Earnings Call: Q2 2026

Nov 12, 2025

Summary

Interim sales and operating profit reached record highs, with auction volume growth outpacing the market. The FY 2025 forecast and dividend were raised, alongside plans for at least 100% total payout and JPY 50bn in three-year growth investment.

I am Ando, the Chairman and Representative Director Chief Executive Officer. Thank you very much for taking time out of your busy schedules to attend today's FY 2025 interim results briefing. I will focus on the key points regarding our current situation, outlook, and future growth strategy. I look forward to answering as many questions as time permits, so please feel free to ask. First, the highlights of today's presentation. In the overall auto auction market, the number of vehicles consigned increased by 112.4% year-on-year, while the number of contract completion increased by 107.1%. In contrast, our company achieved a 115.9% increase in vehicles consigned and a 108.9% increase in contract completion, realizing growth that exceeded the market. For the interim consolidated accounting period, our operating results reached record highs in all profit categories, with net sales of JPY 53.9 billion in operating profit of JPY 28.7 billion. Second is the upward revision of our full year forecast. The primary factor is the upside generated in the first half, with the second half largely in line with plan. Third is earnings distribution. In line with the upward revision of the earnings forecast, we are raising the annual dividend forecast for FY 2025 from JPY 50.4 to JPY 51.4. Additionally, starting in FY 2025, we will raise the consolidated dividend payout ratio to at least 60%. Furthermore, we have established a new policy of achieving a total payout ratio of 100% or higher over the three-year period, beginning in FY 2025. Details on this will be explained later. Next, please turn to page seven. Here, I will explain the reasons for the change in the operating profit. First, the factors affecting net sales. In the auto auction business, auction commission revenue increased significantly due to higher numbers of vehicles consigned and contracted, combined with an increase in fee rates. Next, the movement in cost of sales. The decrease in purchases was due to fewer large-scale dismantling projects in the plant recycling business. On the other hand, the increase in outsourcing expenses resulted from higher costs for adding more lines within the auction venue and security expenses driven by the increase in the number of vehicles consigned. Next, regarding the factors behind the increase in SG&A expenses. The rise in sales promotion expenses is due to increased costs for auction events. Next, please turn to page nine. I will briefly explain market trends. Starting with the first half performance. New car registrations reached 105% of the same period last year, while regional car registrations reached 101.6%, maintaining levels comparable to the previous year for both new and used cars. Meanwhile, used car exports, said to account for one-third of used car demand, reached 873,000 units, representing 115% of the same period last year, continuing robust activity. Furthermore, the auction market as a whole showed steady performance in both the number of vehicles consigned and number of cars contracted. Now please turn to page 11. Please take a look at this slide. It compares the average price of vehicles contracted or the successful bid price between USS and the industry average, excluding USS. In October 2025 this year, USS contract price reached a record high. What we want you to focus on here is the difference between USS price and the industry average. This gap was around JPY 200,000 before the pandemic, and has widened to over JPY 500,000 in recent years. USS maintains unrivaled competitiveness in high-priced retail vehicles with low mileage, a key strength that sets us apart from competitors. We believe this represents the brand strength we have built over more than 40 years since our founding. We will continue to refine this strength and remain at the forefront as the top runner in the auto auction industry. Please turn to page 12. This slide explains the performance of our auto auction business. First, please look at the market share trend in the lower left. Our market share rose to 42.8% from January to June 2025. The key factor is the expansion of lines from 12 to 16 in our Tokyo venue last October. This increased the number of vehicles offered, and the effect has become even more apparent since January this year. Additionally, our sales activities leveraging our reputation as a venue where vehicles sell at higher prices have also been effective. We will continue to capitalize on this momentum and steadily advance toward achieving a 50% market share. Next, please turn to page 13. Let me explain about fees. Regarding fees, the total amount of fees has increased alongside the rise in transaction volume. In April this year, the external bidding system using dedicated terminals has been implemented. As a result, the successful bid fee at USS Japan heightened from JPY 12,000 to JPY 15,000 per unit, an increase of JPY 3,000. Even after the implementation of price hike, we have not observed any significant impact, such as reduced purchasing activity so far, proving the transition has been smooth. Next, please turn to page 14. I would now like to discuss the used vehicle purchasing and selling business. For the Rabbit used vehicle purchasing business, net sales decreased to JPY 3.4 billion, or 92.1% of the level in the same period of the previous year, due to a decline in the number of vehicles sold, as well as a decrease in the gross profit per vehicle. Operating profit was JPY 26 million, or 15.5% of the previous year's level, resulting in a lower sales and profit. Next, I will explain the accident damaged vehicle purchasing and selling business. While we continue to cultivate new customers and the sales volume increased, both the average selling price and gross profit per vehicle declined. As a result, net sales were JPY 2.4 billion, or 95.5% of the previous year's level, and operating profit was JPY 96 million, or 88.3% of the previous year's level, leading to lower sales and profit. We will continue working to improve profitability in these businesses. Please turn to page 15. I will now discuss the recycling business. First, in the resource recycling business, net sales decreased to JPY 2.5 billion, or 91.3% of the previous year's level, due to low metal prices, combined with an increase in depreciation expenses. Operating profit declined to JPY 76 million, or 24.3% of the previous year's level, resulting in lower sales and profit. Next, in the industrial plant recycling business, operating loss was recorded due to a decrease in orders for large plant demolition projects. We will accelerate efforts to build a structure that enables us to respond flexibly to changes in market conditions and firmly establish the foundation for renewed growth. I will now explain the full year consolidated forecast. As mentioned at the beginning, we have revised our full year forecast upward to reflect the results through the first half. Details of the full year operating profit forecast, the factors behind the changes, and segment level forecasts are provided on the following pages. We invite you to review them later. Now, please turn to page 22. From here, I will discuss the market environment surrounding our company and our mid to long-term initiatives. This slide shows the trend in market share from 1999 to the present. As of 2024, USS maintains a 41.4% market share, securing the top position in the industry. However, we will not rest on this achievement. Our next medium to long-term target is to raise our market share to 50%. This slide outlines our medium to long-term management goals. To date, we have built a well-balanced business portfolio centered on the stable growth of the auto auction business and the expansion of the recycling business. Going forward, as we enter a new growth phase, we will clearly demonstrate selective and focused approach, allocating our human, physical, and financial resources to the auto auction business with the aim of achieving a 50% market share. At the same time, we have no intention of easing our efforts in the recycling business. In the resource recycling business, we are advancing technological development related to the recycling of aluminum and solar panels. In the industrial plant recycling business, we will strengthen our sales capabilities to secure large-scale projects while carefully monitoring changes in the competitive environment. The recycling business is not the one in which we focus solely on short-term results. It requires steady, long-term initiatives, and we will continue to pursue these efforts with a long-term perspective. Next, I will explain our cash allocation policy for the next three years. We have raised our total payout ratio target for FY 2025 to FY 2027 to at least 100%. In addition, we plan to execute a cumulative JPY 50 billion in growth investments during the same three-year period. This also represents our commitment to shifting towards more strategic investments than ever before and to enhancing our corporate value over the long term. We will allocate our ample cash on hand in a well-balanced manner to growth investments to support both sustainable corporate growth and the maximization of shareholder value. Moving on to our growth investment plan. Following the reopening of the newly rebuilt Yokohama site on January 13th, two months from now, we plan to significantly increase our capacity by rebuilding both the Tokyo site and the HAA Kobe site. We will also continue investing in digital transformation, such as digital consignment services that enhance convenience for members, as well as investments in human resources, including the training and expansion of vehicle inspectors. Through these initiatives, we aim to establish a robust infrastructure and reinforce our unrivaled position within the industry. This slide illustrates our roadmap to achieving an ROE of 20% or higher. By reducing capital through share repurchase and increasing earnings through business expansion, we aim to achieve ROE of 20% or higher at an early stage. This slide shows trends in dividends since our listing. As mentioned earlier, we have raised the dividend forecast for FY 2025 to JPY 51.4, positioning us to achieve 26 consecutive years of dividend increases. This slide shows the share repurchase implemented on June 25th. We repurchased 10.32 million shares for JPY 16 billion. This slide shows the trend in our total payout ratio. Starting this fiscal year, we will target a total payout ratio of at least 100% over the next three years. This slide illustrates our approach to growth and shareholder returns. We will continue to advance both in tandem rather than prioritizing one over the other to enhance USS' corporate value. That concludes my presentation. Thank you very much.