Coca-Cola Bottlers Japan Holdings Inc.

Good afternoon. This is Gomi, Head of Investor Relations at Coca-Cola Bottlers Japan Holdings. Thank you for joining our full year 2025 earnings presentation for analysts and investors. Today, we are joined by our President, Calin Dragon, and CFO, Bion Urganes. Also with us, our Executive Officer and President of the retail company, Alex Gonzalez, Executive Officer, President of the Food Service Company and Chief Business Strategy Officer, Maki Kato. Executive Officer, Chief Supply Chain Officer and Chief Sustainability Officer, Andrew Ferrett. And Executive Officer and Chief Human Resources Officer, Yuki Higashi. Following prepared remarks, we will be happy to take your questions. Timelatinous interpretation in Japanese and English is available for both today's presentation and the Q&A. Before we begin, please note that today's presentation contains forward-looking statements and should be considered together with cautionary statements contained in our presentation materials. With that, I'd like to turn the call over to Kalin Dragan. Kalin-san, please.

Good afternoon, everyone. This is Kalin Dragan. Thank you for joining our earnings call. And first, I will go over the key highlights of today's presentation. Please turn to slide three. 2025 was a fantastic year that delivered many remarkable results, increasing our shareholders' value. Business income exceeded our forecasts, even after they were revised upward twice during the year and reached 24.5 billion yen more than doubled than the previous year. Despite the challenging cost environment, we maintain a robust profit growth trend. Over the past three years, cumulative business income growth totaled 39 billion yen. I would also like to highlight that this 24.5 billion yen business income includes significant cost increases from external factors such as foreign exchange fluctuations and increased commodity prices. I would also like to emphasize that adjusted business income, excluding the cumulative impact of this factor since 2017, exceeded 50 billion yen and reached a new record high. This clearly shows that our profitability improvement initiatives are delivering steady results. Building on this strong earnings performance, we revised our strategic business plan upward in August and announced the new vision 2030. We set ambitious targets for key metrics and continued our commitment to further increase shareholder value. In October, we also announced an expansion of our shareholder returns. We view this positive cycle where we have consistently improved performance and enhance shareholder returns to be one of our major achievements for 2025. In 2026, we will continue this positive momentum as a year of great progress towards achieving our ambitious long-term goals. This year, our business income target is 35 billion yen. This marks a fourth consecutive year of earnings growth exceeding 10 billion yen. At the same time, we will enhance shareholder returns, including a 20% year-on-year increase in dividends. And as a pilot of the first year of Vision 2030, we will pursue profit growth and higher shareholder returns to further increase shareholder value. Now, our CFO Bjorn Ullgenis will walk you through our financial results in more details.

Thank you, Colleen. Good afternoon, everyone. This is Bjorn. Please turn to slide five for the full year profit and loss. In 2025, our profitability improvement measures and other initiatives proved successful. As a result, profits increased significantly following the previous year. Sales volume also performed well. and outperformed in the market, experiencing negative growth. Revenue remained broadly in line with the previous year and exceeded the revised plan announced in October. Price revisions improved wholesale revenue per case despite the impact of channel mix changes. Gross profits decreased by $3.1 billion year-over-year, This was mainly due to a weaker channel mix and higher external costs. It also includes a one-time revenue decline linked to changes in Coca-Cola Japan Company's marketing investment method. Business income increased significantly by 12.5 billion yen year-over-year. This was mainly driven by top-line growth and cost savings from transformation initiatives. Factors contributing to the profit increase will be explained shortly. Operating income and net income decreased from previous year. This was primarily due to an impairment loss of ¥88.4 billion in the vending business recorded during the second quarter. EBITDA The measure of cash generating profitability rose by 6.7 billion year on year to 64.2 billion. Slide six shows segment performance. In 2025, the OTC and food service businesses supported revenue growth while the vending business drove profit growth. In vending revenue declined due to lower sales volume from ongoing market contraction and the impact of price revision. However, segment profit improved significantly by $6.1 billion. This was mainly due to transformation benefits, including lower depreciation expenses associated with impairment and higher route productivity. In OTC, the market environment was challenging and volume declined due to price revision. However, growth in online and drugstores and discounters supported overall performance and full year volume remained in line with the previous year. Revenue increased by 1.7% partially due to price revision. Changes in Coca-Cola Japan Company's marketing investment methods had an impact, which led to a decrease in segment profit. The food service business achieved strong sales volume and revenue growth and earnings growth rate that was even higher. This was supported by expanded product offerings, activities to acquire new customers, and price revision. Please turn to slide seven for the factors behind the change in business income. Starting from the left, we can see the impact of volume, price, and mix. These reflect changes in marginal profit from commercial activities and contribute a positive 8.8 billion yen year over year. The main factors were a negative impact of ¥6 billion from volume effect, including channel mix, a positive impact of ¥18.8 billion from pricing, and a negative impact of ¥4 billion from other factors. While channel mix deteriorated due to shifts in consumer trends, improved wholesale revenue per case from price emissions, is steadily supporting results. Transformation benefits exceeded initial projections by a significant margin and reached 6.9 billion yen. Major contributions came from commercial and supply chain with vending transformation particularly exceeding expectations. Promotional expenses increased by 0.9 billion yen year over year. Spending increased due to intensified activities to capture peak season demand and secure shelf space ahead of the October price revision. However, the increase was well controlled versus the initial plan through appropriate marketing investments based on market conditions and ROI. Manufacturing decreased by 2.2 billion yen compared to the previous year due to cost savings at manufacturing sites and in the procurement process. Other costs increased by 3.2 billion yen year-over-year. This was mainly due to higher outsourcing fees, logistics costs, and vehicle and facility-related expenses. despite lower personnel expenses. It also includes special factors such as reduced depreciation following the vending business impairment and changes in Coca-Cola Japan Company's marketing method. Commodity and utility costs increased by 1.3 billion yen. Of this increase, 1.4 billion yen was attributable to commodity market and forex rates, while utility costs decreased by 0.1 billion yen. Next slide onwards is on commercial activity. Slide 8 shows sales volume performance by channel and category. Full year sales volume was flat year over year, despite negative impacts from price revision. This was achieved by strengthening core categories, expanding sales space, and executing effective marketing. As a result, we outperformed declining markets. Wholesale revenue per case also improved across all channels following price revision benefits. Bi-channel sales volume for vending and convenience stores declined due to price revisions. However, in vending, wholesale revenue per case improved by 90 yen year-over-year due to price revisions. In convenience stores, profitability improved through higher wholesale revenue per case, disciplined control of rebates, and promotions. Supermarkets, drugstores, and discounters face challenging conditions, especially for large PET bottles due to price revisions and the cycling of the previous year's special demand. However, in the fourth quarter, we captured increased demand opportunities and achieved positive volume growth. Online and food service continued to perform well and supported overall volume growth. Online volume increased by 17%, driven by channel-exclusive label-less products and other initiatives. Food service volume increased by 9%, supported by stronger sparkling sales at restaurants and related initiatives. In the sparkling category, volume increased by 5% led by Coca-Cola and Coca-Cola Zero. Tea volume grew by 1%, mainly driven by Ayataka, which delivered double-digit growth last year following its successful full product renewal. Ayataka further grew by 2% with the launch and renewal of multiple products. including Ayataka Koi Oikutsha, sports, water, and coffee saw volume declines due to the impact of price revision. Slide 9 shows market share and retail price trends. Our profitability-focused commercial activities supported value share growth and maintained price premiums. Market share increased by 0.2 percentage points in total channel value share and 0.5 percentage points in volume share. Despite tough market conditions, our volume continued to outperform the market and contributed to positive value share growth. In vending, the market remained challenging and value share declined. However, effective demand capture measures, including Coke On campaigns, supported volume share growth, while wholesale revenue per case improved through price revision. In the OTC channel, value share declined due to volume decreases from price revisions and channel and package mix. However, In the fourth quarter, we capitalized on increased demand opportunities, resulting in a 0.6 percentage point increase in value share, showing recent improvement. Our products continue to maintain the price premium relative to the industry average. In October last year, we implemented our eighth price revision since 2022, and retail prices continue to show an improvement trend year over year. Slide 10 covers key topics in our 2025 commercial activity. Despite continued challenging market conditions in 2025, we implemented price revisions to improve profitability while enhancing competitiveness and achieving volume growth performance of the market. In 2025, in line with our profitability-focused strategy, we implemented price revisions twice in May and October and worked to maintain and improve the shipment prices after the revision. The effects of these price revisions have materialized as planned and contributed significantly to profitability. Alongside price revisions, we flexibly controlled rebates and promotional costs. Through ROI-focused marketing activities, we worked to contain costs and allocated resources to mid- to long-term growth investments. We have also announced ahead of the industry our ninth price revision this March, targeting green tea products. This shows our strong commitment to further profitability improvements in an environment of rising industry costs. From a competitive perspective, we also delivered solid results. By strengthening core categories, expanding sales space, and executing effective marketing, our sales volume consistently outperform the market experiencing negative growth throughout the year. Implementing these growth strategies within clearly defined business units has led to a more effective business operations and performance management. contributing to enhanced competitiveness and improved results. We are confident this will form the foundation for our mid- to long-term growth. Slide 11 explains our sustainability and human resource strategies for sustainable growth. For environmental and community initiatives, we invested in projects that reduce environmental impact in the future. These include conducting road tests of large trucks using renewable diesel, a new generation biofuel contributing to decarbonization, and demonstration projects that generate clean electricity from tea and coffee grounds while using refurbished high-purity CO2 as a manufacturing power source. At the Osaka Kansai Expo, we implemented horizontal PET bottle recycling through bottle-to-bottle and introduced groundbreaking initiatives such as the world's first vending machine powered by hydrogen cartridges. To strengthen human capital, we focused on recruitment, development and retention to enhance the pipeline at each stage to increase the ratio of female managers. As a result, we achieved our 2025 target of 10% female managers ahead of schedule. We also introduced initiatives to support dual income households, shared parenting and flexible work styles. These ESG initiatives have been highly recognized and our company has been selected for multiple indices. We will continue to advance our efforts towards achieving ESG initiatives that support sustainable growth. From the next slide, Kaleen will explain our 2026 full year plan.