TAKUMA CO.,LTD. Q2 FY2026 earnings call

• Overall Strategic Direction & Mid-Term Plan

  • The ongoing 14th Medium-Term Management Plan is a critical stage to grow by increasing waste treatment plant orders and formalize the company's growth story; financial targets were upwardly revised in May 2025, and progress toward targets is on track amid a solid market environment
  • The company prioritizes expanding stock-type recurring business as its core growth driver, while expanding EPC (Engineering, Procurement, Construction) business to grow its installed base, targeting 20 billion yen in ordinary profit by 2030

• Market & Order Performance

  • Near-term: Demand for rebuilding, life extension, and maintenance of aging waste treatment plants is growing; high construction costs have shifted market preference toward life extension改造 and extended operation of existing facilities instead of full rebuilding. The company expects 15-20 large-scale projects (rebuilding, core improvement改造) annually plus continued DBO (Design-Build-Operate) project tenders through at least 2030
  • 2Q cumulative orders: Secured two large-scale DBO waste treatment plant projects in Numazu City (Shizuoka) and Ichikawa City (Chiba); secured both small biomass power plant projects and coal-to-biomass fuel conversion reconstruction projects, leaving the total order book at a high level and on track to meet full-year targets
  • Long-term: Demand for waste treatment plant rebuilding and life extension will remain stable after 2030 in Japan, due to limited landfill capacity and mandatory incineration for public health. Regional waste management consolidation is driving larger facilities with higher added value (including on-site power generation, CO2 capture, and DBO operations), increasing average contract value per project

• Operational Priorities

  • Human resources: Targets 1,200 design and construction management employees at parent company Takuma; has expanded recruitment and training for several years with smooth hiring progress, but will maintain annual recruitment of 60-70 employees to offset high labor market mobility
  • Research and Development: Starting from FY2027, will conduct a 6-ton-per-day pilot test for CO2 separation and capture from waste incineration facilities at the Senboku Clean Center in Osaka Prefecture, following a successful 0.5-ton-per-day test at a biomass power plant. The new pilot uses energy- and space-saving technology, and targets commercialization by FY2030 for rollout to waste facilities nationwide
  • M&A and Post-Merger Integration: Acquired IHI General Boiler in the previous fiscal year, which was consolidated as a subsidiary in April 2025; plans to merge it with group company Nippon Thermoener Co., Ltd. in April 2026. An integration preparation committee is currently aligning organizational structure, product lines, and facility networks. The company continues to actively source new M&A opportunities focused on domestic environmental and energy businesses that strengthen existing operations, expand engineering talent, or grow adjacent businesses such as material recycling

• Shareholder Return

  • Dividend policy targets the higher value between a 50% payout ratio or 4.0% return on equity; plans a full-year dividend of 79 yen per share (a record high), unchanged from the initial forecast
  • Plans total share repurchases of 18 billion yen over the 3-year 14th Medium-Term Management Plan (FY2024 to FY2026). As of the end of October, 3.8 million shares for 7.5 billion yen have been purchased under the current 10 billion yen repurchase program approved in February 2025, and the company will maintain appropriate cash allocation aligned with its capital policy going forward

Total company results: 2Q cumulative order value reached 161.7 billion yen, total sales reached 70.1 billion yen, and operating profit reached 4.1 billion yen, showing year-on-year revenue growth but profit decline. The primary driver of revenue growth was the民生熱エネルギー事業 (Civil Thermal Energy Business), which led the overall sales increase. No segment-level absolute revenue or revenue contribution percentage figures were provided in the transcript.

• Full-year FY2026 March term earnings guidance is maintained, with no changes from prior forecasts, as 2Q results are on track to meet full-year targets; the company expects full-year revenue and profit growth
• Full-year dividend guidance of 79 yen per share is maintained, unchanged from the initial forecast
• The 18 billion yen 3-year share repurchase plan for the 14th Medium-Term Management Plan period is maintained; the current 10 billion yen repurchase program is progressing as planned

• High labor market mobility increases the challenge of hitting the company's target of 1,200 design and construction management employees, which could limit the company's ability to grow order share in the waste treatment plant market
• Integration costs for the IHI General Boiler acquisition are expected to weigh on current fiscal year profits, with no profit contribution expected from the acquisition in FY2026

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