Mitsubishi Kakoki Kaisha,Ltd. Q2 FY2026 earnings call

Business Portfolio Evolution & GX Business Expansion

• Secured an order for a full set of extraction equipment for the world's largest microalgae production facility being built by Chitose Group in Malaysia, leveraging core filtration/separation technology and algae development expertise to strengthen clean energy business.
• Adapted core separation technology for new GX applications: Mitsubishi Selfjector oil purifiers are now used for impurity removal in sustainable aviation fuel (SAF) production (selected for Japan's first large-scale SAF demonstration project) and microalgae concentration for bioresource utilization.
• On-site hydrogen production equipment HyGeia series shipments remain solid; cumulative shipments of Mitsubishi Selfjector oil purifiers reached 120,000 units in July 2025, with strong order demand centered on new shipbuilding for China.
• Launched MKK PROJECT by Mitsubishi Kakoki Kaisha, a co-creation initiative based in Kawasaki that combines the company's environmental and energy generation technology with partner assets to develop regional circular energy systems using hydrogen and biomass, aiming to build new business models for a circular economy.

Capital Cost and Shareholder-Focused Management

• Followed mid-term management plan shareholder return policy to increase the full-year dividend to 86 yen per share (up 6 yen from the original plan), maintaining a 35% payout ratio.
• Implemented a stock split effective April 1 2025 to lower the minimum investment amount, improve share liquidity, and make the stock more accessible to a broader range of investors.
• Strengthened investor outreach: participated for the first time in the Nikkei/TSE IR Fair 2025 to engage individual investors (connected with ~300 investors over two days), and was featured on a national TV program highlighting core products, improving public understanding of the company's business and technology.

Human Capital and Technical Capital Strengthening

• Targets increasing headcount to 1,200 employees by the final year of the mid-term plan; 1,046 employees as of September 2025, on track with hiring plans.
• Launched regular town hall meetings starting September 2025 for direct dialogue between the CEO and all employees to strengthen engagement, focusing on two core priorities: talent acquisition and employee engagement.
• Is reorganizing the head office and Kawasaki Works to optimize and upgrade manufacturing, R&D, and supply chain management; the redeveloped Kawasaki Works will serve as the company's core manufacturing hub to support GX business expansion, with old facility demolition progressing on schedule.

Governance and Sustainability Improvement

• Is currently calculating Scope 3 greenhouse gas emissions to target supply chain emission reductions; partially disclosed calculated emissions in this year's integrated report, to identify high-emission areas for targeted reduction.
• Is advancing sustainable procurement in line with 2024 guidelines: holds briefing sessions for suppliers to disseminate guidelines, conducts CSR procurement surveys, and works to reduce ESG risks in supply chain sourcing.

1. Engineering Business (expected 50% of full-year revenue): Orders were 11.688 billion yen, sales were 19.667 billion yen, segment profit was 0.898 billion yen, and order backlog was 45.766 billion yen. Orders decreased year-over-year due to lack of large new projects but were in line with plan; sales and profit increased year-over-year from prior-period order backlog and cost improvements on completed projects. Contribution to H1 revenue was ~54.4%.
2. Single Machinery Business (expected 25% of full-year revenue): Orders were 10.38 billion yen, sales were 9.989 billion yen, segment profit was 2.757 billion yen, and order backlog was 10.542 billion yen. Orders and sales grew year-over-year supported by strong shipbuilding/shipping market demand for Mitsubishi Selfjector oil purifiers, related parts, and marine environmental regulation-compliant equipment. Profit rose from higher gross profit on sales growth and increased high-margin after-sales service revenue. Contribution to H1 revenue was ~27.7%.
3. GX Business (newly established segment, expected 25% of full-year revenue): Orders were 1.576 billion yen, sales were 6.465 billion yen, segment profit was 0.024 billion yen, and order backlog was 34.963 billion yen. Orders were in line with plan, sales increased year-over-year from prior-period backlog, and the segment achieved profitability on higher gross profit, but segment profit decreased year-over-year due to increased R&D and selling, general and administrative expenses. Contribution to H1 revenue was ~17.9%.

• The company revised its full-year 2026 March fiscal year consolidated guidance upward from the initial plan. Full-year sales are now projected at 88.5 billion yen (49.5% year-over-year increase, 4.7% above the initial plan), operating profit at 8.55 billion yen (50.1% year-over-year increase, 14% above the initial plan), ordinary profit at 8.65 billion yen, and net income attributable to parent shareholders at 5.85 billion yen.
• Total full-year order guidance is maintained overall: expected order declines in Engineering are offset by order growth in GX (hydrogen utilization, biogas projects) and Single Machinery (marine sector).
• Engineering Business full-year guidance: Orders 32.0 billion yen, sales 46.5 billion yen, segment profit 2.7 billion yen, order backlog 39.246 billion yen. Orders are projected below plan due to customer investment decision delays, but sales and profit are raised from prior-period order backlog contributions.
• Single Machinery Business full-year guidance: Orders 21.0 billion yen, sales 20.5 billion yen, segment profit 5.2 billion yen, order backlog 10.652 billion yen. High order levels are maintained supported by continued strong shipping market conditions, with growth led by oil purifiers, parts, and environmental compliance equipment; profit is raised from higher gross profit and improved cost ratios from strong after-sales service.
• GX Business full-year guidance: Orders 16.5 billion yen, sales 21.5 billion yen, segment profit 0.65 billion yen, order backlog 34.852 billion yen. Order growth is expected from hydrogen utilization and biogas projects, with large sales growth driven by prior-period backlog leading to a large increase in segment profit.
• The current mid-term management plan is positioned as the 3-year

• The Engineering Business faces order delays and declines from broad industry resource constraints (including at general contractors), geopolitical uncertainty leading to more cautious customer investment attitudes, and elevated material prices, with particularly slow investment in the chemical and food sectors.
• Higher R&D and SG&A expenses for GX business development are weighing on near-term segment profit, even as the segment achieves overall break-even in the first half.
• General industry-wide cost inflation increases pressure on accurate project pricing and cost control for long-lead engineering and construction projects.

Q: What are the specific drivers of the strong performance of the Single Machinery business, broken down by product and region? / A: The current boom in the global shipbuilding industry is the core driver, with high utilization at Japanese and South Korean yards, and Chinese yards absorbing excess unmet demand. Growth comes from both new oil purifier unit sales and marine environmental regulation compliance equipment such as WTS for NOx emission rules. High-margin after-sales service is also a major profit contributor: strong dealer collaboration in Japan, and expanded local after-sales operations through the Chinese subsidiary have driven growth and margin expansion.

Q: Is there room for further margin expansion in the Single Machinery business, especially with growth in high-margin after-sales? / A: Japanese government policy targeting expansion of domestic shipbuilding output from under 10 million gross tons to 20 million gross tons will drive proportional growth in oil purifier sales. For after-sales, the company is strengthening partnerships with dealers and running outreach to encourage use of genuine parts, creating meaningful upside for further margin expansion over time.

Q: What is causing order delays in the Engineering Business, and which sectors are most affected? / A: Widespread resource constraints across the industry, including at general contractors, are a key factor slowing investment decisions. Geopolitical uncertainty has also made customers more cautious about new capital investment, and elevated material prices add further pressure. This trend is most pronounced in the chemical and food sectors, where investment plans are being delayed or reviewed.

Q: What is the progress of product development in the GX business, and which product is closest to commercialization? / A: Core development areas are hydrogen, biogas, and microalgae utilization. The highest priority is CO2 capture technology for blue hydrogen production from city gas, with development targeted for early completion to enable commercial blue hydrogen production using the company's equipment. The company is also developing technology to produce hydrogen from biogas sourced from sewage, sludge, and food waste, aiming to create local low-carbon hydrogen production systems powered by non-fossil energy.