SANIX HOLDINGS INCORPORATED Q2 FY2026 earnings call

• Overall Financial Results: Group-wide 2Q results were 21.502 billion yen in net sales, -19 million yen in operating income, -407 million yen in ordinary income, and -613 million yen in net profit, resulting in higher revenue but lower profit YoY, driven primarily by profit declines in the Resource Recycling segment.
• Completed Corporate Spin-off Restructuring: 2025 marks the 50th anniversary of the company, and the spin-off of all business units into independent operating companies was completed in October 2025 to accelerate growth.
• Growth Investments in Resource Recycling:
  • Completed turbine renewal and statutory inspection at the Tomakomai power plant, with an expected 8% improvement in power generation efficiency.
  • Installed new pre-processing equipment "Typhoon" at Tomakomai and Ota plastic intermediate processing plants, expected to increase acceptable waste volume by 17%.
  • Construction of a solid fuel production line for organic waste liquid sludge is ongoing, with the first line expected to launch and start sales next fiscal year.
  • Launched a demonstration project to produce sustainable aviation fuel (SAF) raw material from grease trap sludge (a previously unused waste feedstock), selected for Japan's Ministry of the Environment decarbonization circular economy program with a 2-year demonstration period leading to commercialization.
• Growth Initiatives in Energy (Sanix Engineering):
  • PPA project orders from the partnership with Daigas Energy exceeded 300 million yen.
  • Local government public facility EPC orders in northern Kyushu are growing steadily, approaching 20 projects.
  • Ongoing 3G-to-4G network upgrade works for the long-standing Sanix Eye remote monitoring system for solar power plants, creating special demand of 200-300 projects per month.
• New Strategic Direction: Started market research for overseas expansion, with plans to concrete plans next fiscal year. The company will pursue both continuous and non-continuous growth for its next 50 years of operation.

1. Living Environment Segment: 2Q net sales = 7.742 billion yen (1.5% decrease YoY), operating income = 1.012 billion yen (1.9% decrease YoY). Revenue contribution to total group 2Q sales: ~36%.
2. Energy Segment: 2Q net sales = 3.59 billion yen (1.8% increase YoY), operating income = -0.103 billion yen (45 million yen improvement YoY). Revenue contribution to total group 2Q sales: ~16.7%.
3. Resource Recycling Segment: 2Q net sales = 9.975 billion yen (3.4% increase YoY), operating income = 0.293 billion yen (74.9% decrease YoY). Within the segment, power generation sales grew 7.0% YoY despite extended downtime; waste plastic acceptance volume grew 1.3% YoY, though plastic and landfill businesses saw revenue declines. Revenue contribution to total group 2Q sales: ~46.4%.
4. Other / Headquarter Costs: 2Q net sales = 0.195 billion yen, operating income = -1.221 billion yen, representing a 178 million yen improvement YoY from corporate restructuring.

• Management maintains the full-year (FY2026 March Term) consolidated earnings guidance released in May, with no changes. The full-year forecast remains for higher revenue and higher profit compared to the previous fiscal year: full-year net sales of 46.791 billion yen (3.2% increase YoY), operating income of 2.803 billion yen (25.9% increase YoY), ordinary income of 2.434 billion yen, and net income of 1.775 billion yen.
• Management expects that the first-half performance shortfall will be fully offset in the second half, with 460 million yen in confirmed operating profit improvement from three core factors: 1) increased operating days at the power plant starting October 2025; 2) no additional provision for plastic fuel disposal costs in the second half after first-half accruals; 3) lifting of temporary waste acceptance restrictions at the plastic business in October 2025, leading to delayed revenue recognition in the second half. Two of the three factors have already been realized as of October, making the offset highly certain.
• Unaccounted upside potential exists: additional revenue and profit growth from higher plastic acceptance volume, and continued solid performance from waste liquid treatment, new power retail, and power generation businesses may lead the Resource Recycling segment to exceed its original full-year plan.
• Full-year segment guidance: 1) Living Environment: 16.198 billion yen net sales (7.3% increase YoY), 2.294 billion yen operating income (24.4% increase YoY); 2) Energy: 9.687 billion yen net sales (3.4% increase YoY), 0.586 billion yen operating income (103.6% increase YoY); 3) Resource Recycling: 20.432 billion yen net sales (flat YoY), 2.509 billion yen operating income (10.5% decrease YoY); 4) Other / HQ: 0.472 billion yen net sales (2.4% increase YoY), 122 million yen operating income improvement YoY.
• Dividend guidance is maintained: the annual dividend will be 2 yen per share, targeting dividend resumption for the first time in 21 years.

• Resource Recycling Segment Operational Risks: Extended full operation downtime after statutory inspection at the Tomakomai power plant led to higher repair costs, increased plastic fuel inventory, and 233 million yen in additional provisions for disposal costs, driving a large first-half profit decline. Temporary waste acceptance restrictions during the plastic business spin-off process also reduced revenue and profit in the first half.
• Living Environment Segment Headwinds: Mandatory heat stroke prevention measures led to changed sales operations and lower utilization, while spin-off-related personnel reallocation increased labor costs, resulting in lower revenue and profit YoY.
• The first half of the fiscal year reported a net loss, the first net loss for the period since September 2017, representing significant near-term performance pressure.

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