Good afternoon, everyone. Thank you for taking the time off your busy schedules to view today's results briefing for the fiscal year ended March 31st, 2025. Let us begin. These are the financial results for the fiscal year ending March 31st, 2025. Net sales were JPY 580.3 billion, up JPY 17.4 billion from the previous year. Operating income was JPY 50.0 billion, up JPY 8.4 billion from the previous year, and operating income before amortization of goodwill was JPY 50.7 billion, up JPY 8.5 billion. Ordinary income was JPY 46.3 billion, an increase of JPY 2.3 billion. Profit attributable to owners of the parent was JPY 30.4 billion, a decrease of JPY 1.7 billion from the previous year. Profit attributable to owners of the parent before the amortization of goodwill was JPY 31.1 billion, a decrease of JPY 1.5 billion from the previous year.
The annual dividend was JPY 75 per share, an increase of JPY 5 from the previous year. Factors for the increase in net sales and operating income were higher sales volumes in the automotive battery business, mainly for replacement, an increase in emergency use projects in the industrial battery and power supply business, and the effect of corrective measures in sales prices. We increased the dividend in response to the fact that we have been able to strengthen the earning power with improved earnings, especially in the automotive battery and industrial battery and power supply businesses, despite the decrease in profit. Net sales, operating income, operating income before amortization of goodwill, and ordinary income reached record highs. Here are the factors contributing to the increase or decrease in operating income.
Compared to the previous year, raw material prices and expenses increased due to soaring labor and other costs and inflation, which were negative factors. However, the increase in volume of automotive batteries and an increase in industrial batteries and power supplies projects led to a significant revision of selling prices for both automotive batteries for new automobiles and industrial batteries and power supplies, resulting in a substantial increase in profit. Similarly, compared to the initial forecast, the profit largely increased due to the growth in sales price revisions. These are the factors for changes in non-operating income and loss, extraordinary income and loss, and income taxes. Regarding non-operating income and loss, the equity method income and loss were negative compared to the previous year due to the impact of the R&D joint venture with Honda, while the income of the overseas subsidiaries was on a positive trend.
The impact of inflation accounting, higher interest expense, and foreign exchange losses have had a significant impact on the Turkish site. Regarding extraordinary income and loss, there was an impairment loss for HEVs, but this was offset by compensation from car manufacturers and has no significant numerical impact. With the transfer of the forklift business and the additional transfer of automotive battery operations, the withdrawal from the China business is almost complete. These are the segment results. For automotive batteries in Japan, net sales were JPY 101.9 billion and operating income was JPY 10.7 billion, an increase in both sales and income. For automotive batteries overseas, net sales were JPY 260.1 billion and operating income was JPY 18.7 billion, an increase in both sales and income. Net sales and operating income of the industrial batteries and power supplies segment were JPY 113.1 billion and JPY 17.9 billion, respectively.
Net sales and operating income of the automotive lithium-ion batteries segment were JPY 82.8 billion and JPY 1.4 billion, respectively. For specialized batteries and others, net sales were JPY 22.4 billion and operating income was JPY 2.1 billion. While GS Yuasa Technology, which operates the specialty batteries business, saw an increase in both sales and income, sales of automotive lithium-ion batteries decreased due to lower lithium market prices for both HEVs and PHEVs, as well as a decline in volume. Net sales of automotive batteries in Japan were JPY 101.9 billion, an increase of JPY 7.9 billion from the previous year, and operating income was JPY 10.7 billion, an increase of JPY 2.6 billion from the previous year. Net sales increased due to the revision of selling prices, although the sales volume for new automobiles decreased compared to the previous year.
Orders decreased significantly due to the certification issue, and although a certain volume recovered in the second half of the year, we were unable to make up for the decrease in the first half. Sales volume for replacement batteries increased significantly due to a decrease in sales for new automobiles and a harsh winter. Operating income increased more than the negative impact of raw material prices due to a review of selling prices for new automobiles. Net sales of automotive batteries overseas were JPY 260.1 billion, up JPY 7.2 billion from the previous year, and operating income was JPY 18.7 billion, an increase of JPY 3.6 billion from the previous year. Net sales increased at sites in Europe and Australia, mainly in Southeast Asia and Oceania. Operating income increased significantly due to improved sales volume and selling prices, despite higher expenses and other factors.
The industrial batteries and power supplies segment posted net sales of JPY 113.1 billion, up JPY 3.4 billion from the previous year, and operating income of JPY 17.9 billion, up JPY 4.7 billion from the previous year. Net sales decreased in the regular use field, which mainly handles batteries for power grids, due to the postponement of projects due to subsidies. Although there were some orders that have already been offered, revenue declined due to the impact of the multi-year delay of projects in fiscal years 2025 and 2026 as a result of the subsidies. With regard to the emergency field, sales increased significantly due to special demand from government agencies and nuclear power projects. In addition to increased demand from data centers, sales increased due to continued improvement in selling prices from the previous year.
Operating income increased significantly due to strong performance in the emergency field, both in terms of volume and selling price. Net sales of automotive lithium-ion batteries were JPY 82.8 billion, down JPY 2.0 billion from the previous year, and operating income was JPY 1.4 billion, a decrease of JPY 1.2 billion. Sales for HEVs decreased due to lower sales prices caused by falling lithium market prices, in addition to lower volumes for other manufacturers, despite a large increase in volumes for Honda. Sales for products for PHEVs decreased due to lower volumes through the first half of the year, but sales volumes were on an upward trend from the second half due to deliveries of new models. Operating income decreased significantly due to a decline in volume and utilization rate for PHEVs and a drop in selling prices due to lower lithium prices.
Specialized batteries and others posted net sales of JPY 22.4 billion, an increase of JPY 0.9 billion from the previous year, and operating income of JPY 2.1 billion, a decrease of JPY 1.1 billion from the previous year. Net sales increased due in part to a correction in the unit price of contracts for lithium-ion batteries for submarines. Other defense-related business also performed well. Operating income decreased due to an increase in administrative expenses and R&D expenses, although defense-related businesses, such as those for submarines, performed well. This is the balance sheet as of March 31st, 2025. Total assets were JPY 693.7 billion, an increase of JPY 37.1 billion over the previous year. Current assets increased by JPY 3.3 billion. Inventory is increasing due to the buildup for the increase in projects in the regular use field in FY 2025.
This increase is not a concern as the projects have already been handed over due to the delayed deadlines. Construction in progress has increased significantly due to the construction of a plant for lithium-ion batteries for BEVs. As a result of the use of borrowings to raise funds, the shareholders' equity ratio has remained in the 50% range, although the total amount of borrowings exceeds JPY 100 billion. This is the statement of cash flows. Although we secured JPY 46.9 billion in profit before income taxes, operating cash flow was also affected by a reduction in trade payables, and the amount was JPY 39.3 billion. Investment cash flow is expected to be negative due to capital investment for the future, such as in the BEV business, et cetera, and amounted to negative JPY 58.8 billion. The necessary funds were raised through borrowing.
These are capital investment, depreciation, and research and development costs. Capital investment to expand annual production capacity from 50 million cells to 70 million cells at Blue Energy, which manufactures batteries for HEVs, and construction of a plant for batteries for BEVs to start operation in 2027, will be on par with the previous year. This section covers the earnings forecast and initiatives for the fiscal year ending March 31st, 2026. This section covers the earnings forecast and initiatives for the fiscal year ending March 31st, 2026. Net sales are expected to be JPY 600 billion, operating income, JPY 51 billion, operating income before the amortization of goodwill, JPY 52 billion, profit attributable to owners of the parent, JPY 33 billion, and profit attributable to owners of the parent before the amortization of goodwill, JPY 34 billion.
The dividend will be increased by JPY 5 -JPY 80 per share for the year. We expect record highs in both net sales and profits at all levels. Although a certain level of risk has been factored in, we are steadily gaining earning power, especially in our existing businesses. Next are the factors for increase and decrease in operating income. We assume a significant growth in quantity, volume, and selling prices. We expect expenses and other costs to increase due to the risk of U.S. tariffs and inflation. We also expect the appreciation of the yen to have a slight negative impact on foreign exchange rates. These are the segment forecasts. Regarding automotive batteries in Japan, net sales are expected at JPY 100 billion, and operating income at JPY 11 billion, down and almost flat.
Regarding automotive batteries overseas, net sales are expected at JPY 250 billion and operating income at JPY 18 billion, a decrease in both sales and income. These figures take into account the impact of foreign exchange rates and tariff risks. Net sales and operating income in industrial batteries and power supplies are expected at JPY 130 billion and JPY 19 billion, respectively. The automotive lithium-ion batteries segment is expected to post net sales of JPY 100 billion and operating income of JPY 2 billion, an increase in both sales and income. Regarding specialty batteries and others, net sales are expected at JPY 20.0 billion and operating income at JPY 2.0 billion, a decrease in both sales and income. In the automotive batteries business in Japan, profit from replacement batteries will improve, and we will continue to review selling prices, including labor costs in new automobile batteries.
We view the impact of North American tariffs on new automotive production as a risk. In automotive batteries overseas, we expect steady sales, especially in Southeast Asia, but a strong yen, our Turkish site, and North American tariffs present a risk. In the industrial batteries and power supplies segment, emergency field continues to be strong in terms of both projects and volume. In the regular field, we expect a large increase in sales, including the amount of sales shifted from the previous period. Although we expect an increase in the volume of automotive lithium-ion batteries, we assume that selling prices will continue to decline due to the fall in raw material prices. We expect the specialized battery business, including defense-related business, to remain strong. These are segment performance forecasts.
For automotive batteries in Japan, net sales are expected to be JPY 100 billion and operating income is expected to be JPY 11 billion, a decrease in sales and increase in income, but almost unchanged. Net sales for new automobiles are expected to increase despite the risk of North American tariffs as capacity utilization improves with the recovery of production from the certification issue in fiscal year 2024. Although sales for replacement batteries are expected to decline slightly, they are expected to remain mostly unchanged due to a better product mix. Due to the decline in domestic lead prices, we expect selling prices for new automobiles to slide and sales prices to decline, but we expect sales prices to remain almost flat compared to the previous year. Operating income is expected to increase due to the continued revision of selling prices.
For automotive batteries overseas, net sales are expected at JPY 250 billion and operating income at JPY 18 billion, a decrease in both sales and income. Although there is a risk of North American tariffs in many countries and Southeast Asia in particular may be affected, we assume that sales will be strong at our strategic sites, especially for replacement. On the other hand, we assume that some risks remain for the Turkish site in terms of inflation and exchange rates. We also expect that the appreciation of the yen will inevitably result in a diminution of profits when converted into yen. Operating income is expected to increase due to an increase in volume and a revision of selling prices to recover increased raw material prices and expenses. The impact of foreign exchange rates is expected to reduce operating income slightly.
For industrial batteries and power supplies, net sales are expected to be JPY 130 billion and operating income JPY 19 billion, an increase in both sales and income. In the regular use field, we expect a large increase due to the increase in demand and projects that have been postponed to FY 2025 and beyond. We have high expectations for the future as our batteries won approximately 50% of the orders for subsidies for renewable energies in FY 2024. In the emergency field, we expect that the strong demand from the previous year will continue, but that there will be a slight trough in the replacement demand for ETC, for roadways and nuclear power plants. However, this will be covered by other projects.
Operating income is expected to increase due to the increase in regular use projects in addition to the strong performance of emergency use and is generally expected to remain strong. For automotive lithium-ion batteries, net sales are expected to be JPY 100 billion and operating income JPY 2 billion, an increase in both sales and income. For HEVs, we assume model changes, new car models, and increased quantities. We expect a significant recovery for PHEVs from the negative figure from the first half of FY 2024. Operating income is expected to be affected by the continued decline in the lithium market, although the increase in volume is expected to have a significant effect. For specialized batteries and others, we expect net sales to be JPY 20 billion and operating income JPY 2 billion, a decrease in both sales and income.
We expect a slight decline in the unit contract price of lithium-ion batteries for submarines due to lower lithium prices. However, we view the business environment as firm. We assume that there will remain some risk of North American tariffs with respect to aircraft. Operating income is expected to remain mostly unchanged due to an increase in administrative and R&D division expenses. Although the business of GS Yuasa Technology, which handles specialty batteries, will continue to be strong. These are the capital investment, depreciation, and research and development expense forecasts. We expect certain lithium-related investments will continue to be made, including capital investment for Blue Energy's number two plant, production of 12-V lithium-ion batteries for auxiliary batteries, and production of lithium-ion batteries for BEVs. Shown here is the financial status forecast. Although we have raised funds through borrowing, we expect to continue to maintain a shareholders' equity ratio of 50%.
Interest-bearing debt is expected to fall below JPY 100 billion in FY 2025. Both ROE and ROIC have improved significantly over the past several years as earning power has been firmly established. This is the reason for the sixth medium-term management plan target revision. Net sales are expected to be JPY 600 billion, and operating income before amortization of goodwill is expected to be JPY 52 billion. Changes in the global business environment due to changes in political and economic conditions in various countries, such as tariffs in North America and changing trends in the BEV market, were factored into the earnings forecast. In addition, the impact of the significant revision of selling prices in existing businesses is also reflected in the results. These are the segment targets.
The automotive batteries business in Japan is expected to have net sales of JPY 100 billion and operating income of JPY 11 billion. Operating income is expected to deliver an increase of JPY 2 billion from the target revised in July 2024. Net sales and operating income for automotive batteries overseas are expected to be JPY 250 billion and JPY 18 billion, respectively. Operating income is expected to increase by JPY 1 billion from the target revised in July 2024, while net sales are expected to decrease by JPY 10 billion. Industrial batteries and power supplies are expected to have net sales of JPY 130 billion and operating income of JPY 19 billion. Operating income is expected to be JPY 6.0 billion higher than the target revised in July 2024. Net sales of automotive lithium-ion batteries are expected to be JPY 100 billion and operating income JPY 2 billion.
Operating income is expected to be a JPY 3 billion decrease from the target revised in July 2024. Net sales for specialized batteries and others are expected to be JPY 20.0 billion and operating income JPY 2.0 billion. There is no change here. The degree of improvement in selling prices of automotive batteries in Japan and industrial batteries and power supplies has been increasing to a certain degree in Japan, and we assume that the revision of selling prices will grow here. Each business environment is also updated to the latest status. This concludes today's briefing covering the results for the fiscal year ended March 2025 and the forecast for the fiscal year ending March 2026.
We will now proceed to the Q&A session.
I think the fiscal year 2024 results were very good. I had the impression that the previous forecasts had been conservative. However, I get the feeling that the forecast for fiscal year 2025 also incorporates risks such as the impact of tariffs and the forecast is solid. What risks and opportunities have been factored in with respect to this forecast? Since North America only accounts for a small portion, we believe the impact of tariffs will be small, but please provide us with specific amounts.
I think the impact of tariffs in North America is limited. Sales, mainly industrial batteries and power supplies, are affected because sales in U.S. sales companies consist entirely of imports. In addition, we consider the downturn in the economies of ASEAN countries to be a risk. We are still assessing each site to determine the extent to which the economies of Thailand, Vietnam, Indonesia, Australia, and other countries will be affected by the economic downturn.
However, we consider that the volume will decrease due to the effects of fluctuations in selling prices and demand, and we have factored in a certain degree of risk. As a result, we expect sales and profits of automotive batteries in overseas markets to decline. On the other hand, we recognize that industrial batteries and power supplies in Japan are not significantly affected by tariffs, so the business can provide opportunities for earnings growth. Therefore, we expect conditions to remain firm due to replacement demand for public infrastructure and rising demand for stationary batteries.
Please tell us about the business performance of automotive lithium-ion batteries in fiscal year 2024 and the forecast for fiscal year 2025. JPY 2.5 billion in operating income in the fourth quarter of fiscal year 2024 was very good. Can you give us some color on this front, for example, as it pertains to one-time factors? Also, the forecast of JPY 2 billion in operating income for FY 2025 seems like a small amount of profit compared to the increase in volume. What are the factors?
Although there was an increase in volume, a major factor was the one-time correction of selling prices through price negotiations with customers, which led to a temporary increase in profit in the fourth quarter of FY 2024. in FY 2025, although the volume of LIBs for HEVs is expected to increase with a significant increase in the volume for Honda, the supply to other manufacturers will be shifted from around May to the second half of the year. Consequently, the decrease in volume from the first half of the year is expected to have a significant impact. We also expect an increase in the volume of LIBs for PHEVs.
However, it is expected to fall short of the initial plan. In addition, the depreciation of BEC's second plant will begin, so the profit growth is slowing compared to sales growth. I believe that there was an impact of the worsening spread between selling prices and raw materials in FY 2024 due to the decline in lithium prices.
What is the progress regarding the review of spread contracts? We are continuing negotiations with car manufacturers and raw material manufacturers?
Although some of the counterparties have accepted our terms, there are still many contracts that have not yet been agreed upon. We hope to reach a point by the end of the sixth mid-term management plan period and continue to negotiate.
Regarding investment in LIBs for BEVs, the business environment is changing due to the slowing tide for BEVs. I believe GS Yuasa is conducting R&D on LIBs for BEVs in collaboration with Honda. Could you give us an update on the status of investment and development, if any? Are capital investments in factories progressing smoothly?
Although the trend for BEVs is changing, we expect that electrification will continue to progress. Construction of a LIB plant for BEVs is proceeding as planned. Also, battery development in collaboration with Honda at HGYB is progressing as planned, and we are working diligently to develop better batteries by testing various recipes. The development is progressing according to the original SOP. We have been in conversation with Honda regarding changes in the BEV trend and will consider how to proceed in the future while keeping an eye on actual demand.
What is the impact of the Trump tariffs? Does this mean that there will be no direct exports in the automotive batteries and automotive lithium-ion batteries? Also, what is the export amount to North America of industrial batteries and power supplies?
In automotive batteries, direct exports are negligible, and with respect to lead-acid batteries, there are no direct exports. We export some motorcycle batteries from ASEAN to the U.S., but the impact is small. In industrial batteries and power supplies, we export about JPY 7.5 billion worth to North America, meaning there is a certain impact.
Please tell us about the operating income plan of JPY 2 billion for automotive lithium-ion batteries in FY 2025.
The revised six-medium-term management plan targets were net sales of JPY 100 billion and operating income of JPY 5 billion, while the newly announced target is operating income of JPY 2 billion. Also, the profit margin is low at 5.0% in the revised sixth medium-term management plan targets, but I believe that this business should have a profit margin of just short of 10%.
What is management's view on this low profitability? Do you expect operating income will rise in fiscal year 2026 and beyond, or has profitability become low due to unexpected factors this time around? Is the low capacity utilization of production lines having an impact on sales growth?
We are not satisfied with the decision to lower our operating income target for fiscal year 2025 from JPY 5 billion - JPY 2 billion. We believe that the difference of JPY 3 billion is a major issue. in this business, the volume has a large impact on business performance. For example, at the Ritto plant, which manufactures LIBs for PHEVs, capacity utilization dropped to 60% in the first half of fiscal year 2024.
This had a significant impact on capacity utilization. In fact, production for Toyota declined significantly while production for Honda increased, resulting in a deterioration in operations. In fiscal year 2025, the relationship between volume and capacity utilization will have a significant impact, although this is unavoidable due to the depreciation of BEC's second plant. In addition, we are working to negotiate better selling price contracts through firm negotiations with car manufacturers and to resolve the problem within the sixth midterm management plan period. Therefore, operating income of JPY 2 billion is not where we should be.
Regarding LIBs for BEVs, you have said that R&D and plant construction have not been delayed and that you are in firm dialogue with Honda. We are concerned about the risk of having excess capacity in operation if there is no more demand for BEVs in the future. Are there any measures to deal with this, such as negotiating with car manufacturers to get compensation? We would like to receive information that will provide us with reassurance about the risk.
We will produce not only LIBs for BEVs, but also for PHEVs in the plant being built in Shiga Prefecture. If demand for PHEVs increases significantly or if there is a change in demand, we plan to respond by producing mainly LIBs for PHEVs. We can produce batteries both for BEVs and PHEVs, so we will make decisions based on the balance of volume and demand. It has been more than 10 years since GS Yuasa started the automotive lithium-ion battery business, but I believe you're still not reaching the returns expected by shareholders. For example, the company posted impairment losses in fiscal year 2024.
What profit margin do you think is necessary for this business? What is the timeframe and path to improving the profit margin?
Although net sales are growing, we believe that stagnation in terms of profits is a major issue. We would like to aim for an operating profit margin of 10%, but this is difficult to achieve under the current circumstances. After identifying and addressing issues during the sixth medium-term management plan period, we would like to aim for a profit margin of at least 5%. As a timeframe, we would like to achieve a profit margin of 10% during the seventh medium-term management plan period. We are negotiating with customers on quantity, costs, and selling prices, and we hope to report our results by the end of the seventh medium-term management plan period after taking firm steps.
I believe you are supplying batteries for submarines, but I think GS Yuasa's exposure to the current expansion of demand, such as the expansion of defense-related budgets, is low. What is the profit margin in the defense-related business, and how much room for growth do you see through to around 2027, along with the prospects for expanding production capacity?
The business performance has been growing significantly, due in part to the increase in defense expenditures. The submarine battery business is expected to grow steadily as more and more submarines are equipped with LIBs instead of lead-acid batteries, and replacement demand for these batteries is expected to come in. The profit margin exceeds 10%. In addition to batteries for submarines, demand for special batteries for satellites and thermal batteries for defense applications will also increase, and we intend to report on specific initiatives during the seventh mid-term management plan period.
I believe that specialized batteries and others have net sales of around JPY 20 billion per year. Do you believe this business has enough potential to grow net sales by 50% in the future? I think that growth level is to be expected. The plan for interest-bearing debt for fiscal year 2025 has been reduced to JPY 90 billion. On the other hand, it appears that GS Yuasa can afford to raise debt, but I believe that cash and deposits are getting low. Please let us know if you have any plans or directions for future fundraising. Also, please provide any updates on the status of sales of cross-shareholdings.
We expect to generate a solid operating cash flow in fiscal year 2025 as well. On the other hand, we expect to make a certain amount of investment in LIBs for BEVs and will use the funds on hand from the public offering made in fiscal year 2023. In addition, we expect to use the cash generated mainly from existing businesses for investment in growth and shareholder returns. We have been gradually selling cross-shareholdings every fiscal year, and in fiscal year 2024, we sold deemed shares. Since there is still room for further sales, we will continue to discuss and advance sales through management.
What is the timeline for BEC to reach full production capacity of 70 million cells per year?
There was a discussion that the volume of LIBs for HEVs is lower than expected and that deliveries for some customers have been delayed for fiscal year 2025 as well. It is conceivable that export models from Japan will decrease due to tariffs.
Please tell us about the customer and regional segments and the status of inquiries for the future expansion of LIBs for HEVs.
Currently, we supply batteries for HEVs to three companies, and we expect to fill our annual production capacity of 70 million cells by fiscal year 2027. Currently, we supply to domestic manufacturers and some new car manufacturers export overseas, but basically, we supply mostly to domestic customers. Thank you for your time today.