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Financial Results Summary for the Second Quarter

• Total revenue: 9.953 billion yen, +358 million yen YoY; cost of goods sold ratio 79.4%.
• Operating profit: 408 million yen, -32 million yen YoY; operating margin 4.1%, down 0.5 percentage points YoY.
• Ordinary profit: 356 million yen, +42 million yen YoY; interim net profit: 230 million yen, +31 million yen YoY. The increase in ordinary and net profit stems from the absence of this year's fraudulent conduct investigation costs for the US subsidiary, which were recorded as non-operating expenses in the prior year.
• Reported actual results exceeded the original interim forecast for operating, ordinary, and net profit, due to better-than-expected domestic handling of large equipment and delays of some planned H1 expenses to H2.

Mid-term Management Plan Progress (Current FY is the final year of the 2024-2026 plan)

• Core vision: Shift from "operations" to "solutions", identifying unmet customer needs to become a strategic trusted partner and drive profit growth.
• Profitability improvement: 3 years of price negotiations and operational efficiency improvements reduced cost of goods sold from 79.6% (FY2023) to 79.4% (current Q2).
• Capital expenditures: 7 billion yen total invested in two large logistics facilities: a new warehouse in Savannah, Georgia US (completed August 2025) and a new warehouse in the Narita area Japan (under construction, completion scheduled for July 2026). This is a large, high-priority strategic investment for future growth.
• DX investment: 100 million yen total invested over 3 years, focused on data collection of warehouse and field operations; data digitization is largely complete, with next steps focused on data utilization. A new X-ray inspection machine was installed in Narita to meet stricter explosive inspection rules for air cargo effective January 2026, with continued investment planned to meet growing demand.
• Fuchu Warehouse: Full operations started this FY, located adjacent to a key customer's factory to support just-in-time delivery of parts. Dedicated account management enabled close customer communication and led to expanded business, serving as a model for future warehouse operations.
• New warehouse details:
  • Narita new warehouse: ~8,000 tsubo total floor space, a bonded facility with packing functions, refrigerated/freezing capacity. Target customers include semiconductor manufacturing equipment and temperature-sensitive chemicals, positioned to capture first-mover advantage from Narita Airport's third runway expansion (scheduled 2028-2029), which will increase cargo volume by 1.5x.
  • Savannah US warehouse: Located near Savannah Port, a strategically important East Coast hub, with rare on-site cranes that improve handling safety and efficiency, already well-received by customers. Focus will be on expanding customer base to include additional Japanese firms, leveraging Sanritsu's Japanese-quality service standards.

Sustainability and Workplace Initiatives

• Environmental initiatives: Promote switching from wooden packaging to cardboard packaging, propose joint transportation and modal shift to reduce CO2 emissions. Won the Large/Heavy Goods Packaging Award in the Japan Packaging Contest for a fully cardboard packaging design for over 50kg heavy goods that reduces environmental impact and worker physical burden.
• Social and community initiatives: Donated to Japan Heart international medical support project in Cambodia, handled transport of medical equipment for the project. Hosted the first cardboard art contest to promote cardboard recycling, received 125 entries from across all age groups. Continued diversity and workplace improvement activities, shifting focus from women's empowerment to creating an environment where all employees can maximize their potential; implement annual improvements based on employee feedback, including heat mitigation for non-air-conditioned warehouses.

• Full-year consolidated guidance is maintained at original forecast levels: total revenue 21 billion yen, operating profit 950 million yen, net income 490 million yen. No change to guidance despite upside in H1 results, due to persistent uncertainty around US policy and the shift of planned H1 expenses to H2.
• Large precision equipment is expected to remain strong through H2 and full-year. Machine tools are expected to achieve full-year revenue roughly flat YoY, supported by continued strong domestic demand and a recovering US business. Small precision equipment and medical devices are expected to remain solid full-year.
• Domestic business is expected to remain strong full-year. US business is expected to see a full-year revenue decline of ~300 million yen YoY, due to large H1 declines, even though utilization has started to improve in H2.
• Mid-term management plan original targets (22 billion yen revenue, 1.1 billion yen operating profit, 5% operating margin for the final year) will not be met, primarily due to shortfalls in overseas business. The main drivers of the 800 million yen overseas revenue shortfall (target 2.5 billion yen, current forecast 1.7 billion yen) are: exit from China business in March 2025, strategic shift from Europe entry to focus resources on the Savannah warehouse investment which will not contribute to revenue until next FY, and lower H1 US warehouse utilization.
• Dividend guidance is maintained at 27 yen per share, in line with the company's 30% consolidated payout ratio policy.
• Management expects continued medium-term growth demand for Sanritsu's core products: semiconductor manufacturing equipment, power conversion equipment for data centers, driven by AI market expansion, despite near-term volatility from US-China trade dynamics.

By product group: 1) Large precision equipment: +304 million yen in year-over-year (YoY) revenue growth, driven by full operations starting at Fuchu Warehouse and solid handling of semiconductor manufacturing equipment. 2) Machine tools: -93 million yen YoY revenue decline; domestic handling grew, but US handling dropped sharply due to Trump tariffs, leading to a consolidated decline. 3) Small precision equipment and medical devices: solid performance in the first half. By business segment: 1) Packing business: revenue increased, profit decreased. Revenue grew from strong domestic handling of large precision equipment and machine tools, but profit fell due to lower machine tool handling and warehouse utilization in the US. 2) Transportation business: revenue decreased, profit increased. Revenue fell slightly on softer medical device handling, but profit grew from continued progress in freight fare negotiations and price pass-through to customers. 3) Warehouse business: both revenue and profit increased. Growth came from full operations starting at Fuchu Warehouse and improved leasing of previously vacant warehouse space. 4) Rental building business: both revenue and profit decreased, driven by lower utilization at the headquarters building. By region: Domestic: +754 million yen YoY revenue growth, total revenue 9.297 billion yen, on strong performance of large precision equipment and machine tools. US: -279 million yen YoY revenue decline, driven by lower warehouse utilization due to Trump tariff uncertainty, which led customers to temporarily move stored inventory from US warehouses to Japan and pause shipments to the US.

• Persistent uncertainty around US trade policy (specifically Trump tariffs) has caused significant declines in US warehouse utilization and revenue, and the timing of a full recovery remains uncertain.
• The logistics industry faces persistent structural headwinds: widespread labor shortages stemming from the 2024 logistics industry issue, rising labor and recruitment costs, and forecasts that 30% of parcels may be undeliverable by 2030, increasing pressure on companies to improve operational efficiency and manage rising costs.
• The machine tool industry is highly cyclical, making it difficult to forecast performance beyond the current year.
• Ongoing cost inflation for labor and other operating costs requires continued price negotiations with customers to maintain margins, with no guarantee that all cost increases can be passed through.
• The original mid-term management plan's overseas growth targets will not be met, due to strategic changes and unforeseen trade headwinds, creating pressure to deliver growth from the new large warehouse investments in future periods.

Q: What are the new CEO's strategic priorities and core initiatives for the next period? / A: The CEO states that the top priority for the remainder of the current mid-term plan is full execution of all already launched initiatives, even though the original numerical targets will not be met. The next mid-term plan is currently being developed, and will retain Sanritsu's traditional focus on its existing customer and product base centered on the packing business. The core pillar of the new plan will be to strengthen the existing business base by capturing untapped opportunities with current customers, which still has significant room for revenue and profit growth. A second key priority is improving profitability amid rising costs, including actively reviewing business and customer mix to prioritize higher-margin activities. The most critical near-term initiative is preparing for the July 2026 opening of the new Narita warehouse, which is expected to be a major future growth driver.

Q: How has the business outlook for next year and beyond changed compared to six months ago, and what impact is cost inflation having? / A: Management expects continued growth for Sanritsu's core large precision equipment segment next year and beyond. Machine tools are highly cyclical, so it is difficult to forecast future performance at this point. Overall, the outlook is not pessimistic, as growth in semiconductor and AI-related demand will support performance of Sanritsu's precision equipment segments. In the US, customer activity has started to gradually recover as tariff uncertainty eases, and this improving trend will be reflected in next year's plans. Persistent cost inflation for labor and other inputs means continued strong price negotiations with customers will remain a necessity going forward.

Q: What is the status of customer contracts for the new Narita warehouse? / A: No formal contracts have been signed yet, but around three-quarters of the warehouse space is already committed to a single customer, with negotiations at the pre-contract stage. Management aims to finalize contracts by the end of the year or early next year. Sales efforts are ongoing for the remaining one-quarter of space, and management is waiting for clearer visibility on cargo volume growth from the upcoming stricter X-ray inspection rules before finalizing plans for the remaining space.

Q: What is the fiscal year for Sanritsu's US business? / A: The US subsidiary uses a calendar fiscal year (January to December), aligned with local practice, not the April to March fiscal year used by the parent company in Japan.