Hakudo Co.,Ltd. Q3 FY2026 earnings call

• Overall Q3 FY2026 Financial Results
  • Total consolidated revenue was 49.68 billion yen, a 0.9% decrease year-over-year. The decline came from lower sales volume due to prior demand downturn in the semiconductor manufacturing equipment sector, partially offset by product price increases from raw material market gains and higher sales volume to the aerospace sector driven by overseas and public sector demand. The semiconductor manufacturing equipment sector is now on a recovery trajectory heading forward.
  • Gross profit was 7.518 billion yen, a 3.8% decrease year-over-year, impacted by higher fixed manufacturing costs from the new factory opening.
  • Ordinary profit was 2.153 billion yen, a 7.8% decrease year-over-year: higher non-operating income from increased dividends from Vietnam's Oristar Corporation was offset by higher selling, general and administrative expenses including rising personnel costs.
• Balance Sheet Updates
  • Current assets: Cash and deposits increased alongside higher subsidiary revenue, while inventory assets decreased due to lower standard stocked item inventory levels.
  • Fixed assets: Deposit for guarantees increased due to the newly opened Saitama Second Factory (opened January 2026) and headquarter expansion.
  • Current liabilities: Electronic recorded debt decreased due to shortened payment due dates.
• Key Business Environment Updates
  • Raw material market conditions: Copper prices have risen sharply due to elevated supply risks and rising international market rates; aluminum ingot prices have risen due to higher international prices and a weaker yen; stainless steel market prices have remained flat overall. Market share for Hakudo's aluminum products has remained relatively stable when compared to overall Japanese aluminum rolled product shipment values.
  • End market trends: The semiconductor and FPD manufacturing equipment sector has recently shown signs of recovery and shifted to an upward growth trajectory for Hakudo's sales. For the machine tool industry, domestic orders fell 0.7% while external orders rose 20.4% in the October-December 2025 period, with rising external demand driven by growing demand for AI and semiconductor-related equipment.
• Priority Strategic Initiatives Progress
  • Hakudo Net Service E-commerce Expansion: The 24/7/365 quoting and ordering platform has grown to approximately 212,000 available items as of the end of December 2025, with cumulative registrations of approximately 15,000 companies and 31,000 individual customers, with user growth showing a consistent upward trend.
  • Growth Area Expansion: Hakudo identifies semiconductors, aerospace, and automotive/motorcycle as core growth areas, and continues to pursue sales expansion in these segments. Aerospace is expected to see continued long-term growth after a recent near-term adjustment.
  • Overseas Business Expansion: As of Q3 FY2026, the full year forecast for overseas revenue share of the Hakudo Group is 16.2%. Going forward, Hakudo will expand overseas business via broader use of its EC Package (which offers the same functionality as Hakudo Net Service for international markets), expanding sales channels and product offerings, with EC Package expansion to new markets including South Korea, Taiwan, India, and the Philippines. In North America, Hakudo will strengthen governance and speed up decision-making for its 100% owned subsidiary West Coast Aluminum & Stainless (WCAS) to improve market competitiveness, and will pursue synergy between WCAS and Patriot Metals (in which Hakudo acquired a 14% stake in 2025) to continue expanding North American operations.

By geographic segment: 1. North America Segment: Revenue increased year-over-year, and both operating loss and ordinary loss narrowed. 2. China Segment: Revenue decreased year-over-year, impacted by the stagnation in the semiconductor and automotive industries. 3. Other segment (including Hakudo(Thailand)CO., LTD.): Revenue decreased slightly year-over-year. By product type: 1. Copper alloy products: Revenue increased year-over-year due to product price increases driven by raw material market conditions. 2. Other products (special steel, titanium, plastic): Revenue increased year-over-year. 3. Aluminum products: Revenue decreased year-over-year due to lower sales volume to the semiconductor manufacturing equipment sector. By product category: 1. Standard stocked items: Revenue decreased due to lower sales volume; for Hakudo's standalone standard stocked items, sales weight fell 9.6% year-over-year while product prices rose 5.5% year-over-year. 2. Custom ordered items: Revenue increased year-over-year, as product price increases offset the impact of lower sales volume. By domestic industry contribution: The semiconductor and FPD manufacturing equipment industry (Hakudo's core growth area) has seen an increasing revenue contribution share upward trend since Q2 FY2026. The aerospace industry has strong performance driven by sustained recovery in civilian aircraft demand and strong public sector demand. There is no specific absolute revenue value or full segment revenue contribution percentage provided in the transcript beyond the 16.2% full year forecast share for total overseas business.

• Hakudo has upwardly revised its full year consolidated FY2026 March year end earnings guidance for all revenue and profit line items.
  • Upward revision drivers include: consistent execution of strategic initiatives including new product and new processing introduction, expanded functionality for Hakudo Net Service, successful pass-through of higher costs to product pricing with visible signs of profit improvement in Q3; expected demand growth in the semiconductor manufacturing equipment sector driven by expanding generative AI memory demand; inventory valuation gains from rising raw material market prices; and larger-than-expected yen depreciation that further boosted profits.
• The full year dividend forecast is maintained at 80 yen per share, in line with Hakudo's dividend policy of a minimum annual dividend of 80 yen per share. Management will continue working to improve business performance to increase shareholder returns where possible.

• Raw material prices are currently experiencing extremely volatile fluctuations, and the yen exchange rate has also seen large recent swings. Hakudo will continue to closely monitor these trends, but volatile external market conditions represent a key uncertainty for future performance.

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