Hakudo Co.,Ltd. Q1 FY2026 earnings call

• Core Financial Results (Q1 FY2026 March Term)

  • Total consolidated revenue: 17.059 billion yen, an 8.3% increase year-over-year. Growth was driven by higher product unit prices and increased sales to the aerospace industry (centered on public sector demand), offsetting a sharp sales volume decline to the weak semiconductor manufacturing equipment sector.
  • Gross profit: 2.373 billion yen, an 11.3% decrease year-over-year, driven by lower sales of high-margin standard inventory products, lower per-unit gross profit from falling scrap purchase prices, and higher fixed manufacturing costs from new/expanded factory rent.
  • Ordinary profit: 475 million yen, a 52.3% decrease year-over-year, driven by lower operating profit and higher non-operating expenses.

• Digital Customer Expansion

  • The "Hakudo Net Service" digital platform expanded available items from ~155,200 (end of March 2025) to ~157,000, with cumulative registered users reaching ~15,000 companies and 31,000 individual customers as of end of June 2025. Management will continue improving platform convenience to strengthen and expand the customer base and improve margins.

• Growth Sector Strategy

  • The company defines semiconductors, aerospace, and automotive as core growth sectors; all three have achieved higher sales compared to Q1 FY2021 March Term.

• Overseas Business Expansion

  • Overseas sales accounted for 18.4% of total consolidated revenue in Q1. The company will expand overseas business via broader use of its customized "EC Package" e-commerce system, expanded sales channels, and expanded product offerings.
  • EC Package implementation status: Rollout complete in Thailand, pilot testing with select customers ongoing in the U.S., system improvements planned for China's existing online trading platform, full rollout scheduled for Vietnam's Oristar Corporation this fiscal year, and preparation ongoing at agents in Malaysia and Indonesia.
  • The company acquired the remaining 49% stake in West Coast Aluminum & Stainless, LLC (held by subsidiary Hakudo USA Inc.), making it a 100% owned subsidiary to accelerate decision-making, strengthen competitiveness, and generate synergies in the North American market.

• Balance Sheet Updates

  • Cash and deposits decreased compared to end of March 2025 due to dividend payments. Notes and accounts receivable increased alongside higher revenue. Investment securities and other investment assets increased due to dividends from Oristar, capital contributions to contract partners, and deposit for expanded headquarter space.

By geographic segment:

1. North America Segment: Overall revenue increased, but profit decreased year-over-year due to economic slowdown driven by stagnant capital investment.
2. China Segment: Operating results improved year-over-year, though total revenue decreased due to broader economic slowdown impacts.
3. Other Segment (including Hakudo(Thailand)CO., LTD.): Revenue increased, but saw a slight profit decrease year-over-year.

By product type:

• Aluminum products (core offering): Revenue increased 11.7% year-over-year.
• Stainless steel and other metal products: Revenue also increased year-over-year.

By domestic industry contribution:

• Aerospace: Revenue contribution percentage increased year-over-year.
• Automotive/motorcycles: Revenue contribution percentage increased year-over-year.
• Semiconductor manufacturing equipment: Sales volume decreased sharply due to industry demand downturn, though overall segment revenue was supported by product price increases.

• Management has downward revised the full-year and Q2 consolidated/standalone earnings outlook initially announced on May 14, 2025, due to the deeper-than-expected downturn in semiconductor manufacturing equipment demand seen in Q1.
• While demand for semiconductor manufacturing equipment for generative AI remains solid, broader semiconductor market recovery is expected to take time due to plateauing China market demand, continued weak demand for smartphones and PCs, slowing EV demand, and delayed recovery for non-AI related demand that has led to widespread capital expenditure plan revisions.
• The company's existing capital investment plan and basic dividend policy remain unchanged despite the earnings outlook revision. The full-year dividend forecast was also revised alongside the earnings outlook, and management will work to improve business performance to deliver higher dividends to shareholders.

• High volatility in aluminum, copper, and stainless steel raw material market prices, paired with high volatility in foreign exchange rates, creates operational uncertainty; management will continue to closely monitor market trends.
• The semiconductor manufacturing equipment sector (a core end market and growth focus) faces significant ongoing headwinds: while generative AI-related demand is solid, weak demand for memory, smartphones, and PCs, slowing EV demand, and plateauing China market demand have created high uncertainty for near-term sector recovery, which negatively impacts the company's sales and profitability.
• Reduced sales volume of high-margin standard inventory products (driven by semiconductor sector weakness), falling scrap purchase prices that compress per-unit gross margins, higher fixed manufacturing costs from factory expansion, and rising selling, general and administrative costs (from higher freight and sales promotion expenses) all have combined to reduce profitability significantly in the quarter.
• China's broader economic slowdown has created negative pressure on the company's China segment revenue.

No substantive question and answer exchange content is included in the provided transcript.