Financial Results Briefing for the Fiscal Year Ended December 31,2025

Financial Results Briefing for the Fiscal Year Ended December 31, 2025

March 3, 2026

2025

(Total: 59 minutes, Presentation: 46 minutes, Q&A: 13 minutes)

President & CEO Naoki Nakamura Director, Corporate General Manager Ikuo Shimomura

Thank you so much for taking the time from your busy schedules and braving the slippery streets to

attend today's briefing.

First, let me introduce our two speakers. To your left is President and CEO Naoki Nakamura. To your right is Director and Corporate General Manager Ikuo Shimomura.

This briefing is being webcast in addition to the live presentation at our Tokyo Head Office venue. We expect it to take around an hour and a half. The speakers will explain the briefing materials on business results disclosed on our corporate website on March 2, as well as the Medium-Term Management Plan announced on February 13.

First, Mr. Shimomura will discuss the financial results and sustainable management issues. In keeping with the table of contents, we will start with the business environment and topics before proceeding to the business results for FY2025, forecasts of business results for FY2026, and sustainable management. Then, Mr. Nakamura will explain the Medium-Term Management Plan. He will describe the positioning of the new Medium-Term Management Plan, look back over the previous Medium-Term Management Plan, describe the Company's understanding of the issues it faces, and provide an overview of the new Medium-Term Management Plan and its individual strategies.

The Q&A session to follow the briefing on the Medium-Term Management Plan will respond to questions including those concerning business results. We will accept questions from those participating online as well as those present at the venue.

Now, Mr. Shimomura will address the Business Environment and Topics portion on page 3 of the materials.

Starting with the business environment, despite modest overall economic recovery, inbound demand had limited positive impact on domestic consumption. The recovery in consumer spending lacked strength due to the steady rise in the cost of food and other nondurables.

Topics for the year include record high net sales, driven by Paper Products. We made Hikari Packs Ishikawa Co., Ltd. a subsidiary with the goal of enhancing the paper cartons lineup. Additionally, we strengthened our business foundations for the future through investments in manufacturing facilities, backbone systems, and human resources. Dividends per share were increased in accordance with the policy of stable dividend growth. We formulated a new Medium-Term Management Plan.

Next, I would like to report on business results for FY2025.

Please refer to the summary of FY2025 business results on p. 5 of the materials. Although net sales grew by about 1.6% to 103,125 million yen, both operating profit and ordinary profit fell from the previous year, to 7,207 million yen and 7,532 million yen, respectively.

Even as sales increased centered on paper products, profits fell due to capital investments and upfront investments in backbone systems and human resources.

Dividends grew by 2 yen per share after accounting for the stock split implemented last year.

The next page shows results by segment. In the Paper Products segment, which accounts for more than 70% of our overall sales amid the gradual expansion of the segment share, sales of paper cartons and corrugated boxes proved strong.

On the other hand, sales fell for supplies used in department stores and large retailers and for exterior flexible packaging materials for sanitary products. As I noted earlier, the major causes of lower profits in each segment include the impact of capital investment and rising HR costs, including investments in human resources.

This graph summarizes the various factors that underlie the changes in operating profit in FY2025. Despite growth in both sales volumes and average sales prices, centered on paper products, we couldn't offset the increasing expenses of measures to enhance manufacturing facilities and logistics functions as well as other rising costs. For this reason, profits fell by about 800 million yen.

Our extensive product lineup includes paper bags, paper cartons, films, corrugated boxes, and labels. The increase in sales volumes and average sales prices, as well as fluctuating raw materials costs, account for changes in the entire product mix. One specific trend last year was a slightly higher percentage of sales of lower-priced products and those that don't provide high added value.

This graph summarizes trends in business results by segment since FY2020. The percentage corresponding to the Paper Products segment, shown in darker green at the bottom of the graph, is increasing steadily. Currently it accounts for 73.5% of total sales and shows a growth rate of 3.6%.

This table gives a breakdown of Group net sales by our customer businesses. Let's look at the food products and convenience store sectors. Our products for convenience stores are centered on packages for hot snacks sold next to the cash register. In contrast to steady sales growth, primarily of paper products in the e-commerce and home electronics and home installations sectors, sales declined in the supermarket, drug store, and life care sectors, the last of which consists mainly of outer packages for disposable diapers.

From this point forward, we'll present various materials to explain the results by segment. Shown here is the current business environment.

We're trying to improve productivity by making active investments in machinery and equipment while diversifying the product lineup. Backed by growing environmental awareness, we're actively proposing solutions to meet the demand to transition away from plastics and toward paper.

One of our strengths is our capacity to propose and implement the cross-selling of various products, including paper bags, paper cartons, and corrugated boxes intended for delivery use. Since we expect the Paper Products segment to account for an ever growing percentage of net sales, we want to realize growth in this segment befitting the amounts we've invested to date.

Next, we will look at materials that address paper bags in the Paper Products segment. Shown here is the current business environment.

Sales are stronger in overseas markets than in the domestic market, and we're receiving increasing inquiries regarding paper delivery bags used for shipping and deliveries.

In addition to continuing efforts to increase production capacity and productivity at our plants, we're also trying to strengthen supply chains by making proactive use of subcontractors and Group companies. We will also continue to develop paper delivery bags, which help to improve transportation efficiency and work efficiency.

In FY2025, sales in this area were down 170 million yen, or 0.5%. The graph on the lower right shows sales by type of paper bag, with or without tote handles and turned-over tops.

This page gives a brief summary of types of paper bags. Please refer to it later. Last year, sales grew slightly for bags with turned-over tops and square bottom paper bags without tote handles.

The following page is about paper cartons. Shown here is the current business environment. In response to chronic labor shortages, we're receiving growing numbers of inquiries and requests related to carton assembly and product packaging.

We're continuing to strengthen paper container sales for food products and other uses and have also promoted capital investment. We're not just selling packages, but also focusing on providing services in response to customer labor shortages, including paper carton assembly and product packaging. Based on various enhancements made in the corresponding equipment, we're proceeding with discussions with numerous customers.

As conditions of orders received in the paper cartons field remain strong, net sales in this segment increased by about 4% to 26,916 million yen.

This page addresses results for corrugated boxes. Shown here is the current business environment.

We're strengthening production capacity for delivery materials for the e-commerce market. We continue to develop corrugated cushioning materials to use as little plastic as possible and are enhancing cross-selling of paper bags and cartons and corrugated boxes to the snack and food products markets, which are among our strengths.

While net sales grew 13.2% to 14,743 million yen, the improvement in gross profit was slower due to the continuing trend toward higher proportions of low-margin products and competition in the corrugated box industry. For this reason, profit continues to trend down. As in other segments, we plan to improve profit margins by strengthening sales of high value added products and sales of products in which we have competitive strengths.

Let's move on to the Film Packaging segment. Amid growing environmental awareness, fewer and fewer people are using polyethylene or plastic non-reusable shopping bags to carry their purchases. Demand is weak for another main product line, outer flexible bags for paper-based sanitary products or disposable diapers. This is due to the emergence of China's local brands and declining birth rates.

We're considering actively proposing our high-definition flexographic printers, manufacturing equipment with low environmental impact, in other fields as well. In the area of flexible packaging and film packaging, another pillar of future growth, as described earlier for corrugated boxes, we plan to enhance both cross-selling in markets where we have strengths and procurement and supply structures.

We ended last year with slightly lower net sales of 13,322 million yen. Despite relatively small sales volumes, we saw steady growth in sales of flexible packaging and film packaging for food products, one of our focus areas.

Finally, let's take a look at our other businesses. Here we see the results for products not classified under the paper bag, paper carton, corrugated box, or film packaging segments discussed so far. These products include fabric or nonwoven-fiber bags, supplies, sundries, labels, and ribbons.

Net sales here were down 5.4% to 14,048 million yen due to slow sales of supplies, centered on sales of supplies for department stores and large retailers, and the impact of some specific factors.

Here's the balance sheet, which I have no particular comments about.

This table shows a brief summary of cash flows. Cash flow from operating activities increased by about 500 million yen year on year due to factors including investments in machinery and equipment and depreciation associated with replacement of the backbone systems. Cash flow from investment activities resulted in net cash provided of 3,514 million yen from reduction of cross-shareholdings. Cash flow used in financing activities includes the purchase of 1,000 million yen in treasury shares last year.

These are the full-year forecasts for FY2026. As shown here, we forecast net sales of 106,000 million yen and operating profit of 7,500 million yen.

We plan to pay dividends of 42 yen per share.

While we expect the cost of raw materials to rise this year, we will seek to achieve the forecasts shown here by reflecting higher costs in prices and promoting our specialty of cross-selling, especially for paper products.

Additionally, I would like to note that we recorded gains on sale of investment securities last year. Although we don't hold an unusually high volume of cross-shareholdings, we're continuing to move toward reducing them. At the same time, since these consist mainly of shares of stock in business partners, we plan to make the appropriate decisions through careful consideration of the options.

This page summarizes the forecast of full-year results and actual results. We will strive to improve profitability while continuing to achieve steady sales growth.

This page shows the factors underlying the current forecasts of changes in full-year operating profit.

We expect measures including product lineup expansion, cross-selling, and new customer development to lead to steady growth in sales and profit. As noted earlier, although we expect the cost of raw materials to rise this year, we plan to reflect them in prices without delay. While carrying out business, we will increase profitability decisively using the machinery and equipment we've invested in to improve productivity.

Next, I'll review our progress on sustainable management.

We established five KPIs as targets to be achieved by FY2030. The first KPI involves expanding sales of FSC products to 50% or more of net sales through eco-friendly product planning and technology development. Sales of FSC products currently stand at just 21.5%, and we aim to accelerate the pace of this transition to FSC products.

Next, we're aiming to reduce CO2 emissions by 46% from levels in FY2018 to reduce the environmental impact of all our business activities. This is an ambitious goal, but we will move to achieve this KPI by promoting measures like switching to more energy-efficient machinery, transitioning to electricity from renewable energy, and purchasing renewable energy.

The third KPI calls for expanding the scope of The Pack Forest® Environment Fund afforestation activities to contribute to environmental conservation and preservation, targeting 15 activities and 500 participants per year.

Last year, we concluded a contract on a new forestation site, our 10th, in Wakayama Prefecture. Thanks to the participation of not just our own employees, but volunteers from the general public, the number of participants reached 75, the highest figure since COVID-19. We will make steady progress to move toward achieving this KPI in FY2030.

The fourth KPI calls for raising the percentage of women managers to 15% or higher by promoting diverse work styles for employees.

We're making gradual but steady progress toward this target, having reached 8.9% last year. We will continue making steady progress toward achieving this KPI in FY2030 too.

Over the past several years, we've also steadily increased the percentage of women among our university graduate recruits. In Osaka, we earned three stars in the city's program to accredit leading companies in promoting women in the workplace.

The fifth KPI is to increase the number of partner companies supporting the Pack Forest® Environment Fund to 300 as part of efforts to co-create brand value alongside our customers.

Although this is clearly not a low target, we plan to reach 300 supporting companies through vigorous efforts.

This concludes my report today. Thank you for your attention.

I would like to describe the new Medium-Term Management Plan launched with FY2026, as shown on the following slides.

Let's start with the positioning of the new Medium-Term Management Plan. During the preceding Medium-Term Management Plan, we promoted capital investment, expanded the product lineup, and improved productivity-efforts that were reflected, in part, in business results. We see this as a period in which we broadened the scope of the value we can provide.

Under the new Medium-Term Management Plan, we plan to promote business expansion through additional investments in growth, targeting a top line of 120.0 billion yen. We will also build the business foundations needed for the next generation and strengthen ties with stakeholders as we continue to improve capital efficiency.

We will take on the challenge of transitioning to high-quality growth through The Pack Group's business expansion and improved capital efficiency.

Let's review the preceding Medium-Term Management Plan. Page 6 shows the major KPIs. Let's look at the FY2025 results presented in the column.

Consolidated net sales was 103.1 billion yen, or 96.4% of the planned level. Operating profit was

7.2 billion yen, ROE was 7.96%, and ROIC was 6.48%. Regrettably, despite progress toward our targets, we fell short of initial plans.

The reasons behind these results are summarized in the key points. One major trend was a sharp fluctuation in sales in a market on the rebound from COVID-19. This plan was developed in 2022, the initial stage of the recovery, and actual results fell short of expectations. In particular, we didn't anticipate the slowdown in 2025.

Page 7 reviews growth strategies in each of the three major markets.

Food products market sales reached 32.0 billion yen, in line with plans. We secured major new customers and strengthened customer relationships in the gift and souvenir sectors in particular.

Sales to the e-commerce/logistics market were 98.3% of the planned level, at 18.0 billion yen. Sales grew sharply as capital investment enabled increased production for major customers. Results were slightly lower than planned.

Sales to the retail market were 93.7% of the planned level, at 53.4 billion yen. Despite price increases centered on paper bags, sanitary packages, PAS systems, and vendor services to transport consumables in general trended lower than expected.

We recorded growth in each of these three markets, but issues remain compared to the planned targets.

Next, we'll review growth strategies by product.

First, paper bag sales reached 101.6% of the planned target, increasing by 5.8 billion yen to 32.0 billion yen. We secured new customers and significantly strengthened relationships with existing customers. Progress on various measures, including facility enhancements to enable supply of these products and switching to more highly productive manufacturing machinery, resulted in higher than planned sales growth.

Paper carton sales were close to the planned level, rising by 4.7 billion yen to 26.9 billion yen. Major contributing factors included appropriate proposal activities in response to specific demand, including proposing paper containers for the souvenir and takeout markets.

Next, corrugated box sales were 98% of the planned figure, growing by 2.5 billion yen to 14.7 billion yen. This figure resulted from growth in our share of the market for major e-commerce customers and further success in capturing e-commerce demand in the retail market.

The situation was challenging for film packaging sales. Sales of packages for sanitary products, consisting mainly of packages for disposable diapers, were impacted by fewer births and associated lower unit prices as customers chose lower-end products amid increasingly severe price competition in the industry. Results in this segment fell far short of plans.

Positive results for paper cartons and paper bags are reviewed in the lower left. There you'll see also issues in response to which we plan to continue to address and strengthen our efforts.

Page 9 reviews our human capital strategies. From the top down, it shows numbers of employees, women as a percentage of permanent employees, and women as a percentage of managerial personnel. We will continue to address these topics.

The results on the lower left show that regular increases of approximately 5%/year continued as planned. Another positive result was improved employee retention, achieved by revising various regulations.

As shown in the center column, we improved both HR development and evaluation systems, and these efforts continue. As you can see at right, we're continuing to enhance employee engagement and normalization of HR placement.

Page 10 reviews our financial strategies. Here you see the plan targets at left and the results at right.

The preceding Medium-Term Management Plan targeted capital investment and strategic investment of 24.5 billion yen. The actual result was just 16.9 billion yen. One category that fell significantly short of plans was M&A investments, in the center of the slide. Unfortunately, few M&A opportunities met our conditions, and we invested only 400 million yen in a single M&A during the period. We have retained the corresponding funds for investment and will continue to look for investment opportunities.

With regard to capital investments, we believe we were able to invest in new equipment and upgrades in a well-balanced manner for paper bags, paper cartons, and other products.

Regarding shareholder returns at the lower center of the slide, in accordance with the revisions to the shareholder return policy announced on February 9, 2024, we acquired approximately 2.0 billion yen in treasury shares in FY2024 and FY2025, and the dividend payout ratio grew from 30% to 35%, as we made progress according to plan. In May of last year, we implemented a three-for-one stock split intended to expand our investor base. We also sold shares in August as you know, seeking to increase the ratio of floating shares and to expand the shareholder base.

This concludes our review of the preceding Medium-Term Management Plan.

The next slides show our understanding of the issues, starting with the external environment, as illustrated in this diagram.

In the macro environment, severe labor shortages are becoming the norm. Consumer purchasing habits are diversifying, package-related laws and regulations continue to become stricter, and industrial structural reforms continue to advance via AI and digitalization. Other trends include shrinking populations and changing household structures in Japan, economic uncertainty related to geopolitical risks, and growing ESG demands. Stakeholder demands and needs are analyzed in three categories based on this macro environment.

The new Medium-Term Management Plan addresses changing customer needs, the changing competitive environment, the pursuit of capital efficiency and valuation of nonfinancial information, in addition to issues carried over from the preceding Medium-Term Management Plan.

Our analysis of financial issues follows on page 13. The graph at the left shows trends in ROE and PBR. The one at right shows trends in components of ROE since 2015.

As you see at left, ROE peaked in 2017 before falling during the COVID-19 pandemic. It improved thereafter until 2024 before reaching current levels in 2025. Although exceeding the cost of equity, as this page shows, we continue to consider raising PBR and PER to be similarly important topics.

Now let's look at the new Medium-Term Management Plan. Page 15 shows the plan's basic policies in the four categories of growth strategy policy, human capital strategy policy, financial strategy policy, and sustainability.

First, let's look at the growth strategy policy at left. This calls for providing value exceeding customer expectations by maximizing our strengths as a manufacturer conducting direct sales. Group sales today exceed 100.0 billion yen. To reach the next targets of 120.0 billion yen and

150.0 billion yen, we will need to gain the support of still more major users. The status of a manufacturer is becoming an essential precondition in particular in the paper cartons market. We will expand and strengthen our structure to enable major new users to order from us with peace of mind.

The human capital strategy policy, shown in the middle, calls for inspiring the best of individual strengths to build a strong organization for continuous growth. This relates to the growth strategy mentioned earlier in our desire to emphasize our strengths as a manufacturer. We will focus on continuing to develop the outstanding operators, quality control personnel, production technology experts, and researchers, for which we've already earned a strong reputation in the industry, and securing the next generation of human resources to carry on these technologies.

The financial strategy policy at right calls for improving capital efficiency while also investing in growth. This phrase permeates this Medium-Term Management Plan. Since ours is a classical capital-intensive industry, investment is essential to growth, as mentioned earlier. The plan to replace and renovate the Nara Plant has reached its final stage as we make every effort with a keen awareness of the need to improve capital efficiency under this expansion strategy.

The next page reviews related target figures. At left, you see the 2030 target for consolidated net sales is 120.0 billion yen. This represents an average annual growth rate of 3%, for 17.0 billion yen in growth. The operating profit target of 10.0 billion yen is up 2.8 billion yen.

At right, you see our targets of maintaining ROE at 8% or higher while targeting 10% during the period covered by the plan. We're targeting a total payout ratio of 70% during the same period. We are also targeting an equity ratio of 60-65%, which we consider appropriate. In these ways, we will realize high-quality management to realize a virtuous cycle of growth and returns.

Next, let's look at strategy-specific KPIs. Here, too, these are grouped by product at left. We will return to these later.

In the center, you see the new human capital strategy KPIs of engagement survey score and productivity KPIs.

At right, we pledge a dividend payout of 40%, purchases of 10.0 billion yen in treasury shares over five years, and a total payout ratio of 70%. Again, we also plan to control the equity ratio.

This concludes our overview of the new Medium-Term Management Plan.

The next slide describes our growth strategies to achieve these KPIs. Let's start with the basic policy. As a comprehensive package manufacturer, we are targeting growth in all four of our major product categories: consolidated net sales of 35.0 billion yen in paper bags, 35.0 billion yen in paper cartons, 18.0 billion yen in corrugated boxes, 15.0 billion yen in film packaging, and 17.0 billion yen in other products.

A key point is that paper bags and paper cartons have roughly equal sales. By further accelerating sales expansion for paper cartons, for which there is even more room to grow in the market than for paper bags, we will demonstrate an even stronger growth storyline. We aim to achieve strong sales in both segments.

KPIs by market are shown in the column at right. These include overseas sales of subsidiaries in the United States and Shanghai. Their performance was also very strong last year. We will promote further growth centered on investments in human resources.

Next, let's review growth strategies and measures. Here you can see the details of strategies and investments by product.

In paper bags, tote bags continue to grow, albeit at a slightly lower rate than last year due to a challenging market environment characterized by low birth rates, the rise of e-commerce, and bags provided for a fee. This can be considered a strength of our top share of the market. We plan to transition toward paper cartons as our long-term growth engine, but we also plan to take advantage of this opportunity to strengthen our advantageous position in this paper bag market.

In another category of paper bags, those without tote handles, or what the industry calls square bottom paper bags, can be expected to see organic growth for uses such as fast-food takeout orders and home-delivery bags.

Key points regarding paper cartons are shown at right. The distribution and processing businesses show very strong trends. We're earning a very strong reputation for proposing solutions of carton assembly along with product assembly through just-in-time delivery.

We operate these services at facilities in the Kanto and Kansai regions, and we seek to expand the Kansai facility and launch one in Fukuoka this spring while launching a facility in Sapporo before the end of the year. The other day, we received an annual order of approximately 200 million yen in one area. We expect considerable growth in this sector, with each area receiving strong orders and growing numbers of inquiries.

Other measures are presented on the slide.

In corrugated boxes too, efforts to sell these products to meet e-commerce demand from existing customers continue to perform well. We plan to grow our share of the market for reinforced corrugated boxes, originally one of our strengths.

In the film packaging business, while the downturn in products for the sanitary market is pronounced, we are continuing to capture new demand in areas like beverage labels. We plan to enhance sales to grow this into a pillar of our businesses and we hope to report on the results in the future.

Page 20 depicts our human capital strategy. We will promote four priority themes under the basic policy of inspiring the best of individual strengths to build a strong organization for continuous growth. These themes are hiring, placement; skills development; utilization; and comfortable work.

As this page shows, we will strive to increase employee engagement and move toward human capital that supports sustained organizational growth, thereby evolving into an organization with increased productivity to achieve the targets of the new Medium-Term Management Plan.

This slide shows human capital strategy measures and KPIs. Please refer to this when you have time.

Next, let's look at the financial strategy basic policy and KPIs. To repeat, we will seek to improve capital efficiency while investing in growth.

Page 23 clearly depicts, in a logic tree, our goal to achieve based on management conscious of capital costs. This is intended to express intentions to have such management permeate the organization.

Page 24 depicts our financial strategy and capital allocation. Their status in the preceding Medium-Term Management Plan is shown at lower left.