is an English translation of the Japanese original, prepared only for the convenience of non-Japanese native shareholders. The original Japanese version will prevail should there be any difference in the meaning between the English version and the Japanese version. DISCLAIMER: The forecast or projections in this material are based on the assumptions and beliefs of our management considering the information available as of Nov. 21, 2025. Changes in global, economic, and business conditions could cause actual results to differ materially from these forecasts. The content of this transcript has been edited or revised by the company. Presentation Hamada: Thank you all for taking time out of your busy schedule to attend our financial results briefing today. I would like to explain the details of the financial results we announced last Friday, November 14. Today, I will explain the key points of the settlement of accounts, and then I will hand it over to Mr. Arimura, and back to me again. In the first nine months of this year, both sales and profit declined, partly due to the high base in the previous year. However, foreign exchange movements - the yen's appreciation from last year's weak level - had a negative impact of approximately JPY 4.6 billion on overseas sales. Excluding this impact, sales would have increased by around JPY 2.9 billion. In Q3 alone, sales and profit exceeded the previous year's level. Since Q1, results have improved quarter by quarter, and although the cumulative total is still below last year, we see the overall trend as improving. Profits attributable to owners of the parent were lower than the previous year due to a decrease in the gain on sales of securities. However, we plan to sell the securities in Q4, so we will be able to play some catch-up in this area. By business segment, Polymers and Coatings and Packaging Materials performed well. Polymers and Coatings grew, especially overseas, while domestic sales of packaging materials did well. As for printing and information, domestic sales were firm, but overseas sales struggled a bit. Colorants and functional materials struggled both in Japan and overseas. More details will be given later in this presentation. For the full year of the current fiscal year, the overall performance will be solid, except for some businesses. In addition, naphtha-derived raw materials are expected to remain stable, and we believe we will be able to continue the current trend. Considering this, the consolidated earnings forecast remains unchanged. Arimura: I will explain the summary of the consolidated business performance on pages 4 to 6. Net sales were JPY258.4 billion, down 0.7% from the same period last year. As Mr. Hamada mentioned earlier, there was a negative impact of JPY4.6 billion due to the appreciation of the yen against the US dollar compared to the same period last year. Excluding this negative factor, we consider the increase in sales to have been JPY2.9 billion, or 1.1%, in real terms. Regarding operating profit, the weak performance of high-margin products, such as color filter materials, had an impact. We will explain the analysis of increases and decreases of it on the following pages. Although the increase in personnel, logistics, and other expenses was compensated for by price revisions and cost reductions, the total operating profit decreased by 5.8%. Ordinary profit decreased by 3.4%, but looking at non-operating profit and expenses, we were able to compress it to minus JPY400 million from minus JPY800 million in the same period of the previous year. One factor was the effect of converting loans in Europe and the US, especially in the Turkish subsidiary, to loans from the parent company, which reduced the interest burden for the Group as a whole. As for profit attributable to owners of the parent, while a gain on sale of investment securities of JPY2.2 billion was recorded in the same period of the previous year, the amount was only JPY0.4 billion in the current period. The tax burden was also higher than in the previous year due to the reversal effect of the temporary tax reduction in the previous year, when the tax burden was temporarily lower due to the sale of a subsidiary, which allowed past losses to be included in deductible expenses. Consequently, the deviation from ordinary income widened compared to the previous year. The full-year plan has not been revised at this time. Although the progress rate of sales was a little low as of Q3, we believe that operating profit and ordinary profit are coming along well. As for profits attributable to owners of the parent, the rate of progress is low, but as mentioned earlier, we plan to proceed with the sale of shares and other measures in Q4. This chart shows quarterly net sales and operating profit. In 2025, there has been a steady increase since Q1. Q1 is a quarter in which demand declines seasonally every year due to vacations such as the Chinese New Year in many countries, but we recognize that even if this is considered, demand is increasing steadily. In terms of sales, the package-related business struggled in Q1 in Turkey during the off-season of contracts, but since then, the Company has been able to steadily win contracts and increase its volume. In addition, demand was strong for pressure sensitive adhesives for displays and functional films in China and can coatings for tuna cans and other applications, which were stable in Thailand. In terms of profit, we were able to make solid progress with price revisions, and with stable raw material prices overseas, we were able to secure a solid spread, which is reflected in the figures. Here is the analysis of the factors behind the YoY difference. The analysis shows a decrease of JPY0.9 billion compared to the same period of the previous year. First, in terms of increased expenses, we were affected by a negative profit impact of JPY2.6 billion. Personnel expenses amounted to JPY1.7 billion, and depreciation and amortization expenses totaled JPY900 million. Personnel expenses increased both domestically and internationally, especially in Turkey, where inflation had the effect of implementing additional salary revisions even during the period. As for raw materials, it had a positive effect of JPY200 million, which benefited from the price decline. Looking at domestic and overseas, the domestic impact was JPY0.7 billion, and this had a negative impact on profit due to price increases. There was a sharp rise in the price of raw materials for UV curable inks and silver, etc. On the other hand,, overseas, the prices of crude oil and naphtha remained stable, and we benefited from lower prices of raw materials derived from these products. Sales mix was negative JPY1 billion. Although overall sales on a volume basis were almost unchanged from the previous year, a change in the sales mix, which resulted in a decrease in high-margin products, such as materials for color filters, had a negative impact of JPY1 billion. In terms of cost reduction, we continued to review raw materials and improve production efficiency, which resulted in a JPY1 billion effect. We have also been communicating with our customers to obtain their approval for price revisions, and we believe that the price revisions, including the fruits of negotiations in the previous year, had an effect of JPY1.8 billion in the current fiscal year. Lastly, regarding the foreign exchange fluctuations, the trend of yen appreciation from the previous year resulted in a negative impact of JPY0.3 billion due to translation and other factors. That is all for the summary of the overall numbers. Hamada: I will now explain the summary of performance by business segment. What you are looking at now is the P&L by segment, and we have been asked whether the figures for the others segment might be abnormal. We received questions wondering why the positive JPY400 million through Q3 leads to a negative JPY900 million forecast for the Q4 accumulation. In the first place, in the others segment, the Group's, artience Holdings, R&D and management costs are allocated to domestic business segments and operating companies under the name of management guidance fees. For example, sales and profit that do not belong to business segments, such as overseas raw material sales and real estate rentals to operating companies, and infrastructure costs, such as information systems, are first recorded by artience as the holdings, and then allocated to each business based on usage. Management guidance fees are allocated based on the previous year's performance, and because the performance in 2024 was good, the amount allocated for 2025 was increased. That said, the allocation amount for 2024 was based on 2023, so that made a bit of a big difference. In addition, system acceptance for information systems usually occurs in Q4 , so there is a tendency for expenses to increase in Q4. However, as things stand now, there are not enough expenses incurred to go from positive in Q3 to negative JPY900 million, so I believe that we were somewhat overly conservative and our estimates in that area were not correct, and I expect that we will settle at breaking even in real terms. If the others business segment performs as planned, the difference of JPY900 million will be positive. We apologize for the confusion caused by our conservative estimates in this area. We will correct our perspective in this area. Moving on to the description of each business segment. First, let me explain about the colorants and functional materials segment, where progress has been delayed. One of the main reasons for the struggling business was the weak performance of the color filter materials business, which had been highly profitable in the past. Our target markets for color filter materials are China, Taiwan, and Japan. In terms of products, there are markets for large-size TVs and other products and markets for small- and medium-size displays for PCs and automobiles. As for the Japanese market, that used to be the source of our profit, but unfortunately, production in Japan has become part of the small- and medium-sized displays. Currently, our most profitable market is Taiwan, where we have a nearly 40% share of the market, but our Taiwanese customers, Taiwanese panel makers, are experiencing deteriorating profitability due to intensifying price competition with Chinese panel makers and a decline in operating rate, which is affecting our product shipments and other operations. In the Chinese market, there was an increase in demand for TVs and other products due to government subsidies, but since we export from Taiwan and supply Chinese panel makers, we were unable to fully capture the increase in demand, and profit declined due in part to a lack of competitiveness in the face of the emergence of local Chinese makers. Then, there was the so-called policy Buy China, which affected Chinese panel manufacturers. The impact of promoting purchases from a Chinese capital company has also made it more difficult, especially in acquiring new products. The shift to China is progressing even in high-end products and small- and medium-size displays, which have been strong in Taiwan, and this is a headwind for our company, which has been earning strong profit in Taiwan. A joint venture has been established in China, and production is now underway. This is the intention behind the change in the business model to supply the Chinese market from the joint venture . In this field, materials for optical semiconductors performed well, and we are now working to develop this into a core business that will cover the weak performance of the business for LCDs I mentioned earlier. In addition, profitability of plastic colorants, another pillar of this segment, improved in Japan due to price adjustments and cost reduction effects from the delayed rise in raw material prices. As for overseas, profitability of encapsulation materials for solar cells in China, which was strong last year, is deteriorating due to intensified price competition in the market, as well as price competition and inventory adjustments on the part of customers. This had a significant impact, and both domestic and overseas sales and profit were below last year's levels. However, in Southeast Asia and elsewhere, business for components with new functions was solid, partly due to the acquisition of business for components with new functions, and except for solar cells, which were large last year, other products performed well in general. Plastic colorants have been divided into two parts, the part that imparts color and the part that imparts function, but we are strengthening business development, especially from the perspective of imparting function, and I believe that by advancing this, our global network in this business will become a strength. Profitability of pigments improved due to cost reductions and the effect of price revisions. We expect this process to continue in the future. In the inkjet business, the Chinese market, which was strong last year, was sluggish due to customers' inventory adjustments, etc. Sales increased slightly, and profits were at the same level as the previous year. Although progress against the segment's full-year forecast has been slow, we are taking a hard look at the situation. Although this segment tends to be profitable in Q4, we are aiming to achieve the forecast by increasing profit in the color filter business in Q4 and reducing the deficit in CNT dispersion. CNT dispersion for electric vehicles will be explained on the next page. This is the status of the mobility and battery-related businesses, CNT dispersion for LiBs. As for CNT dispersion for electric vehicles, sales for Q3 were JPY1.2 billion, and the cumulative total was JPY3 billion. The full-year target is JPY5 billion this year. The key is how to increase the number of major customers in China, but although sales of existing parts for European cars are growing, quality verification by customers on actual lines, such as for new large-lot Chinese cars, has not been completed. Previously, the project was already scheduled to be finished and fully operational by October, but this has been delayed. The situation is now very delicate as to whether the large portion of the project that can be operational by the end of the current fiscal year. This makes it a bit of a tough situation to get to JPY5 billion in annual sales as things stand now. The customer's own response policy itself has not changed at all, as it is being evaluated on actual equipment, and we expect full operations to begin in the next fiscal year. As for Europe, it is firm. In North America, as you may have heard, the situation of automobile manufacturers, such as Ford, has been sluggish, and we are concerned that the situation may worsen. Customer evaluations for anodes and LFP batteries are progressing, and we expect to start actualizing results in 2027, hopefully, around the end of 2027. Next, I will explain the polymers and coatings segment. As for processed functional films, as mentioned earlier, the high cost of raw materials, such as silver, had been affected, but this was compensated for by sales growth, and profit remained strong. In adhesives, profit was driven by optical pressure-sensitive adhesives for displays, especially for Chinese displays, and profit from overseas sales grew. Earlier, we mentioned that the demand for color filter displays was not fully met, but the growth in the adhesive part of the market responded exactly to the demand, or even higher. In Japan, where sales were sluggish last year, we were able to secure profit through cost reductions and price revisions, which had been delayed. As for laminating adhesives, both sales and profit remained at the same level as the previous year due to soaring raw material prices and price revision delays in Japan and sluggish growth in other overseas markets. Then, regarding can coatings for manufacturing, sales and profit both exceeded those of the previous year due to strong sales in Thailand, Turkey, and other overseas markets. Profitability in Japan also improved due to an increase in volume sales. Next, let me explain the packaging materials segment. In Japan, both sales and profit exceeded the previous year's levels due to sales increase, production efficiency improvement, and price shifting of raw material price hikes. What we are referring to here as price shifting is not just the effect of new work done this year, but the effect of price shifting in the sense that the effect of work done prior to last year is continuing. As for overseas, Turkey, which had a slow start due to the loss of a large customer at the beginning of the period, caught up in terms of volume and sales with the acquisition of new customers. However, profits were down from the previous year due to the depreciation of the new plant and inflation accounting. However, the difference from the previous year has been shrinking since Q1, as the period progresses. That is how much sales and profit improved. In Southeast Asia, all our bases performed well. India also continued to grow, and India is the largest of the overseas bases in this segment in terms of sales and volume. Based on the situation in the packaging materials segment that I have just explained, we have decided to make two major investments. In India, we have already released the product, and as demand continues to grow, we will invest in expanding production capacity, which we expect to increase approximately 1.5 times. Naturally, we will realize cost reductions through further productivity improvements with state-of-the-art facilities. We will also promote the development of environmentally friendly products and products that contribute to sustainability, including environmental responsiveness, which is also the desire of our Indian customers, and we will also build production facilities with a view to export. In Japan, we will make a major investment in the current Saitama plant. In anticipation of rising labor costs and increasing difficulty in securing labor in the future, we aim to further reduce costs by improving labor and saving labor in a people-friendly manner and by improving production efficiency. It is expected to be in operation in 2027 or 2028. We plan to gradually expand this high-productivity production process overseas. Finally, I would like to explain the printing and information segment. As for offset inks, the market continues to shrink, as we have always explained. In this context, we have taken initiatives to downsize our structure, improve efficiency, revise prices, and form alliances with other companies in the industry in areas such as logistics, with the aim of getting out of the deficit. We are slightly in deficit now, but there has been a marked improvement over the past few years. In overseas, in the field of offset inks, we are beginning to see market contraction in China and other countries due to the decline in paper media. Declines in sales and profit were observed. In India and other countries, local manufacturers have been attacking us with low prices in this field, and we are trying to compete with them. In response, we are working to speed up the conversion to UV curable inks and other functional inks and, of course, to produce low-cost products that can compete with them, but we will also aim to acquire new fields, such as UV curable inks. Incidentally, we have sold UV curable inks to a certain extent in India, but we will aim for having further sales. Performance of UV LED inks was firm in Japan, with quarterly growth trends. I will explain about its performance for this year. As for overseas, in Europe, we are dealing with some lost ground. In the US, sales and profit were down from last year's level, when there was special demand for the election, etc. This year, there was a bankruptcy of a major company, which led to the suspension of transactions, etc. In the US, sales and profit were down, but other than this, it is fair to say that the business is doing well, with growth in all other areas. We will continue to grow through efforts to expand our sales area in the US. As for overseas, we will focus on responding to the strong European market, which has large sales, and on capturing the expansion of the UV LED inks market in Southeast Asia and India. In terms of the environment and quick drying, we expect to see a shift from general offset inks in this field in overseas as well as in Japan. That concludes our explanation. Thank you for your attention.

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