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Carbon Neutrality-Centered New Market Creation

• Chugai Ro has set a target of achieving net-zero CO2 emissions by 2050, accounting for emissions from its in-operation products, which represent the majority of the company's supply chain emissions. The 2013 baseline emissions (1.2 million tons) account for approximately 1% of Japan's total national emissions.
• As of September 2025, cumulative CO2 reductions from 2013 reached 270,000 tons, a 23% reduction that achieved the 2026 fiscal year 20% reduction target early.
• The company is advancing commercial deployment of decarbonized industrial furnaces and hydrogen-based gas heating equipment for electric heating, hydrogen, and ammonia applications, leveraging results from its Green Innovation projects. Two key progress examples:
  • The company secured an order for electric furnace dust recycling equipment from Tokyo Steel, which allows recovered crude zinc oxide to be sold to third parties; the company will actively propose this solution to other electric furnace steel makers.
  • The company delivered equipment to strategic technology partner Microwave Chemical; this equipment electrifies the heat treatment process, the main source of CO2 emissions in lithium smelting to achieve low-carbon production, and expected demand will grow alongside rising lithium-ion battery demand.

Existing Product Improvement and Profit Growth

• The company won the Technology Development Award from Toyota Motor Hokkaido for modifying its existing vacuum carburizing furnace to meet customer needs, achieving smaller size and higher quality processing, following a previous top technology development award from Toyota Motor Corporation.
• In the plant business, the company is leveraging the industry shift from blast furnaces to electric furnaces among steel makers as a business opportunity, actively proposing its existing energy-saving burners. The company also secured 2 large orders for upgraded energy-efficient, high-performance large plant projects in the first half.

Building an Engaging Workplace

• The Business Reform Promotion Office established in 2022 has launched an operational design support system, and began testing a procurement support system this fiscal year, with the shift from testing to full operation progressing across business functions.
• The company has completed the implementation of generative AI, and is pursuing further operational efficiency to hit the medium-term management plan targets of higher operating profit per employee and reduced working hours by next fiscal year.

Corporate Value Improvement and Shareholder Returns

• Of 7 public corporate value improvement initiatives, the board of directors reform has been completed, and the remaining 6 initiatives are on track to be achieved or maintain target performance levels.
• The company maintains its target of a 60%+ payout ratio based on after-tax operating profit (NOPAT), and a 50%+ total payout ratio including share buybacks.

• Full-year net profit guidance was upwardly revised from 2.8 billion yen to 3.7 billion yen, driven by expected special income from partial sales of investment securities and recent solid performance trends.
• For the second half of the 2025 fiscal year, the company expects to secure approximately 22.7 billion yen in sales and approximately 2.8 billion yen in operating profit from progressing work on backlogged projects including steel processing lines for domestic and overseas markets and heat treatment furnaces, putting the full-year performance target on track to be achieved.
• The company's 5-year medium-term management plan targets (running to 2026 fiscal year) remain on track, with the 20% CO2 reduction target achieved two years early, and operational efficiency targets on track to be met one year ahead.

• Heat Treatment Business: Sales increased year-over-year from digesting accumulated prior-period backlog, maintained interim operating profit black ink. No absolute revenue or profit figures or contribution percentage were provided.
• Plant Business: Both sales and operating profit grew significantly year-over-year, driven by smooth revenue recognition of previously awarded large-scale plant projects and continued strong performance of the burner business. No absolute figures or contribution percentage were provided.
• Development Business: New project acquisition outside of the Green Innovation Fund project has slowed, with the segment facing challenges in securing new work. The company continues development work and expects to recover performance through expanding sales of electric furnace dust recycling equipment and other products. No absolute figures or contribution percentage were provided.
• Other (Subsidiary-Related) Segment: Sales grew from digesting previously strong backlog, but operating profit turned negative due to lowered profitability at overseas subsidiaries. The company will implement improvement initiatives going forward. No absolute figures or contribution percentage were provided.

• Development Business: New project acquisition outside of the Green Innovation Fund project has slowed, creating near-term performance pressure for the segment, even as the company expects to recover over time.
• Overseas Subsidiaries: The Other segment recorded negative operating profit due to lowered profitability at overseas subsidiaries, requiring corrective action to improve performance.
• Rising Personnel Costs: Selling, general and administrative costs increased 120 million yen year-over-year in the first half, driven primarily by rising personnel costs that put pressure on margins.
• Carbon Neutrality Target Uncertainty: Achieving full net-zero CO2 emissions by 2050 is acknowledged to be difficult, requiring additional carbon reductions outside of product improvements to meet the target.

No question and answer section was included in the provided transcript.