Transcript - Presentation of Financial Results for the Third Quarter ended December 31, 2025 (FY2025)（1MB）

Financial Results Briefing for the 3rd Quarter Fiscal Year Ending March 2026 February 12, 2026

(Total: 50 minutes, Presentation: 16 minutes, Q&A: 34 minutes)

Masahiro Ota Director and Executive Officer, General Manager of Finance and Accounting Division

Satoshi Taninaka SMBC Nikko Securities

Kentaro Maekawa Nomura Securities

Kenjin Hotta BofA Securities

Graeme McDonald Citigroup Global Markets

Hirosuke Tai Daiwa Securities

*Analysts that SCRIPTS Asia was able to identify from the audio who spoke during Q&A or whose questions were read by moderator/company representatives.

Today's materials are available on TSE's TDnet and our IR website.

Masahiro Ota, Director, Executive Officer and General Manager of the Finance and Accounting Division, will first provide an overview of the quarterly financial results, followed by a question-and-answer session. Due to time constraints, we will select approximately five individuals from those who have expressed their desire to speak in advance. We appreciate your understanding. The scheduled end time is 16:30.

Please, start.

Page two, a summary of the P&L. On the left, at YoY.

While net sales increased by 3.3%, the gross profit increased by 1.7%, with the growth in cost of sales outpacing the growth in net sales by that amount. As for operating income, it was negative compared to the previous year. This also means that the growth in expenses has exceeded the growth in gross profit. In the area of ordinary income, interest income, foreign exchange gains and losses, and other factors were positive,

resulting in a slightly positive result. Net income for the period was positive, as the Company sold some of its policy holdings, which resulted in a gain of about JPY3 billion.

The average rate of exchange for the cumulative total, throughout Q3. First, in terms of the US dollar to yen, the yen is at a higher level compared to the previous year. The yuan is also at a high level against the yen.

I will come to the right side and explain QoQ.

As for QoQ, we managed to increase both sales and income, although the percentages of both SG&A and cost of sales have been gradually rising. Regarding ordinary income and net income, I think the movement is almost the same as the cumulative total.

The average exchange rate in Q3, compared to Q2, moved in the direction of a slightly weaker yen, and I think this also contributed to the Q3 results.

On page three, the waterfall chart shows the factors that contribute to the increase or decrease in sales and operating income.

Sales in YoY were positive JPY19.4 billion, a positive figure. Sales volume is increasing, plus JPY17.8 billion. The sales price is a little bumpy in each region, but in total it is positive JPY1.2 billion. As I mentioned earlier, foreign exchange fluctuations have been negative up to Q3 because we are still in a phase of yen appreciation compared to the previous year.

Since the scope of consolidation has been expanded this fiscal year, the amount of expansion has been included in sales by JPY5 billion.

Operating income, minus JPY5.2 billion. Sales volume is increasing, plus JPY80 billion.

Sales price, plus JPY1.2 billion. Foreign exchange fluctuations are minus JPY2.6 billion, which is the figure taken over from the sales figure above.

Inventory devaluation have returned, plus JPY7.7 billion. Processing costs, material costs, and other expenses, are mainly cost of sales or, in our case, cost of production, and depreciation and amortization expenses, labor costs for hiring new employees since we have built many factories overseas and they are gradually coming into operation, and so on. The cost of hiring workers, labor costs, and the cost of materials are rising.

Next is SG&A expenses, where labor costs, mainly overseas, have risen slightly. Also, depreciation is included in SG&A expenses for the head office, for example, so this is also a negative factor.

As I mentioned in Q2, US tariff-related, this is JPY4.7 billion, which is a negative effect from the previous year.

JPY1.2 billion in positive operating income due to the expanded scope of consolidation. I hope you understand that the JPY1.2 billion here comes from the fact that many of the subsidiaries that have expanded are basically profitable.

Page four shows the increase or decrease in the QoQ P&L.

Net sales were plus JPY9.5 billion. Sales volume was plus JPY1.3 billion, sales price was plus JPY1.4 billion, and foreign exchange fluctuations were plus JPY6.8 billion.

Operating income, minus JPY4 billion.