Fuji Die Co.,Ltd. Q2 FY2026 earnings call

Core Financial Results

• Consolidated Q2 FY2026 sales: 8.417 billion yen (+1.7% YoY, -3.5% vs. plan); operating profit: 0.322 billion yen (+10.7% YoY, +46.5% vs. plan), achieving sales growth and profit expansion. Profit beat plans due to lower-than-budgeted personnel costs from delayed hiring and delayed planned maintenance spending, offsetting lower sales and higher-than-expected raw material costs.
• Net profit below YoY levels due to the absence of prior-year Kumamoto factory construction subsidies and prior-year foreign exchange gains against current-year foreign exchange losses of 42 million yen.

Mid-Term Management Strategy (FY2025-FY2027) Key Initiatives

• Management Base Strengthening: Updated corporate vision in July 2025 to "Deliver moving experiences through the power of people, materials, and technology" while retaining its core "value people" focus. Plans to expand DX for sales visibility and workflow efficiency in H2.
• Productivity & Operational Efficiency Improvement: All 160 million yen planned automation investment projects have been launched, with new automation deployed across all domestic factories. Successfully doubled production capacity for high-demand Chinese market cemented carbide materials via process adjustments, with full benefits expected in H2.
• Decarbonization & Circular Economy Contribution: Launched commercial sales of Susteroid STN30, a new alloy that cuts rare metal (tungsten and cobalt) usage by 90% while matching cemented carbide strength and offering 4x the wear resistance of steel. Addresses Chinese export control risks for tungsten as an alternative material. Other new development projects (metal-air battery catalysts/electrodes, next-generation optical fiber connector molds) are progressing well, with positive customer evaluation.
• New Business Establishment: Launched a pilot rare metal recycling collection program in October 2025, with plans to build a business model and expand coverage. Actively exploring M&A and strategic partnerships to accelerate new business launch.
• Overseas Business Growth (Core Growth Driver): Focused on high-potential China and India markets. China: Secured new optical customers via the new Dongguan sales office, with ongoing penetration of NEV-related manufacturing; cemented carbide sales remain strong despite weak Chinese consumer consumption, driven by domestic semiconductor localization policies. India: Launched a business restart project for the dormant local subsidiary, targeting full operational restart in FY2026. ASEAN: Expanding outreach to non-Japanese (foreign and local) customers to offset weak performance from existing Japanese automotive and semiconductor clients, with active trade show participation planned. Targets 25% of total group sales from overseas by the final mid-term plan year (FY2027 March term).

Shareholder Return

• Shifted dividend policy from payout ratio to 4% target dividend on equity (DOE), with planned FY2026 full-year dividend of 40 yen per share. Announced a share repurchase program in August 2025; shares rose 15% between March and November 2025, with a current dividend yield of 4.61%. Aims to reach a 1x P/B ratio via improved performance and active IR.

The firm reports unconsolidated sales performance by major industry segment for the first half of FY2026, with progress rates against annual plans as follows: 1. Transportation machinery: 48% progress, dragged by production adjustments and tariff impacts on conventional automotive die supply, offset partially by strong next-generation automotive development project sales; 2. Steel-related: Low performance due to a pullback in overseas hot rolling roll sales and weak domestic demand from reduced automotive and construction machinery production; no full-year recovery is expected; 3. Non-ferrous metals and metal products: 49% progress, with solid can-making tools and strong grooved plug sales driven by increased air conditioner production; full-year demand recovery is expected as customer inventory adjustments conclude; 4. Production/industrial machinery: Strong semiconductor manufacturing equipment sales in H1, but softened inquiries for H2; growth is expected from new imaging products for optical elements; 5. Electrical/electronic components: H1 sales maintained by growing demand for automotive battery products, offsetting very weak demand for semiconductor encapsulation material products; full-year target achievement relies on continued automotive battery growth; 6. Mold/tool materials: Flat EV-related sales in H1, but very strong overseas cemented carbide material sales, especially in the Chinese market; further growth is expected from deepening market penetration via the new Dongguan facility. Consolidated total Q2 FY2026 sales hit 8.417 billion yen, with operating profit of 0.322 billion yen. First half 2026 FY overseas sales reached 21.7% of total sales, up 2.2 percentage points year-over-year.

• Full-year FY2026 guidance is maintained at 17.67 billion yen consolidated sales (+6.5% YoY) and 0.6 billion yen operating profit (+22.9% YoY), driven by Chinese sales expansion, strong mold/tool material performance, and recovering transportation equipment demand, with price increases offsetting higher personnel and raw material costs.
• Mid-term FY2027 March term targets are maintained unchanged at 20 billion yen consolidated sales, 2 billion yen operating profit, and 10.5% recurring profit margin, despite uncertainty from US tariff policy. Management prioritizes achieving the 2 billion yen operating profit target over sales, and notes that even if sales miss the 20 billion yen target, profit can still be hit via improved margins, making the target achievable under current conditions. Key KPIs are recurring profit margin and overseas sales ratio.

• Raw material supply risk: Chinese export controls on tungsten have caused sharp, higher-than-expected price increases and tightening global supply; it is difficult to fully replace Chinese supply with increased volumes from European and US suppliers, creating procurement uncertainty.
• Geopolitical and policy risk: US tariff policy and trade tensions create high uncertainty for North American operations, leading to delayed progress vs. mid-term plan targets; shifting trade policies also impact automotive sector demand and raw material costs.
• Demand risk: Weak domestic demand in steel-related segments, weak semiconductor encapsulation product demand, and slow growth in core ASEAN market segments create pressure on full-year performance.
• Operational timing risk: Delayed planned maintenance in Q2 will shift 83 million yen in costs to H2, creating downside risk for H2 profits.
• Raw material cost risk: Tungsten prices have more than doubled from initial forecasts, creating continued margin pressure that requires further price increases for some products.

Q: What share of the 194 million yen H1 raw material cost increase comes from key minerals, and which mineral has the largest impact? / A: Almost the entire cost increase comes from higher tungsten prices, while cobalt prices have stabilized. A portion of the increase is also due to weaker-than-expected foreign exchange rates compared to plan, which raised yen-denominated import costs.

Q: How is the firm addressing procurement risk from Chinese export controls, and what is the current status of the recycling business? / A: The firm pre-stocked tungsten before export controls took effect, so it has enough supply for FY2026 and can partially source from non-Chinese suppliers for FY2027. It is still partially reliant on China, so it continues to diversify sources and scale up recycling. The recycling business launched this year, with customer collection programs already underway, and the firm is working to collect scrap from overseas as well, seeing large long-term growth potential.

Q: How is the firm responding to raw material cost inflation, and what is the impact on next fiscal year? / A: The firm is working on process improvements to use lower-grade tungsten feedstock, which is already partially successful and will enable further diversification of suppliers. Spring 2025 price increases will start delivering benefits in H2 FY2026. Since tungsten prices have more than doubled from initial forecasts, the firm is planning another round of price increases starting April 2026, and will pass through costs to all customers by next fiscal year. For popular products facing supply constraints, further price increases may be necessary.

Q: Will the firm still hit its FY2027 mid-term targets, and what will drive growth? / A: The firm retains its 20 billion yen sales and 2 billion yen operating profit targets, and prioritizes hitting the 2 billion yen profit target via improved production efficiency and margins. Growth will come from expanding overseas sales and a recovery in core steel and automotive demand, rather than just new product contributions. Management believes the 2 billion yen profit target is achievable even if sales do not hit 20 billion yen.