Hakudo Co.,Ltd. Q2 FY2026 earnings call

• Customer base expansion and profitability improvement via digital service expansion:
  • Hakudo Net Service has grown to ~170,000 available items as of end-September 2025, with cumulative registrations of ~15,000 customer companies and 31,000 individual customers, showing consistent steady growth.
  • The platform has added new end-to-end functions including drawing, automatic quoting, and ordering for processed products to support customer DX and reduce customer procurement costs, with continued plans to add customer-requested features.
• Growth sector expansion:
  • The company identifies semiconductors, aerospace, and automotive as its core growth sectors. Domestic industry revenue composition shows solid continued recovery in private aerospace demand, with strong performance in government defense-related demand; semiconductor/FPD manufacturing equipment revenue share increased compared to Q1 FY2026; automotive and motorcycle revenue share remained stable at ~5%.
• Overseas business expansion:
  • The company has fully acquired the remaining 49% stake in West Coast Aluminum & Stainless (already holding 51% previously), making it a 100% owned subsidiary to strengthen governance and speed up decision-making in the North American market.
  • A 14% minority stake was taken in Patriot Metals, a Midwest US-based processor and distributor of stainless and aluminum thin plates, to expand geographic coverage and processing capabilities in the US, and create synergy with West Coast Aluminum & Stainless.
  • The EC Package, a localized version of Hakudo Net Service for overseas markets, will be rolled out to new markets including South Korea, Taiwan, India, and the Philippines to expand sales channels.
• Sustainability management:
  • The company achieved its original 2030 CO2 emission reduction target (42% reduction vs 2020 levels) ahead of schedule via initiatives including solar panel installation and EV adoption for sales vehicles, and has revised the 2030 target upward to 90% reduction vs 2020 levels.

1. North America Segment: Revenue increased driven by higher sales volume from US tariff increase impacts; operating profit improved year-over-year despite a net profit decline from foreign exchange loss impacts. 2. China Segment: Both revenue and ordinary profit decreased due to domestic economic slowdown impacts. 3. Other Segment (representing Hakudo (Thailand) CO., LTD.): Profit decreased year-over-year, caused by declining domestic automobile sales volume in Thailand. Overall group consolidated revenue for the interim period was 32.699 billion yen, up 0.7% year-over-year; gross profit was 4.76 billion yen, down 8.4% year-over-year; ordinary profit was 1.087 billion yen, down 38.8% year-over-year. By product type, aluminum, stainless steel, and other product categories all saw year-over-year revenue increases. Overall overseas revenue accounted for 17.4% of total group revenue in the interim period.

• Full-year FY2026 consolidated earnings guidance is maintained at the level of the Q1 downward revision; all interim period revenue and profit targets were achieved against the revised guidance.
• Interim dividend per share increased by 1 yen from the Q1 revised forecast to 28 yen per share, driven by higher-than-expected interim net profit.
• Full-year dividend guidance is maintained at the committed annual minimum dividend of 80 yen per share, with the company aiming to deliver higher dividends if performance improves.

• Volatility in raw material markets for aluminum, copper, and stainless steel has increased recently, with elevated copper supply risks driving sharp rises in cathode copper prices; combined with high foreign exchange rate volatility, the company will continue to closely monitor market trends.
• Semiconductor industry demand remains uncertain: while demand for generative AI-related equipment remains solid, China market demand has softened and memory demand is sluggish, keeping the outlook unclear.
• China's domestic economic slowdown has negatively impacted the China segment's revenue and profit performance.
• Declining domestic automobile sales in Thailand have negatively impacted the Thailand-based Other segment's profit.

Q: What is Hakudo's outlook for the semiconductor market, which makes up ~40% of the company's revenue? / A: After a 2021 boom, semiconductor manufacturing equipment demand has been stagnant for an extended period, with softness in China-bound demand and slow growth in EV and PC demand. Management expects gradual demand recovery going forward, driven by growing generative AI and data center demand, as well as new AI-enabled smartphone demand. It expects a significant recovery in semiconductor equipment demand this cycle, and is operating the business based on this outlook.

Q: What is the strategic rationale for making West Coast Aluminum & Stainless a 100% owned subsidiary, and what changes will this bring? / A: Previously, the minority 49% stakeholder's CEO led the company, and alignment on strategic priorities was sometimes difficult. Full ownership allows Hakudo to execute its North American strategy much faster. Key priorities include strengthening governance, cleaning up inefficient management processes, and accelerating expansion of the 24/7 365-day digital quoting EC Package platform. Combined with the minority investment in Patriot Metals, it expands product range and adds stainless polishing processing capabilities that benefit West Coast's competitiveness, with further North American expansion via targeted acquisitions still on the table.

Q: What is the outlook for aerospace and defense sector demand, which has seen growing sales volume? / A: Private aircraft demand, especially for small aircraft, is growing steadily, and this growth is expected to continue long term. Defense-related government demand has also grown rapidly recently, and is expected to increase gradually over the long term rather than spike sharply. The company will strengthen its sales capabilities and expand its product range to capture this growing demand.

Q: What new features have recently been added to Hakudo Net Service? / A: To differentiate the commoditized material business, the company added auxiliary materials including screws, tools, and safety supplies to the platform, enabling one-stop procurement for customers. It also added new digital quoting capabilities for custom processing: customers can upload CAD data for metal/resin 3D printing, water jet, laser cutting, and simple milling processes to get instant quotes and place orders directly. The new features cater to processors that have uneven capabilities across material types, and the company will continue to add customer-requested features to increase platform value and high-margin business.