NAKAMOTO PACKS CO.,LTD. Q2 FY2026 earnings call

• Overall Financial Performance

  • Total interim revenue reached 24.986 billion yen, up 2.5% YoY, and operating profit reached 1.611 billion yen, up 3.2% YoY, hitting a new all-time high for the interim period. Gross profit margin was 18.7%, with selling, general and administrative expenses totaling 3.052 billion yen.
  • A shift from prior-year foreign exchange valuation gains to current-year valuation losses pushed ordinary profit down 570 million yen YoY to 1.567 billion yen, and net profit attributable to parent shareholders fell 1.87 billion yen YoY to 1.059 billion yen.
  • Q2 operating profit declined to 860 million yen from the prior-year Q2 record of 1.01 billion yen, after Q1 hit a new all-time quarterly high, resulting in a year-over-year decline in Q2 profit on a strong prior-year base.

• Strategic & Operational Initiatives

  • Core system replacement for the parent company was completed in May 2024, with rollout to group subsidiaries ongoing to enable real-time operations, paperless workflows, DX, and end-to-end production/SCM optimization to support future growth. The corporate website was renewed in August 2025 to improve recruitment and stakeholder outreach.
  • Fully-owned subsidiary Nakamoto Advanced Film Co., Ltd. has delivered strong sales and profit contributions, and is on track to hit a new all-time high revenue in its third full year under the Nakamoto Pax group, with expected further profit growth from cross-selling to the group's existing customer base.
  • Joint venture RN Smart Packaging Co., Ltd. is expanding adoption of label-less top seal packaging, centered on convenience store clients. The technology was first adopted for frozen bento production lines in May 2025, an industry first, and the company's RESC environment-friendly barrier paper is now used for mandarin orange packaging and is being expanded to overseas supermarket clients.
  • The company acquired a new site and adjacent existing factory next to its Saitama First Plant in April 2025, doubling the available land area. Consolidation of three previously leased warehouses started in October 2025, expected to deliver 60 million yen in annual cost savings.
  • A test coater machine for secondary battery electrode materials will be installed at the new Saitama plant by March 2026, with commercial operation starting in May 2026. Mass production coater specifications will be finalized in 2027, with the goal of establishing a leading domestic position in the secondary battery materials segment by 2030, followed by overseas expansion.

• Shareholder Return

  • The company has not cut dividends since its 2016 listing. The 2025 February term year-end dividend was raised from 32.0 yen to 34.0 yen, bringing full-year dividend to 66.0 yen. A further 2.0 yen increase to 68.0 yen full-year dividend is planned for the 2026 February term.

1. Food-related segment: Revenue was 15.859 billion yen, gross profit was 2.295 billion yen, up 2.8% YoY in revenue and 9.7% YoY in gross profit, driven by strong demand for dairy and agricultural product food packs, tofu packaging materials, and prepared food products. This segment accounts for approximately 63.5% of total company revenue.
2. IT & Industrial Materials segment: Revenue was 4.615 billion yen, gross profit was 1.035 billion yen, up 4.1% YoY in revenue and 7.8% YoY in gross profit, supported by solid demand for smartphone components, semiconductor-related materials, EC logistics materials, and industrial heavy bags. This segment accounts for approximately 18.5% of total company revenue.
3. Living Materials segment: Revenue was 2.365 billion yen, gross profit was 0.977 billion yen, up 2.3% YoY in revenue and 9.3% YoY in gross profit, driven by strong sales of high-margin proprietary products, including storage and mite-proof goods. This segment accounts for approximately 9.5% of total company revenue.
4. Building Materials segment: Revenue was 0.889 billion yen, gross profit was 0.121 billion yen, down 11% YoY in revenue and 22.8% YoY in gross profit, due to shrinking demand from declining new housing starts and lower residential interior decoration demand. This segment accounts for approximately 3.6% of total company revenue.
5. Medical & Pharmaceutical segment: Revenue was 0.807 billion yen, gross profit was 0.176 billion yen, up 1.2% YoY in revenue and 3.2% YoY in gross profit, driven by growing demand for adhesive patch materials and solid demand for medical packaging bags. This segment accounts for approximately 3.2% of total company revenue.

• Full-year 2026 February term guidance is maintained: revenue of 52.0 billion yen, operating profit of 3.0 billion yen, ordinary profit of 3.1 billion yen, and net profit attributable to parent shareholders of 2.011 billion yen. Management will promptly disclose updates if a revision becomes necessary due to changing business conditions.
• The current mid-term business plan (Mid-term Management Plan 2024) ends this fiscal year, and the 50 billion yen revenue long-term target is on track to be achieved this term, with the 3.5 billion yen ordinary profit target also approaching. A new three-year plan and revised long-term targets will be disclosed after full-year results are finalized.
• For the second half of the fiscal year, management expects continued solid performance: food-related growth will be driven by further contributions from Nakamoto Advanced Film and growing orders for label-less top seal and RESC environment-friendly packaging; IT & Industrial Materials will benefit from ongoing solid semiconductor demand and growth projects in the secondary battery segment; Living Materials will continue to focus on expanding high-margin proprietary products; Medical & Pharmaceutical will grow driven by high-margin adhesive patch materials and new orders for infusion solution-related projects.

• Rising raw material, electricity, and logistics costs are pushing up manufacturing costs, which the company is working to offset via production efficiency improvements but remains a core headwind.
• The building materials segment faces continued headwinds from rising interest rates, higher construction material costs, and declining new housing starts, with limited growth upside outside of renovation demand.
• The Living Materials segment faces two key risks: higher input costs from yen depreciation that raised import costs from China, and increased competition from low-priced Chinese goods that are diverted to the Japanese market due to US Trump-era tariffs.
• The expected large-scale entry of label-less top seal packaging at a major convenience store client is currently paused due to the client's focus on stabilizing existing operations, delaying near-term revenue expansion for the product line.

Q: The Q2 operating profit was down ~15% YoY, which suggests a slowdown from the prior growth trend. What factors drove this result? / A: Management explains three key temporary factors: 1) Prior-year Q2 delivered an exceptional all-time high profit of over 1 billion yen, an outlier above the typical 500-600 million yen quarterly range; 2) Q1 this year already saw a 200 million yen year-over-year profit increase, with some profit pulled forward into the first quarter; 3) Machinery issues and customer schedule delays at the overseas subsidiary pushed back expected revenue that was planned for Q2, leaving profit below expectations. The overall growth trend remains intact.

Q: How is the top seal business progressing against plan, and what is the outlook for the next 12 months? / A: The largest expected convenience store project is currently paused as the client prioritizes stable existing operations, so near-term expansion has not materialized. Other convenience store projects are progressing on track. The new automatic steam vent technology for microwaveable packaging is nearly complete and received strong feedback at a recent industry exhibition. The business will now expand into frozen food and noodle applications, targeting more than doubling sales, and reached break-even this fiscal year, with profit contribution expected starting next term.

Q: Where does the food segment's structural transformation to offset declining convenience store printing sales stand, using a mountain climbing analogy? / A: Convenience store printing sales have fallen from ~3 billion yen peak to under 300 million yen, a 90% decline, but container molding business growth for the same clients has offset the decline, keeping the overall convenience store sales share in the low 20% range of food revenue. Acquisitions and new businesses like top seal are expected to grow this share further. Management estimates the transformation is only at the 2nd to 3rd stage of mountain climbing, with much more growth to come as the company builds a stable new profit base.

Q: Why has the IT & Industrial Materials segment's gross margin fallen 7-8% from its peak, and can profitability recover after the new factory launches? / A: The large majority of the margin decline comes from a classification change: lower-margin industrial materials from subsidiary Mikuni Paper Industries, including heavy bags, were moved into this segment, dragging down the overall average margin. The new Saitama plant investment will be offset by 60 million yen annual cost savings from warehouse consolidation, and the new test coater will already serve booked customer trial orders from launch, keeping utilization high. Management expects to limit further margin declines while growing new business.