HAGIWARA ELECTRIC HOLDINGS CO.,LTD. Q2 FY2026 earnings call

• Overall Second Quarter Results: The company reported year-over-year lower revenue and profit for the first half (first half includes the reported second quarter), but both revenue and profit exceeded the original first half plan, driven by expense efficiency gains that pushed profit above plan. A 90 yen per share interim dividend was declared in line with the initial forecast.
• Planned Business Integration with Satoru Electric: The integration will be structured as a share transfer to establish a new joint holding company called MIRAINI Holdings, with a share transfer ratio of 1.02 for Satoru Electric and 2 for Hagiwara Electric, based on standard market price-based valuation. A special shareholder meeting will be held in December to seek shareholder approval. Key expected synergies come from almost no overlap between the two firms' customer bases and product portfolios, creating large cross-sell and up-sell opportunities; combined India market expansion capabilities with Satoru Electric's larger existing scale and logistics network; and operational efficiency gains as peer industry players. The strategic goal is to vertically expand solution product offerings and horizontally expand into new market segments, optimizing the business portfolio for better profitability, growth and stability. The new holding company will operate dual headquarters in Nagoya and Tokyo, with an initial 13-member board selected from both companies.
• Corporate Value Improvement Initiatives: The company updated its reference cost of equity based on changed external conditions and dialogues with institutional investors, clarifying the need to further accelerate the shift to solution-focused business to improve portfolio quality and drive sustainable corporate value growth. It revised executive compensation systems to incorporate evaluations of non-financial capital (including sustainability and human capital) alongside medium-term financial targets, aligning management incentives with long-term value creation. It also established a quantitative monitoring system with core KGIs for human capital management to track talent development and engagement, strengthening the foundation for sustained growth. All these initiatives will be refined within the new MIRAINI group framework after integration.

1. Device Business: Revenue of 110.931 billion yen, segment profit of 1.857 billion yen. Revenue declined year-over-year due to customer inventory adjustment and reduced domestic demand for semiconductors/electronic components driven by US tariff policy changes, offset partially by solid performance in Asian overseas markets amid yen appreciation. Profit decreased due to foreign exchange losses from yen appreciation and increased spending on human capital investment. This segment accounts for approximately 87.4% of total consolidated revenue. 2. Solution Business: Revenue of 16.009 billion yen, segment profit of 0.556 billion yen, both increasing year-over-year. Growth was driven by capturing strong capital investment demand from manufacturing (especially automotive electrification), plus M&A synergy contributions. FA solution segment grew strongly; IT solution/data platform segment saw a post-Windows 10 replacement demand pullback but still grew positive due to revenue contribution from acquired BellaDati. Profit increased as gross profit growth outpaced higher spending on system strengthening and upfront investment. This segment accounts for approximately 12.6% of total consolidated revenue.

• Management maintains the full-year 2026 March fiscal year earnings guidance released on August 8, with no upward or downward revision. The August guidance already incorporated approximately 0.6 billion yen in business integration-related expenses, leaving underlying business forecasts unchanged. The foreign exchange assumption remains 147 yen per USD, unchanged.
• The full-year plan is intentionally structured to be heavily weighted toward the second half, which accounts for the majority of full-year revenue and profit growth, based on the expected gradual ramp-up of revenue from synergies of new vehicle model launches and prior M&A activity. The company confirms that new vehicle model launches are proceeding as planned with no delays to date.
• The annual dividend forecast is maintained at 185 yen per share (95 yen per share final dividend), unchanged from the initial forecast.

• Sharp foreign exchange volatility creates profit uncertainty: A shift from yen depreciation to yen appreciation in the first half created a 0.6 billion yen negative impact on gross profit, as inventory purchased at a weaker yen exchange rate is sold when the yen is stronger, reducing margins. While yen depreciation in the second half would be positive, persistent exchange rate volatility remains a key risk to profitability.
• Customer inventory adjustment driven by US tariff policy changes created a temporary slowdown in domestic semiconductor and electronic component demand, negatively impacting Device Business performance in the first half. Any further trade policy changes or extended demand softening could continue to pressure near-term results.
• The planned business integration with Satoru Electric requires shareholder approval, and the success of expected synergies is not guaranteed, with potential integration risks that could impact performance post-close.

Q: Can you break down the 1.13 billion yen negative impact from foreign exchange and inventory impairment, including specific amounts and the reasoning for inventory impairment? / A: The negative impact was split between approximately 0.6 billion yen in foreign exchange losses from the shift from yen depreciation to yen appreciation between inventory purchase and sales recognition, and 0.5 to 0.6 billion yen in inventory impairment. The company confirms that larger yen depreciation in the future will create proportional positive margin impacts going forward. Inventory impairment is done on a granular, item-by-item basis based on actual sales outlook, rather than a blanket percentage of total inventory, with impairment only taken for products that have limited future sales potential.

Q: What contributions to the Solution Business growth have come from prior M&A activity? / A: M&A contributions come from three main sources: 1) Hagiwara Engineering has seen strong growth in new customer orders; 2) Synergies with Hagiwara Tech Solutions have driven new business in the automotive mobility segment that has started contributing to revenue; 3) The prior year acquisition of BellaDati has begun delivering tangible revenue contributions to the IT solution segment. The company does not disclose specific public figures for individual contributions, but confirms all three are adding positive growth.

Q: Why is full-year profit heavily weighted to the second half, and are all the expected projects on track to hit the 2.1 billion yen year-over-year profit growth target? / A: The heavy second half weighting is driven primarily by the on-schedule launch of new vehicle models, which are progressing with no delays to date. Additional profit growth comes from expected ongoing revenue contributions from acquired businesses in the solution segment, plus a recovery in performance from Hagiwara Tech Solutions, which saw a stagnant performance in the prior year, alongside broader market improvement. All factors are aligned to deliver the planned second half profit growth as currently forecast.

Q: What is the timeline for the Satoru Electric integration? / A: The special shareholder meeting to approve the transaction is scheduled for December 11. The final trading day for both companies' existing shares will be March 27, with existing shares delisted on March 30. The new MIRAINI Holdings will be listed on the Tokyo Stock Exchange Prime Market and Nagoya Stock Exchange Premier Market on April 1 of next year, in line with the already announced plan.