NIKKON Holdings Co.,Ltd. Q2 FY2026 earnings call

Overall Consolidated Financial Performance

• Total consolidated revenue: 131.912 billion yen, up 9.6% YoY, driven by new business acquisition, existing business expansion, and M&A effects
• Operating profit: 10.772 billion yen, down 6.6% YoY, dragged by one-time TOB/FA fees for Chuoh Shiko Kogyo (0.821 billion yen total), goodwill amortization from new M&A subsidiaries, and reduced profit at existing group companies
• Net income attributable to parent shareholders: 7.201 billion yen, up 6.8% YoY, supported by policy-held share sales and reduced foreign exchange losses
• Capital expenditures in the first half: 12.5 billion yen (annual plan is 23 billion yen, excluding M&A investment), 1.7 billion yen for vehicle expansion, 10 billion yen for land and warehouse development, with 1 new facility completed in Thailand, 3 completed in Suzuka Japan, and 5 facilities under construction globally

Mid-Term Management Plan Progress

• The first two years of the mid-term plan met sales and profit targets as scheduled. For the final full year (FY2026 March), the plan targets 280 billion yen in total revenue and 28 billion yen in operating profit. First half revenue progress hit 47.1% of the full-year target, while operating profit progress hit 38.5% of target; the group will mobilize all resources to recover the delayed progress

Growth Driver Initiatives

• Expanding circular economy logistics: Growing aluminum material recycling closed-loop delivery, and contracted storage/shipping business for remanufactured faulty engines
• Expanding constant-temperature warehouse capacity: The Kitakami sales office warehouse (completed Feb 2025) is already at full capacity for industrial machinery storage, and part of the Kitakyushu Logistics Center has been converted to constant-temperature storage for industrial machinery parts
• Overseas expansion: NK America opened a new office in Dallas, Texas to expand US-Mexico transport and build out US-Japan shipping networks; the company targets expansion of EV-related and assembly business in India, and aims to grow overseas revenue to 30% of total revenue

Automation and Labor Saving

• The in-house developed CIRRUS logistics automation system integrates warehouse management (WMS) and transport management (TMS) to connect end-to-end logistics data. Deployed sites have seen 14% higher operational efficiency, with standardized operations, paperless work, reduced administrative labor, and improved quality; the company is rolling it out across the group and selling it to external clients
• 3 truck unloader units have been deployed at Nippon Express Packaging & Warehouse, cutting 10 minutes of unloading/transport time per truck, equal to 20 hours of daily labor savings (over 2.5 full-time worker equivalents)
• AMR autonomous mobile robots deployed at Nippon Rikuso for export carton sorting reduced headcount by 3 workers as planned, while also improving sorting quality and mitigating risks from labor shortages and unexpected absences

Capital Strategy and Shareholder Return

• Starting in FY2026 March, the company replaced the prior 40% payout ratio policy with a new 4%+ DOE (Dividend on Equity) target, while continuing progressive dividends, and committing to 40 billion yen in share buybacks by FY2029. 15 billion yen of the buyback was announced in Sep 2025, is ongoing, and will be completed by March 2026
• Interim dividend is 37 yen per share, full-year forecast is 74 yen per share (37 yen at year-end), equal to a 62.1% payout ratio. The company maintains target ROE of 8% and operating margin of 10%, and will actively use debt for growth investment to improve capital efficiency while considering cost of capital

Special Committee on Corporate Value Improvement

• The committee of 4 independent outside directors established in June 2025 has held 10 meetings to review real estate holdings and corporate value improvement initiatives
• It is currently testing 10 rental properties for potential sale, and has selected the top 20 largest, most liquid operating properties to evaluate usage, potential sale/leaseback impact, and fair value
• The committee will submit its final recommendations to the board by the end of 2025, and results will be disclosed promptly after receipt

ESG Initiatives

• CO2 emissions were 5.96% below plan in FY2025 March, with initiatives including eco-friendly vehicles, solar power, renewable energy procurement. The company targets further progress by 2030, despite challenges of EV infrastructure and high vehicle costs
• Targets 30%+ female employee share in domestic operations, currently at 2.9% female managers domestically (24.7% overseas), and is improving working policies and environment to boost retention. It aims to fully eliminate mercury lighting by the end of FY2026 March, and has already removed 2,073 units
• The group holds 143 sets of double-connected full trailers that cut CO2 emissions by 37% vs conventional heavy trucks. A new low-emission car carrier, N-MODEL, was developed to accommodate heavier EV finished vehicles, supports mixed loading of agricultural machinery, cuts CO2 by 13% vs existing models, and enables remote loading via smartphone app

1. Transportation Segment: Revenue grew 7.9% year-over-year driven by expanded business volume and the consolidation of a U.S. car carrier company from M&A; operating profit grew 27.3% year-over-year. Revenue contribution percentage is not explicitly provided for individual segments in the transcript. 2. Warehousing Segment: Revenue grew 3.9% year-over-year from warehouse expansion, while operating profit only saw a 0.2% micro year-over-year increase due to higher depreciation and labor costs. 3. Packaging Segment: Revenue decreased 1.2% year-over-year due to lower business volume at some consolidated subsidiaries; operating profit decreased 11.6% year-over-year from the revenue decline impact. 4. Testing Segment: Revenue grew 2.2% year-over-year from increased business volume, while operating profit decreased 5.5% year-over-year due to higher depreciation for testing equipment and increased labor costs. By industry, automotive revenue grew 16.2% YoY, automotive parts grew 13.6% YoY, industrial machinery (a priority expansion area) grew 35.5% YoY, making up 2.8% of total revenue. By region, North America revenue grew 12.5% YoY (113.2% operating profit growth from the absence of prior year M&A one-time costs), Asia revenue grew 4.6% YoY with 1.8% operating profit micro-growth. Overall overseas revenue accounts for 18% of total consolidated revenue.

• Full-year FY2026 March guidance is maintained at 280 billion yen in consolidated revenue and 28 billion yen in operating profit, with management committed to recovering the first half operating profit shortfall
• Overseas business expansion guidance is maintained: long-term target to increase overseas revenue share to 30% from the current 18%
• Shareholder return guidance is maintained: 40 billion yen total share buybacks by 2029, with 15 billion yen buyback to be completed by March 2026, and a 74 yen per share full-year dividend forecast
• Full elimination of mercury lighting is guided for completion by the end of FY2026 March, on track with current progress
• The Special Committee's final recommendations on real estate strategy are guided for submission by the end of 2025

• Macroeconomic risks: Persistent domestic price increases for food and consumer goods, ongoing geopolitical uncertainty from the Ukraine conflict and Israel-Hamas war create broader economic uncertainty
• Industry-specific structural risks: The logistics industry continues to face persistent labor shortages from hiring difficulties and aging workforce, with sustained high labor and fuel costs
• ESG initiative risks: Expansion of EV heavy trucks for emissions reduction faces challenges from insufficient charging infrastructure and high vehicle purchase costs
• First half operating profit performance missed the mid-term plan full-year target progress, with 38.5% progress vs the 47.1% revenue progress, requiring group-wide effort to recover the gap in the second half

No questions and answers were included in the provided earnings call transcript.