Shinwa Co.,Ltd. Q2 FY2026 earnings call

• Company Overview & Growth Strategy

  • Shinwa's corporate purpose is "Protect lives, support the future", focused on manufacturing, selling, and providing services for temporary construction materials and logistics equipment. It is the leading domestic company in system scaffolding sales share.
  • The company has accelerated strategic M&A to expand its business footprint: it acquired Yagumi Group (large scaffolding construction firm) in April 2024, Ohtori Metal Industry (aluminum processing company) in May 2025, and Kaizu Construction (formwork and civil engineering firm) in October 2025.
  • Growth strategy combines internal resource utilization with strategic M&A to expand business scope for both segments, strengthen manufacturing and procurement networks, and accelerate group evolution.

• Product & Innovation Initiatives

  • Launched Rapid Floor, a new system suspension scaffolding for bridges that combines wide work space and high strength, improving site safety, work efficiency, and cost for aging infrastructure maintenance.
  • Released BUDDY SYSTEM, a new lightweight scaffolding product that reduces weight by over 20% compared to legacy products, cutting transport and assembly workload and improving productivity amid industry labor aging.
  • Developed new safety materials to prevent worker accidents and material falls, and enhanced scaffolding with fall-out prevention features for mid-to-high-rise buildings.
  • Shinwa's spectator stands were fully adopted for the new venue of the Nagoya Grand Sumo Tournament, demonstrating product versatility.

• Interim Financial Performance

  • The company posted 9.902 billion yen in consolidated sales revenue and 1.367 billion yen in operating profit for the interim period, reaching all-time highs since listing with significant year-over-year revenue and profit growth.
  • Operating profit grew 56.9% year-over-year, and interim net profit grew 66.0% year-over-year, driven by revenue growth and ongoing cost reduction initiatives including supplier restructuring, raw material cost cuts, partial outsourcing, and production and logistics efficiency improvements. Gross margin improved 2.2 percentage points, and operating margin improved 3.6 percentage points.
  • All key profit metrics exceeded 50% progress against the original full-year plan, leading to upward guidance revisions.

• Shareholder Return Updates

  • Changed dividend policy from a target 40%+ consolidated payout ratio to a progressive dividend policy with a 32 yen per share annual minimum dividend starting this fiscal year, to balance shareholder returns with capital allocation for M&A and growth investments.
  • Revised the year-end dividend forecast upward alongside the full-year earnings revision, bringing the full-year dividend to 34 yen per share (up 2 yen from the prior forecast).
  • Updated the shareholder benefit program to add new holding tiers (2,500+ shares and 3,000+ shares) with increased benefit points, and add extra points for long-term holders (3+ and 5+ years), effective September 2026, to expand the stable shareholder base.

1. Temporary Materials Segment: Reported 6.673 billion yen in sales revenue for the interim period, which was roughly flat year-over-year. This segment contributes approximately 75% of total annual revenue. Footing product sales declined due to ongoing customer demand shift from purchases to rentals amid persistent high materials prices, but strong order intake for temporary construction work from newly acquired subsidiary Yagumi Group kept overall sales stable. For the full fiscal year, the segment forecasts 14.4 billion yen in sales revenue, a 10.5% increase year-over-year.
2. Logistics Equipment Segment: Reported 3.228 billion yen in sales revenue for the interim period, an 87.3% increase year-over-year, marking an all-time high for the segment. This segment contributes approximately 25% of total annual revenue. Strong growth was driven by multiple large-scale logistics warehouse projects, stable repeat orders, and new orders from a wide range of industries including glass and automated guided vehicle sectors. For the full fiscal year, the segment forecasts 5.6 billion yen in sales revenue, a 25.2% increase year-over-year, which will also be an all-time high.

• Management upward revised the full-year FY2026 March Term consolidated earnings guidance following a stronger-than-expected interim performance. The revised full-year sales revenue is 20 billion yen (14.3% year-over-year growth, an all-time high since listing), operating profit is 2 billion yen (23.3% year-over-year growth), and net profit attributable to parent shareholders is 1.246 billion yen (27.8% year-over-year growth).
• Interim progress against the revised full-year guidance is ~50% for sales revenue and ~70% for operating profit. Third quarter and fourth quarter performance is expected to remain in line with original projections, and Kaizu Construction revenue will be recognized in the second half following the October 2025 acquisition.
• The company forecasts steady demand for system scaffolding, and projects 14.4 billion yen in full-year sales for the Temporary Materials Segment (10.5% year-over-year growth), supported by expansion of infrastructure-related products and growth in temporary construction services from group subsidiaries.
• For the Logistics Equipment Segment, the company expects continued strong demand for bulk containers for liquid transport and large logistics warehouse racks, and projects 5.6 billion yen in full-year sales (25.2% year-over-year growth, an all-time high), supported by higher value-added products leveraging aluminum processing capabilities from newly acquired Ohtori Metal Industry.
• The current mid-term management plan (covering FY2025 March to FY2029 March) is focused on laying the groundwork for stable growth, with priorities on expanding sales of infrastructure products, increasing value added for temporary construction services, and expanding the logistics business footprint. Management is currently reviewing and considering revisions to the final mid-term plan numerical targets.

• The construction industry faces ongoing headwinds: high building material prices, labor shortages, and declining new residential construction, which have driven a persistent shift in customer demand from product sales to rentals in the temporary materials segment.
• Broader industry challenges include aging social infrastructure requiring urgent maintenance, ongoing labor shortages at construction sites, and updated safety regulations that create ongoing pressure for product adaptation and cost management.
• Large one-off projects such as the large logistics warehouse projects that drove interim logistics segment growth do not recur steadily, creating uncertainty around future order volume for the segment.

Q: What is the background for the accelerated M&A strategy over the past year, and what is the future direction for this strategy? / A: Management is pursuing active M&A to strengthen future growth potential while building on its core temporary materials and logistics equipment businesses. It prioritizes targets that offer clear synergy with existing operations, with the goal of building a revenue structure less vulnerable to economic cycles. Going forward, the company will continue to pursue targeted strategic M&A focused on areas that expand its existing core strengths, following a selective and focused strategy.

Q: What specific synergy effects have been achieved from recent acquisitions, and what is the target investment payback period? / A: For the temporary materials segment, adding the construction capabilities of Yagumi Group and Kaizu Construction drives growth in construction-related sales, expands opportunities to use Shinwa's own products, and enables comprehensive growth through new product development and supply. For the logistics equipment segment, Ohtori Metal Industry's aluminum processing technology now enables the company to meet product lightweighting demand with high value-added product offerings. Management targets payback within 3 to 5 years post-acquisition, and all recent acquisitions are progressing according to plan.

Q: Can strong growth in the logistics equipment segment be sustained, and is stable order intake expected beyond this fiscal year, given the large contribution from one-off large logistics warehouse projects? / A: While large logistics warehouse projects were a major contributor to interim growth, these orders were won based on Shinwa's long-standing customer relationships and proven technical capabilities. While new large projects are not confirmed for next fiscal year at this point, demand for renovation and retrofitting of existing facilities is expected to remain steady. Growth will be sustained through the renovation business and new customer development leveraging new aluminum processing technology.

Q: What is the outlook for future capital policy, specifically the dividend payout ratio and potential for share buybacks, and how will the company balance growth investment and shareholder returns? / A: The company's core policy is progressive dividends. It will secure capital for growth investments including M&A while steadily expanding shareholder returns in line with profit growth. For share buybacks, the company will evaluate opportunities flexibly based on prevailing share prices, financial balance, and other investment needs, and will act opportunistically if it judges an buyback will improve shareholder value.