6637.T

• Marine Market Strategy

  • Launched the "TERASAKI ONBOARD" strategy to expand marine business, combining multi-layered and horizontal expansion
  • Multi-layered expansion: covers domestic/overseas markets, multiple vessel types, product categories (systems/equipment), and business stages (new construction/lifecycle) to capture more opportunities
  • Horizontal expansion: increases content of Terasaki products and services per vessel, leveraging the industry trend of rising onboard electrification
  • Secured first order for DC grid system for a small domestic hybrid container vessel, advancing development for vessel hybridisation and electrification
  • Expands business in marine simulators for crew training schools, benefiting from ongoing seafarer shortages driving institutional investment

• Production Capacity Expansion

  • Operates 5 global production bases: 2 in Japan, 2 in China, 1 in Singapore, allocates production by demand to improve flexibility and productivity
  • Completed Phase 1 reconstruction of the Kagami Factory (main breaker production site in Japan): new plating facility started performance testing, will enter mass production in early 2026 to improve BCP resilience, productivity, production capacity, and reduce environmental impact
  • Guangzhou, China factory expanded capacity 1.5-2x via relocation 2 years ago, is conducting additional capacity expansion and investment to handle higher-than-expected orders
  • Shanghai, China factory will expand size ~1.5x via leasing an additional building, and upgrades aging equipment in-period to meet growing demand

• Non-Marine Business Development

  • Japan: industrial system products see growing demand from data center backup power and overseas LNG power plants, strengthens sales for green energy transition projects and rail projects; medical device business maintains steady investment, collaborates with partners on new product development and overseas expansion
  • Asia: industrial system products benefit from strong Singapore infrastructure investment (power plants, data centers, subway, solar), driving sales growth; opened a new office in Doha, Qatar to support growing LNG marine traffic and local shipyard/repair operations as part of the global TERASAKI Global Service Network (TGSN)
  • Europe: focuses on new product launches for next period, expands into new markets in surrounding Europe, Middle East and Africa, improves inventory and logistics efficiency; expands TGSN headcount and service coverage to grow aftersales lifecycle service business

• Full year FY2026 (ending March 2026) consolidated guidance is maintained unchanged from the initial forecast: total revenue +5.3% YoY, operating profit +1.5% YoY to 5.7 billion yen, with a 9.6% target operating margin
• Full year product revenue forecasts: 18.8 billion yen for equipment products (-6% YoY), 28 billion yen for marine system products (+18% YoY), 2.7 billion yen for industrial system products (+23.5% YoY), 2.74 billion yen for medical devices (slight YoY decline), 6.9 billion yen for engineering & lifecycle services (-7.4% YoY)
• Full year capital expenditure forecast is 2.8 billion yen, depreciation forecast is 2.0 billion yen, and R&D expenditure forecast is 0.9 billion yen
• Dividend guidance is maintained: total annual dividend of 43 yen per share, with an already approved 20 yen interim dividend and 23 yen planned final dividend
• Assumes an average foreign exchange rate of 145 JPY per 1 USD, with estimated sensitivity: 1 JPY of USD movement changes annual revenue by ~0.2 billion yen and operating profit by ~0.1 billion yen

The company discloses segments by geographic region, with internal management reporting also by product line:

1. Japan Region: Revenue of 13.67 billion yen, +9.1% YoY; segment profit of 1.806 billion yen, +16.4% YoY, accounting for 46.9% of total consolidated revenue. Product-wise within the region: Marine system products, industrial system products, and medical devices saw revenue growth, while engineering & lifecycle services and equipment products saw slight declines.
2. Asia Region: Revenue of 11.997 billion yen, +13.2% YoY; segment profit of 1.29 billion yen, +28.5% YoY, accounting for 41.2% of total consolidated revenue. Product-wise within the region: Marine system products grew across all vessel types (tankers, LNG carriers, bulk carriers), while engineering & lifecycle services and equipment products saw slight declines.
3. Europe Region: Revenue of 3.487 billion yen, -7.9% YoY; segment profit of 0.219 billion yen, -27.0% YoY, accounting for 11.9% of total consolidated revenue. Product-wise within the region: Equipment product sales were weak due to slow domestic and Middle Eastern investment, but engineering & lifecycle services saw growing demand for marine breaker replacements that offset some weakness.

Internal management product segment results (1H FY2026):

• Equipment (breaker) products: 9.4 billion yen revenue, -7.1% YoY
• Marine system products: 13.5 billion yen revenue, +24% YoY
• Industrial system products: 1.4 billion yen revenue, +34% YoY
• Medical devices: +10% YoY revenue
• Engineering & lifecycle services: slight YoY revenue decline

• The company has 50-60% dependence on the marine shipping and shipbuilding industry, so its performance is heavily exposed to industry demand cycles
• Shipbuilding new order volumes fell 14.8% YoY in the first 9 months of 2025, though full year 2025 orders are still on track to hit 100-110 million gross tons, a top 3-4 historical level
• Recent yen appreciation against the US dollar created a 0.571 billion yen negative impact on 1H revenue and 0.327 billion yen negative impact on 1H operating profit; further yen appreciation would pressure full year results
• Domestic equipment product demand is steady, but labor shortages and supply chain issues cause persistent delivery delays, making forecasting difficult
• In the Asian region, some markets show signs of slowing investment that could pressure equipment product sales
• In Europe, Middle Eastern demand for equipment products has been weaker than expected, leading to projected full year sales decline

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