6486.T

• Overall Financial Performance

  • The company beat both year-over-year targets and internal plans for the 2nd quarter, delivering growth in both revenue and profit. Negative headwinds from rising raw material costs, higher labor costs, and foreign exchange impacts were offset by cost reduction, productivity gains, sales volume growth, favorable product mix, and price increase effects.

• Segment Operational Status

  • Automotive & Construction Machinery: Solenoid valves for EV suspension are seeing expanding adoption to improve vehicle stability for heavier EVs, and are a core product not dependent on vehicle powertrain type. The company targets over 25.0 billion yen in next-generation automotive product sales by FY2030, and is developing new thermal management products for EVs including LLC switching valves and GlideX motor rotor cooling components that improve EV efficiency.
  • General Industrial Machinery: Lower plant utilization and after-sales demand in Southeast Asia weighed on H1 results, but full-year revenue is expected to stay flat year-over-year supported by growing energy demand driving sales to plants in India and Southeast Asia.
  • Semiconductor: Demand and sales are recovering alongside a broader industry recovery centered on generative AI. The company has launched development of new products including slip rings and combined magnetic fluid seal rotary joint units, targeting a return to profit next fiscal year.
  • Marine: The company holds over 60% market share in stern tube seals for medium and large vessels over 10,000 tons. Strong repair demand offset lower margin new ship sales, keeping the segment on track for full-year revenue and profit growth. The company will focus on maintaining market share and growing high-margin after-sales services.
  • Aerospace: Mass production inquiries from overseas aircraft engine manufacturers are increasing, and development work is ongoing for product adoption on next-generation fighter jet engines. The company is participating in domestic and international commercial rocket development projects, and is making upfront investments for future growth that reduce near-term profit, targeting over 10.0 billion yen in annual segment revenue starting next fiscal year.

• Business Integration with NOK

  • Eagle Industry was spun out of NOK's mechanical seal division in 1964 and has operated independently while maintaining collaboration since 1982. The two companies agreed to a business integration via a joint share transfer to form a new common holding company NOK Group, scheduled for implementation on October 1, 2026 following shareholder approval in June 2026. NOK Group will be technically listed on the Tokyo Stock Exchange Prime Market, and both companies will retain their effective listing status.
  • Expected synergies: Expanded product lines from combining complementary material technology strengths, cross-selling opportunities to each company's customer base, more efficient utilization of existing facilities, expanded in-house production, improved purchasing power from greater scale, optimized allocation of management resources and efficiency gains from consolidating back-office functions into the holding company, and improved enterprise value from coordinated group-wide investment strategy.

• Full-year 2026 March fiscal year guidance has been upward revised from prior first-quarter estimates, now targeting total revenue of 175.0 billion yen, operating profit of 11.7 billion yen, ordinary profit of 15.3 billion yen, and net profit attributable to parent of 9.8 billion yen.
• Segment full-year guidance: Automotive & Construction Machinery is expected to maintain H1 sales levels in H2 and deliver increased profit as price increases take effect, despite headwinds from US tariffs and product mix; General Industrial Machinery is expected to deliver full-year results flat with the prior year; Semiconductor is expected to maintain H1 sales levels in H2 and cut full-year operating losses in half; Marine is expected to deliver another year of revenue growth; Aerospace is expected to grow sales but post a profit decline driven by upfront growth investments.
• Total full-year capital expenditure and depreciation is projected at 11.9 billion yen, bringing the three-year capital expenditure plan from FY2024 to FY2026 to a total of approximately 35.0 billion yen.
• ROE is projected to exceed 8% for the full year, with long-term target KPIs of 6%+ ROIC and 9%+ ROE starting next fiscal year.

Aggregate 2nd Quarter cumulative results: Total revenue of 85.5 billion yen, operating profit of 5.5 billion yen, ordinary profit of 7.2 billion yen, net profit attributable to parent of 4.8 billion yen, with all segments except the general industrial machinery segment posting year-over-year sales growth that beat plan. 1. Automotive & Construction Machinery: Increased revenue and increased profit, driven by strong sales of solenoid valves for EV suspension. 2. General Industrial Machinery: Decreased revenue and decreased profit, driven by lower plant utilization in Southeast Asia. 3. Semiconductor: Remained unprofitable, but sales increased year-over-year and operating losses narrowed. 4. Marine: Increased revenue and slight increased profit, driven by higher sales to new shipbuilders and continued strong repair demand. 5. Aerospace: Increased revenue and decreased profit, driven by overlapping costs to scale up production capacity.

• Rising raw material costs, growing labor expenses, and negative foreign exchange impacts are expected to continue through the full fiscal year.
• Trade friction and lower plant utilization in Southeast Asia create downside pressure for general industrial machinery after-sales demand.
• Intense competition and short development timelines in China's EV market create uncertainty around investment planning for growing EV-related sales.
• Geopolitical risks have driven a shift in shipping routes and a boom in new shipbuilding, which increases marine sales but lowers near-term segment margins, as marine profit is concentrated in 5-year interval after-sales services rather than new ship sales.

Q: Global EV market growth has slowed significantly, but Eagle Industry's EV-related sales are growing strongly. What explains this outperformance, and where is most of this demand coming from? / A: Management had already built a conservative forecast assuming slower EV growth, and stronger-than-expected sales penetration with component manufacturers delivered large order wins. Its core EV suspension solenoid valve product is particularly popular in China and Europe, the largest EV markets, and the company is currently negotiating production increases with customers. It is also developing new EV thermal management products with strong early inquiry flow, and is positioning its component technology to meet the industry's ongoing demand for improved EV efficiency. Most current inquiries come from Chinese OEMs, but inquiries from European OEMs are also growing.

Q: What is the core strategic rationale for the business integration with NOK, and what synergies are expected outside of the core automotive segment? / A: Both companies generate the majority of their revenue from automotive-related products, and the integration is intended to combine strengths to better address the shift to EVs and new mobility products that neither could fully address alone. For non-automotive segments including semiconductor, marine, and aerospace, the biggest synergy comes from complementary material technology: Eagle Industry specializes in inorganic materials (ceramics, carbon) while NOK specializes in organic materials (resins, rubber). Combining these full technology capabilities will enable stronger product innovation across all business segments.

Q: Why did the marine segment deliver higher sales but only a small profit increase this quarter? / A: Marine industry profit is structured around high-margin after-sales service, which comes due every 5 years after a new ship is delivered. Recent geopolitical shifts have driven a boom in new ship construction, which increases near-term sales but has much lower margins than after-sales work. This shift in product mix to higher new ship volumes is the main reason sales grew but profit only increased slightly, which matches market expectations.

Q: What is the progress of the planned sales price increases to offset higher costs, and how have US tariffs impacted pricing negotiations? / A: Price increase progress is broadly on track with initial full-year plans, and has actually slightly exceeded expectations as long-negotiated price adjustments have been finalized this half. US tariffs have increased costs for the company's US operations, and approximately 30% of this additional cost has been passed through to customers via price increases, with the remaining 70% currently absorbed as higher internal costs.