OPTIMUS GROUP COMPANY LIMITED Q1 FY2026 earnings call

• Overall Quarterly Financial Performance:

  • Total group revenue was 69.111 billion yen, up 5.2% quarter-over-quarter, with early signs of recovery across Australia, New Zealand, and other markets. Despite the challenging overall market environment, results were broadly in line with management expectations outside of the Autopact segment.
  • Operating profit was 1.217 billion yen, down 18% quarter-over-quarter. The decline stemmed from discounts on export vehicles damaged by a March 2025 hailstorm in Nagoya, and lower profit margins at Australia-based dealer Autopact.
  • Ordinary profit returned to a black ink figure of 0.29 billion yen, driven by foreign exchange gains, insurance payouts for the hailstorm damage, and lower interest expenses from falling Australian interest rates.
  • Against the first half fiscal plan, revenue reached 48.7% of target and operating profit reached 35.8% of target. The operating profit shortfall is entirely concentrated in Autopact, with all other segments performing as expected. The quarter's results include 0.56 billion yen in goodwill amortization, and the full year end results will adopt IFRS accounting standards.

• Regional Market Conditions:

  • Australia: The new car market saw higher sales volumes, but intensified competition from widespread manufacturer vehicle shipments at the June fiscal year-end led to larger discounting, higher inventory costs, and broad profitability declines across the sector. The domestic used car market remains sluggish, while the group's transport and warehousing segment Autocare outperformed amid these conditions.
  • New Zealand: The core market for the group's used car export value chain has underperformed expectations for longer than anticipated due to economic downturn and government import restrictions. However, the market has started adjusting to regulations, inventory has bottomed out, supply and demand have tightened, and the market is now trending toward recovery.

• Core Strategic Priorities:

  • Diversify the used car export business away from over-reliance on New Zealand by expanding operations and building full value chains in other new markets, to serve as a foundation for future long-term growth. Strengthen CtoC used car business within New Zealand.
  • Pursue targeted roll-up M&A in strategic Australian market to expand scale efficiently through complementary acquisitions. Management views current market weakness as a strategic opportunity, as industry-wide stress creates attractive acquisition openings.
  • Capture synergies between the used car sales chain and transport logistics network, actively build group-wide synergies, accelerate operational efficiency improvements, and strengthen overall profitability.
  • Proactively add fast-growing Chinese-brand EVs and hybrid vehicles to the new car sales offering, and advance new growth initiatives.
  • Maintain the committed 4.5% dividend on equity (DOE) payout policy.

The transcript does not break out separate revenue and profit figures for each product segment with corresponding revenue contribution percentages. Only segment-level operational performance is provided:

1. Autopact (Australia new car dealership): Reported significantly lower profitability due to intensifying new car market competition, expanded discounting, higher inventory holding costs, which was the primary cause of the group's lower-than-planned operating profit for the quarter.
2. Autocare (Australia transport and warehousing): Benefited from the current market conditions and posted positive operational performance.
3. New Zealand used car export core business: Export volume to New Zealand increased 23.0% quarter-over-quarter, and the segment maintained a 40% market share in the market. The business has high profitability as a core part of Optimus Group's value chain.

• Management expects that the negative headwinds that impacted both the Australian and New Zealand markets in the first quarter will continue to create pressure in the near term. The company is positioned to weather this period of weakness, with gradual market normalization expected starting from the second half of the fiscal year.
• The company maintains its commitment to achieving its medium-term management plan targets, building operational foundations for the next phase of growth amid the current industry downturn.
• No explicit upward or downward revision to the full-year fiscal guidance was provided in the available transcript.

• Persistent economic downturn in Australia and New Zealand, combined with ongoing industry headwinds, has delayed the company's expected earnings recovery.
• The New Zealand used car market has remained weaker than initially anticipated for a longer period, due to sustained economic stagnation and government import restrictions.
• Intensified competition in Australia's new car market has led to wider discounting and higher inventory costs, driving material profitability declines at the group's Autopact dealership segment that resulted in a large first half operating profit shortfall against plan.
• The global automotive industry is facing a once-in-a-century period of structural transformation, and the group is exposed to spillover impacts from global economic uncertainty originating from the US.
• Near-term downside risk remains from the lingering negative effects of first quarter headwinds on both core markets.

Q: What is the current macro market situation for Australia, and how is Optimus Group performing there?

A: Australia's new vehicle market saw higher sales volumes in the period, but intensified competition from end-of-fiscal-year manufacturer shipments led to larger discounting and higher inventory holding costs. This pushed down industry profitability, and the group's new car dealer Autopact could not avoid this margin decline. The domestic used car market remains sluggish, while the group's transport and warehousing business Autocare benefited from the current environment.

Q: What is the market outlook for New Zealand, Optimus' core used car export market?

A: New Zealand has been weaker than expected for longer than management anticipated, due to economic downturn and government import restrictions. However, the market has started adapting to the new regulations, inventory has hit a bottom, supply and demand are tightening, and the market is now clearly trending toward recovery. The company has maintained its 40% market share and is preparing for a quick earnings rebound as the market recovers.

Q: When does management expect market recovery in Australia and New Zealand?

A: Management acknowledges that the negative factors that hurt performance in the first quarter will likely continue to impact results in the near term, and this is a period where the company must hold position to weather the downturn. Gradual market normalization is expected to begin starting from the second half of the fiscal year.

Q: Can you restate Optimus Group's current core strategic priorities?

A: The company is diversifying its used car export business to reduce reliance on New Zealand, building out value chains in new markets as a growth foundation, while strengthening domestic CtoC business in New Zealand. In Australia, it continues pursuing targeted roll-up M&A to grow efficiently, and views current industry weakness as an opportunity to acquire assets at attractive valuations. The firm is also actively expanding its offering of fast-growing Chinese EV and hybrid vehicles, and working to capture cross-business synergies to boost profitability.