SKSUF

Preliminary Incident Update

• No injuries or casualties from the July 2025 Kumamoto Prefecture earthquake were reported across the group, and damage to production and sales facilities was minor. No material impact on business activities or financial performance has been identified to date.

Overall Quarterly Performance

• Group net sales, operating profit, and ordinary profit all reached record quarterly highs in Q1 FY26, exceeding internal business plans.
• The company began the fiscal year with a policy of passing through higher raw material costs driven by Middle East conflict instability, and this implementation is progressing well. Pre-emptive inventory building by customers and distributors pulled some sales forward from Q2 and later quarters, particularly in the HPP and UIEP segments.
• Peropsky Solar Cell commercial product shipments commenced as planned in the quarter.

Strategic Segment Updates

• HPP: In electronics, large LCD display demand remained firm despite weaker-than-expected smartphone demand; non-LCD materials including binder resins for MLCCs and sulfur process materials grew steadily on strong semiconductor demand. In mobility, general automotive materials were sluggish due to market stagnation, but interlayer films for head-up displays remained firm, projected to exceed 100% year-on-year first half sales volume; aeronautical components are growing with recovering aircraft demand and steady expansion in new drone and air mobility markets. In industrial, the company continues expanding sales of labor-saving and eco-friendly products and acquiring new orders for sensors and care materials, with a portion of demand pulled forward to Q1.
• Housing: Q1 new housing orders progressed largely in line with plan; the company is targeting full first half plan achievement via new product expansion, with order growth expected for both detached housing and apartment buildings. Renovation orders grew steadily, the newly consolidated Ben House real estate business contributed to sales and profit from Q4 FY25, and Tokyo-area town and community development sales progressed steadily. Three Hokkaido-based group construction management companies were consolidated into a new entity earlier this month to stabilize workload fluctuations, share expertise, and train technicians.
• UIEP: Q1 sales were pulled forward, especially for piping materials, which boosted sales volume and mix, with margins fully protected against raw material price increases. Plant piping demand remains strong in South Korea and China; FFU rail load sleepers are gaining adoption in Europe; domestic pipeline renewal is steadily capturing market demand, and prioritized high-growth products and overseas sales continue to expand steadily.
• Medical: Profitability improvement measures and fixed cost control initiated last year are progressing well. Weakness in some developed markets is offset by foreign exchange gains; diagnostics businesses are expanding market share in Japan and growing via stronger US/European alliances and new product launches in overseas markets, with double-digit diabetes segment growth in China. Pharmaceutical and fine chemical sales are expected to stay flat year-on-year due to order timing shifts, and infectious disease testing kit sales are in line with expectations.

• Group full first half FY26 net sales guidance is revised upward to a projected record high of 690.5 billion yen (up 60.7 billion yen year-on-year), and operating profit guidance is revised upward to 48 billion yen (up 2.6 billion yen year-on-year, an upward revision of 1.6 billion yen from the initial April forecast) driven by favorable foreign exchange impacts and lower-than-planned fixed costs. Ordinary profit guidance is also revised upward to 49.3 billion yen (up 0.3 billion yen year-on-year).
• Net profit attributable to owners of the parent guidance remains unchanged from the April 2025 plan, and the planned interim dividend of 40 yen per share will be paid as scheduled.
• UIEP first half operating profit guidance is revised upward to 10 billion yen, alongside upward revisions to overall group top line and operating profit guidance to reflect stronger-than-expected Q1 performance.
• Q2 is expected to see demand pullback and adjustment after the Q1 forward sales pull-through, with group operating profit projected to decline by 1.7 billion yen quarter-on-quarter following Q1's 4.3 billion yen increase.
• No material raw material or component procurement disruptions from the Middle East conflict are expected for the first half of FY26.

HPP: Q1 net sales and operating profit reached record highs; first half 2025 net sales is projected at 255.2 billion yen, up 31.7 billion yen year-on-year, with projected operating profit of 30.2 billion yen, up 1.8 billion yen year-on-year, contributing 37% of total group projected first half net sales. Housing: Q1 net sales and operating profit declined in line with plan; first half 2025 net sales is forecast at 276.7 billion yen, up 18.1 billion yen year-on-year, with projected operating profit of 16.5 billion yen (down from prior year due to lower new home unit sales), contributing 40.1% of total group projected first half net sales. UIEP: Q1 net sales and operating profit reached record highs; first half 2025 net sales is forecast at 121.5 billion yen, up 9.4 billion yen year-on-year, with projected operating profit revised upward to 10 billion yen, up 1.9 billion yen year-on-year, contributing 17.6% of total group projected first half net sales. Medical: First half 2025 net sales is forecast at 45.7 billion yen, up 1.4 billion yen year-on-year, with projected operating profit of 4.8 billion yen, up 300 million yen year-on-year, contributing 6.6% of total group projected first half net sales. Group total: Q1 FY26 net sales was 333 billion yen (up 27.8 billion yen year-on-year), operating profit was 25.5 billion yen (up 4.3 billion yen year-on-year); all top line and operating profit metrics hit record quarterly highs.

• Sustained raw material price increases stemming from the ongoing Middle East conflict represent a key input cost risk, though the company has so far been able to fully offset this via timely price pass-through to customers.
• Global automotive production is expected to fall below both prior year levels and internal forecasts in Q2, creating downstream demand pressure for HPP's mobility segment products.
• Global smartphone shipments were weaker than expected in Q1 and are projected to decline further in Q2, falling significantly below prior forecasts and prior year levels, pressuring HPP's smartphone LCD display business.
• Domestic housing customer traffic remains below prior year levels, and a gradual downward trend in new housing demand is expected to continue despite minor recovery from the FY25 low point, pressuring the housing segment's new home construction sales.
• Raw material and component procurement constraints related to the Middle East conflict remain a potential ongoing risk, though no material issues are anticipated in the first half.

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