Konoike Transport Co.,Ltd. Q2 FY2026 earnings call

Overall Performance Summary

• The company reported higher revenue and higher profit for the first half, with FSNL in India driving overall growth despite the negative impact of US tariffs. Full-year consolidated operating profit has been upwardly revised from the initial forecast.

1. Integrated Solutions Business: Revenue of 116.5 billion yen, up 6.9% year-over-year; segment profit of 12.592 billion yen, up 8.5% year-over-year. Revenue contribution: 65% of total consolidated revenue. Despite negative impact from customer production line halts, growth was driven by the consolidation of Indian steel subsidiary FSNL, resumption of international passenger flights at airports, new facility operation and increased volume in food-related生活産業 business, and increased volume of commercial air conditioning retrofit projects. 2. Domestic Logistics Business: Revenue of 28.1 billion yen, up 2.4% year-over-year; segment profit of 1.894 billion yen, up 6.8% year-over-year. Revenue contribution: 16% of total consolidated revenue. Growth came from increased volume in constant-temperature logistics, proper pricing adjustments, and increased volume of housing product handling. 3. International Logistics Business: Revenue of 34.6 billion yen, up 4.2% year-over-year; segment profit of 2.106 billion yen, down 11.2% year-over-year. Revenue contribution: 19% of total consolidated revenue. Revenue grew due to the consolidation of Canadian subsidiary, large project wins, and increased local handling volume in India and Vietnam, but the decline in profit could not offset the volume reduction caused by US tariff policy.

• Full-year consolidated revenue is forecast at 355 billion yen, a 3.3% downward revision from the initial forecast, representing a 2.9% increase year-over-year. The downward revision reflects slower-than-expected resumption of international passenger flights, US tariff impacts, and North American automaker production adjustments. - Full-year consolidated operating profit is upwardly revised to 22.5 billion yen from the initial 22 billion yen, representing a 5.2% increase year-over-year. Operating profit is almost in line with the initial forecast overall, while ordinary profit is forecast 4.7% higher than the initial forecast, driven by higher profit from FSNL, productivity improvements, and cost reductions that offset the negative impact of international logistics. - Net income attributable to parent shareholders is forecast to increase 3.2% year-over-year. - Segments: 1. Integrated Solutions Business: Forecast revenue 231 billion yen, 0.2% lower than initial forecast; forecast segment profit 22.9 billion yen, 7.0% higher than initial forecast. 2. Domestic Logistics Business: Forecast revenue 56.6 billion yen, 2.1% lower than initial forecast; segment profit forecast unchanged from initial. 3. International Logistics Business: Forecast revenue 67.2 billion yen, 13.4% lower than initial forecast; forecast segment profit 4.1 billion yen, 14.6% lower than initial forecast. - The annual dividend is maintained at 110 yen per share, in line with the initial plan, consistent with the 40%+ payout target for the mid-term plan. - The 2028 March term (mid-term plan final year) target of 78 billion yen in overseas revenue and 3.3 billion yen in overseas operating profit is maintained unchanged.

• US tariff policy has caused significant negative impacts on Canadian packaging design subsidiary PVP and Hong Kong forwarding subsidiary BEL, with an expected 1.2 billion yen full-year operating profit reduction compared to the initial forecast. BEL faces sustained oversupply in the Hong Kong air cargo market for US-bound EC cargo, with no near-term improvement expected. - China's travel advisory is expected to reduce China-bound flights at major Japanese airports starting December, with an estimated 2.5 billion yen revenue impact for the current fiscal year, though the exact impact depends on the scale of reductions and airline fleet adjustments. - Lower-than-forecast flight volume at airports, delayed arrival of foreign workers, higher hiring and training costs, and higher selling, general and administrative expenses (system costs, consulting fees for lease accounting changes) are expected to push down second half operating profit compared to the initial forecast. - The Indian rail transport business underperformed initial volume forecasts due to US trade policy impacts, delayed new route setup, and extended scheduled maintenance.

Q: Why is the second half operating profit forecast lower than the initial projection, and what is management's outlook for the second half? / A: Management still expects contribution from the Indian steel business similar to the first half, but expects lower profit overall due to lower-than-expected airport flight volumes, timing delays for foreign worker entry, and higher hiring and training costs. In international logistics, the tariff impacts on BEL and PVP that were partially offset in the first half by other US/ASEAN volume cannot be offset in the second half due to cargo stagnation. Higher system and consulting costs for accounting changes also add to expenses. Management will target to reach near the initial profit level through new spot business wins.

Q: Why is the Indian rail business volume below initial forecasts, and what is the outlook going forward? / A: The container transport business saw reduced export activity due to US tariffs, and new rolling stock投入 required longer-than-expected route setup time to reach target volumes. The automobile transport business was also impacted by extended scheduled maintenance for its two train sets. That said, the投入 of used rolling stock has delivered clear volume growth year-over-year, and completion of double-stack freight rail upgrades has increased total transport capacity, which will support future growth.

Q: What is the expected impact of China's travel advisory on Konoike's airport business? / A: At the three major Japanese airports, China flights account for ~25% of total airport business revenue, which equals ~8 billion yen in annual revenue. Cuts are expected to start in December, leading to an estimated ~2.5 billion yen impact for the current fiscal year. The actual impact will vary based on how deep cuts are, whether airlines use smaller aircraft, and which flight segments are cut, so a precise impact cannot be estimated at this time.

Q: Have there been any changes to the mid-term plan priorities or targets given recent risks from US tariffs and potential China flight cuts? / A: There are no major changes to the existing mid-term plan, and the final year overseas business revenue and profit targets remain unchanged. BEL is exiting the loss-making master loader air cargo space sales business, which will reduce its overall scale. PVP has already secured new client contracts despite tariff impacts, and the company will continue strategic investment for its expected future growth. Airport business has experience managing through past crises (including the COVID pandemic) via flexible staffing, and will continue to pursue long-term growth while accounting for near-term risks.