BRIDGESTONE CORPORATION Q4 FY2024 earnings call

• Strategic Positioning

• 2025 is designated as an "Emergency Crisis Response Year", with a dual focus on strengthening defensive operations (business restructuring) and laying groundwork for offensive growth initiatives, targeting a move to the "true next stage" of growth in 2026.
• Management has identified that profitability, ROIC, and ROE have declined since 2021, and is prioritizing building a stronger business foundation with a strong sense of urgency. • Business Restructuring (Stage 2)
• The global business is split into BRIDGESTONE WEST (North/South America, Europe) and BRIDGESTONE EAST (Japan, Asia, India): restructuring is already contributing to profitability improvements in WEST, and is accelerating in EAST for underperforming Japanese tire and chemical/diversified businesses.
• Recent restructuring actions include: closing the Lanclerc retread plant in Belgium; closing the LaVergne TB tire plant in the US; reducing capacity and headcount at the Des Moines AG tire plant in the US; cutting corporate and operational headcount in the US; announcing capacity and headcount reductions in Argentina and Brazil. The company maintains its "local for local" production policy in the US, and has simplified the unified WEST organizational structure. • Governance and Organizational Reform
• The new Shin-Glocal management system launched on January 1, 2025, adding four vice presidents, with clear separation between P&L responsibility for WEST/EAST and cross-functional global optimization responsibility for global C-suite roles, to strengthen governance and deliver result-focused execution. • Offensive Growth Initiatives
• Premium tire focus acceleration: Scale up ENLITEN technology, targeting 170 new vehicle model fitments for 2025, increasing high-inch tire new fitment ratio to 75% in North America/Europe and replacement market ratio to 45%, targeting over 60% sales share for premium tire brands, and expanding ENLITEN fitment rate to 35% in the replacement market with 30 new product launches.
• Global cost reduction: On track to hit the original 100 billion yen target one year early, with 75 billion yen of cost savings already delivered in 2024.
• Prioritize growth markets: Position US business, India business, and B2B production solutions as core growth drivers. Revitalize the Firestone brand in the US to compete in lower tire tiers, expand the Firestone auto care network, and expand Bridgestone Fleet Care for TB customers. Expand co-created digital-integrated solutions for mining and aviation customers.

1. Geographic Segments (2024):
   • North America: Increased revenue and profit year-over-year, supported by favorable foreign exchange. Passenger/light truck tire sales volume decreased, but 20+ inch ultra-high-inch Bridgestone brand tire sales grew 112% YoY; commercial truck/bus (TB) tire sales grew 108% YoY, and the overall premium tire business maintained an adjusted operating margin of ~14%. Revenue contribution is approximately 40% of global consolidated sales.
   • South America: Decreased revenue and profit YoY, ended the year in a net loss. Argentina improved performance to break-even, while Brazil remained in continued deficit due to unaddressed structural changes from increased low-cost imports. 2025 capacity and headcount reductions have been announced to target a return to profitability.
   • Europe: Increased revenue and profit YoY, exiting its worst performance period. Premium passenger tire achieved growth, while TB, retail, and retread segments saw reduced deficit; early restructuring efforts began contributing to results. Profitability improved YoY on the back of high-inch tire mix improvements.
   • Asia/Oceania/India/China: Profitability improved YoY, while Japan saw profitability decline. Specialties (mining, aviation, specialty tires/solutions): Increased profit YoY, with 22.3% adjusted operating margin (up 0.7pp YoY), supported by strong mining tire sales and growing aviation tire business, acting as a core support for consolidated results.
2. Business Portfolio Segments (2024):
   • Premium Tires (core business): Maintained adjusted operating margin of ~14%.
   • Solutions (growth business): Achieved increased revenue and profit YoY.
   • Chemical & Diversified Business: Reported a large net decrease in profit. Hydraulic hoses and crawler segments saw sales declines on weak construction equipment demand; the cycle business ended in operating deficit; US diversified business saw profit decline from tough market conditions and startup costs for EV-related new business.

• Consolidated 2025 Guidance (ex-foreign exchange):

• Sales revenue of 4.33 trillion yen, +2% YoY; adjusted operating profit of 505 billion yen, +11% YoY; adjusted operating margin target of ~12% (+1pp YoY); ROIC projected to recover to 9.2% (+1pp YoY).
• Net income from continuing operations is projected at 253 billion yen (-11% YoY) with ROE of 7.2%, due to 100 billion yen of one-time restructuring costs included as adjustment items. • Segment 2025 Guidance:
• Premium tire: Maintain 14% adjusted operating margin; Solutions: Target 140% profit increase YoY; Chemical & Diversified: Target 6% adjusted operating margin via restructuring and improvement.
• Americas: Expect increased revenue/profit with 2pp margin improvement, driven by North America TB sales growth and restructuring; Europe, Middle East, Africa: Expect increased profit despite lower revenue, with 1.6pp margin improvement from restructuring benefits. • Capital Allocation and Shareholder Return:
• Total capex for the 2024-2026 mid-term plan is adjusted to 1.2 trillion yen (+20% from the original 1 trillion yen target), with 400 billion yen capex planned for both 2025 and 2026.
• Launch a 300 billion yen maximum share repurchase program (with full cancellation of acquired shares), funded by 200 billion yen of debt and 100 billion yen of existing liquidity. Target a 60% equity ratio in 2025, with a medium-term target of 55%.
• Increase 2025 dividend per share to 230 yen (+20 yen from 2024), raise the consolidated payout ratio to 50% (top-tier for the industry).

• Potential higher tariffs under the Trump administration: Proposed 25% additional tariffs on imports from Mexico and Canada, plus upcoming auto tariffs, have uncertain final details and are not included in the 2025 guidance. Bridgestone operates 1 plant in Canada and 2 plants in Mexico, and relies on imported steel cord and inputs for US production, so material negative impacts are expected, and this is cited as the largest single risk to 2025 results.

• Persistent market headwinds: Increased low-cost imported tires in South America and developed markets, ongoing structural demand declines for some chemical/diversified product lines (crawler, cycle, truck air springs), and weak consumer tire demand in the US create ongoing profitability pressure.
• Raw material price increases: Natural rubber raw material prices are projected to rise YoY in 2025, creating margin pressure that must be offset by pricing actions and cost reductions.
• Execution risk for restructuring: Delays or unforeseen costs from facility closures, headcount reductions, and organizational changes could impact projected profitability improvements for 2025 and 2026.

Q: Are there any regions or product lines showing improving external environment momentum for 2025, or will the year remain full of headwinds? / A: US TB (production segment) demand has been rising since 2024, and dealer feedback confirms strong momentum with Bridgestone's strategies already gaining traction. India's business is also growing steadily with Bridgestone maintaining a top market position. US consumer tire remains challenging with tariff-related uncertainty, but Bridgestone will leverage the Firestone brand to compete across all tire tiers. Overall management expects gradual improvement in North America.

Q: Why are you increasing shareholder returns amid high market uncertainty, and what is the biggest risk to your 2025 profit target? / A: The company's equity ratio has risen steadily from 50% in 2020 to 65% now, so it has sufficient financial strength to support both restructuring and increased shareholder returns. The 2025 budget is built on the high-certainty 40 billion yen of restructuring benefits, so the plan is conservative and low-risk. The largest risk is new US tariffs, as the US represents 40% of global sales, and Bridgestone has operations in Canada/Mexico and relies on imported inputs. Management is building multiple scenario plans to mitigate impact, but it remains the top downside risk.

Q: What is the pace of restructuring spending and when will the 2026 mid-term targets (13% adjusted operating margin, 10% ROIC) be achieved? / A: Most of the 100 billion yen 2025 restructuring budget is tied to the LaVergne plant closure. Total restructuring spending will hit 100 billion yen in both 2024 and 2025, for a total of 200 billion yen, with a large portion non-cash. Management expects 40 billion yen of annualized benefits to already materialize in 2025, with additional incremental benefits accumulating in 2026, and remains on track to approach the 2026 margin and ROIC targets, even if top-line absolute profit comes in below original plans due to market changes.

Q: How has your long-term strategic priority changed from the original "growth first" approach? / A: The core commitment to high-quality growth remains unchanged, but after two years of trial and error, management is prioritizing improving operational and business quality first, with a deliberate slowdown in near-term top-line growth to fix underperforming areas. The 2025/2026 phase of deliberate consolidation is a strategic choice, not a surrender on growth: the company is focused on maximizing total stakeholder value by balancing growth, capital efficiency, and shareholder returns, with B2B solutions now prioritized over B2C new growth initiatives, while the core split between core premium tire and growth solutions remains unchanged.