MAX CO.,LTD. Q2 FY2026 earnings call

• Overall Financial Performance: The company achieved record-high half-year revenue and all profit metrics, meeting all targets set in July 2025. Q2 total company revenue was 48.688 billion yen (+8.5% YoY), and operating profit was 9.467 billion yen (+27.6% YoY). Gross profit margin was maintained at a high level due to product mix shifts and price increases. The key growth driver was concrete construction tools led by rebar tying machines, with half-year sales of 20.9 billion yen (+19% YoY), reaching 58% progress against the full-year target of 36 billion yen. The 2027 March fiscal year medium-term target of 39 billion yen for this business is on track to be achieved one year early. - Regional Operational Highlights: - North America: Two price increases were implemented in May and September 2025 to offset US tariffs. May saw notable pull-forward demand, while September pull-forward demand was limited. Persistent construction labor shortages driven by immigration policy have boosted demand for both rebar tying machines and consumables. Launch of extra-large diameter models has generated cross-selling synergies that drive adoption of standard models. - Europe: Sales volumes recovered in core markets of Germany and Nordic countries, with new customer development progressing especially in Eastern Europe. Sales volumes of both machines and consumables increased sharply YoY. Infrastructure projects (renovation, new transport/energy/defense construction) support market growth, and severe labor shortage is accelerating mechanization adoption. - Domestic: Despite challenging external conditions including declining new construction floor area, sales of machines and consumables matched YoY levels, with solid performance from new products like extra-large diameter models and mesh bar cutters. - Segment-specific Trends: - Industrial Equipment: Maintained high profit margin driven by growth in overseas industrial machinery (led by rebar tying machines) and improved profitability in residential environment equipment. Profit margin saw a slight quarter-on-quarter decline due to reduced timing benefits from cost increase lags after additional tariff-related price hikes. - Office Equipment: Auto stapler business saw slowing orders and a long-term gradual decline expected due to paperless trends. Quarter-on-quarter profit margin decline was driven by lower domestic office sales caused by component shortages and weak stationery demand. - HCR Equipment: High-value product sales have underperformed, leading to worsening profitability quarter-on-quarter and a small operating loss in the half.

1. Industrial Equipment Segment: Total segment profit increased 34.1% YoY to 9.996 billion yen, with a segment profit margin of 27.3%. Breakdown by sub-segment: Domestic industrial machinery: 10.228 billion yen in revenue (+0.4% YoY); Overseas industrial machinery: 20.043 billion yen in revenue (+20.4% YoY); Residential environment equipment: 6.309 billion yen in revenue (+9.9% YoY). This segment accounts for 75.1% of total company Q2 revenue. 2. Office Equipment Segment: Total segment profit decreased 12.9% YoY to 1.845 billion yen, with a segment profit margin of 17.4%. Breakdown by sub-segment: Domestic office business: 3.491 billion yen in revenue (-2.2% YoY); Overseas office business: 3.075 billion yen in revenue (+6.5% YoY); Auto stapler business: 4.032 billion yen in revenue (-4.1% YoY). This segment accounts for 21.8% of total company Q2 revenue. 3. HCR Equipment Segment: Total revenue was 1.507 billion yen (-8.2% YoY), with a segment profit of -19 million yen (negative 1.3% profit margin). This segment accounts for 3.1% of total company Q2 revenue. Overall, overseas revenue for the half was 13.023 billion yen (+20.7% YoY), representing 52.5% of total cumulative revenue.

• Full-year company guidance has been upwardly revised from the July 2025 plan, to 97.7 billion yen in total revenue (+6.4% YoY) and 17.2 billion yen in operating profit (+18.9% YoY), with an operating profit margin of 17.6% and projected ROE of 12.3% (up 1.2 percentage points from the prior plan). The company targets four consecutive years of record-high revenue and profit. - Segment guidance: Industrial Equipment segment guidance is upwardly revised to 73.09 billion yen in revenue and 18.17 billion yen in segment profit (24.9% margin). Office Equipment segment guidance is downwardly revised to 21.5 billion yen in revenue and 3.82 billion yen in segment profit (17.8% margin). HCR Equipment segment is projected to hit full-year net profit of 10 million yen, returning to full-year profitability. - Sub-segment guidance: Overseas industrial machinery guidance is upwardly revised (reflecting strong performance), while domestic industrial machinery, domestic office, and auto stapler guidance are downwardly revised though domestic industrial machinery is still projected to grow YoY. - Full-year operating profit is projected to be 9.4 billion yen in H1 and 7.7 billion yen in H2 (lower than H1). The expected H2 decline is driven by three factors: 1) Tariff-related cost increases will mainly be recorded in H2 and beyond; 2) Seasonal construction shutdowns in Western Europe and North America during winter will moderate rebar tying machine sales; 3) The company will increase investment in R&D and DX-related expenses for future growth in H2. Management still expects core business to remain solid in H2 and targets outperforming the revised guidance. - The annual dividend per share guidance is upwardly revised to 132 yen, an 18 yen increase from the prior year, with a projected payout ratio of 45.4% and ROE of 5.6%.

• Persistent yen appreciation against the US dollar created a 632 million yen negative impact on revenue and profit in the first half. - US tariffs increase input costs, which will mostly hit profit in the second half after timing lags in the first half. - Component shortages have already negatively impacted sales of the 'Beepop' label maker in the domestic office business, and pose an ongoing supply risk for rebar tying machines and other electronic products. - Domestic construction industry weakness driven by declining new housing starts creates headwinds for domestic industrial machinery sales. - Long-term paperless trends create a gradual structural decline in the auto stapler business. - HCR equipment faces stagnant customer orders and weak demand for high-value added products, leading to continued unprofitability in the first half.

Q: Why have rebar tying machine sales grown so dramatically in Europe, even in already well-penetrated core markets? Is this from new policies/demand, or specific company initiatives? / A: The key drivers are strong construction market conditions (supported by widespread infrastructure projects including renovation, new transport, energy, and defense construction) and extremely severe labor shortages that have pushed widespread wage growth and accelerated mechanization adoption. The recent launch of the new extra-large diameter RB823T model completed the company's full product lineup covering all project types, which has driven incremental net sales growth in the region.

Q: What is the main driver of growing rebar tying machine demand in North America despite significant price increases from tariff adjustments? Is it primarily labor shortages from stricter immigration policies? / A: That understanding is correct. Stricter immigration policy has worsened already tight labor conditions, especially in regions like the southern US. This has led to an increase in additional machine purchases and new customer adoption, expanding the overall market for the company's products.

Q: Is production capacity at risk of becoming a bottleneck now that the 39 billion yen medium-term rebar tying machine sales target is on track to be hit a year early? / A: The company does not expect material bottlenecks. For the machines themselves, capacity can be expanded incrementally by adding production lines to match growing demand. For consumables, the company's third factory in Thailand has significant unused spare capacity that can absorb higher demand.

Q: Why is H2 operating profit projected to be 18 billion yen lower than H1 in the Industrial Equipment segment, and what drives the expected decline? / A: The single largest factor is normal seasonality: the first half is the peak construction season, while winter weather reduces construction activity in North America and Europe, lowering seasonal sales volumes. Tariff cost impacts account for a low single-digit billion yen amount of the decline, and increased future-focused investment (R&D and DX) accounts for another low single-digit billion yen. The overall guidance incorporates these headwinds alongside continuing underlying business growth.