91福利

The following is a summary of the main Q&A from the H1 FYE 3/'26 Financial Results Briefing held on October 27, 2025.

International Business

Please tell us the reasons for the upward revision in sales (whether the initial forecast was conservative, whether orders received during the period contributed to sales, etc.).

When formulating the initial budget, we set some conservative assumptions due to reports that infrastructure investment would be curtailed following President Trump's inauguration. However, there was actually no impact from curtailed infrastructure investment. Moreover, orders have been trending favorably. Therefore, we have revised our forecast upward this time.

Can we expect growth in the FYE 3/'27 and FYE 3/'28 as well?

For the FYE 3/'26, our core tertiary wastewater treatment product, the Cloth Media Filter (CMF), is expected to perform well. Furthermore, we anticipate strong prospects for our new wastewater treatment product, Nereda^?. Nereda^? targets approximately 50% reduction in energy costs and up to 75% reduction in land area. While its profitability is not as high as CMF, we have high expectations for its future growth.

For the FYE 3/'26, the operating income for the 2H is projected to decrease compared to the H1. Does this reflect costs related to acquisitions?

This is because because a one-time unprofitable project from Schwing Bioset, Inc. (SBI), acquired in April 2025, shifted from the H1 to the H2, leading to a decrease in operating income in the H2 forecast compared to the H1.

It was mentioned that CMF is performing very well and expanding from urban areas to rural areas in North America. Could you elaborate on the timing and scale of this expansion?

The expansion of sewage treatment is proportional to population, so we expect the market to roughly double as it expands from urban to regional areas. While there are competing manufacturers, we believe we can leverage our strong track record to develop our business in a strong position.

While there is significant potential for CMF to become widespread in the US, do you also see opportunities in Europe? Also, how do you view the timeline and potential there compared to the US?

CMF was originally developed by our Swiss subsidiary and has already been generating sales in Europe. Since the potential for widespread adoption tends to be roughly proportional to population size, its growth in Europe may not be as strong as the US. Yet, we expect to see steady growth in Europe over time.

It was mentioned that Nereda^? has a lower profit margin compared to CMF. When do you expect its profitability to improve?

Since CMF has been standardized, it continues to deliver a high profit margin a high profit margin. For Nereda^?, we expect profitability to improve as we gain more experience in upcoming projects and move toward standardized designs. At present, we are conducting demonstration projects for Nereda^? in Miyagi Prefecture and plan to promote its broader adoption in Japan.

Regarding SBI, you mentioned the aim is for it to contribute to earnings starting in the FYE 3/'28. How about the impact in the current year?

Initially, we expected SBI's operating income after goodwill amortization to be almost zero, but due to the impact of some one-off unprofitable projects, we are now expecting a loss.

Domestic Business

I assume that your costs are rising amid the current inflation. What measures are you taking in response? Also, is there room for further improvement in profitability?

While prices remained largely stable during the past 30 years of deflation, recent increases in labor costs and the positive impact of industry-wide lobbying efforts have shortened the time lag before labor unit costs are adjusted Consequently, we are now in an environment where we can set prices that reflect wage increases.

FYE 3/'26 earnings forecast

The increase in SG&A expenses for the FYE 3/'26 was projected to be 4.9B yen YoY in the initial plan. With the current forecast indicating an additional increase of 2.0B yen, does this mean the full-year increase will be 6.9B yen?

That is correct. This increase mainly reflects higher commissions paid to agents in line with the growth of our sales in the International business, which is driving up SG&A expenses.

Cash Allocation

At the time of announcing the Mid-Term Business Plan 2027, cash allocation of 40B yen for growth investments and 20B yen for shareholder returns were indicated. Given the upside in earnings how do you now view the outlook for investments for growth and shareholder returns?

Regarding investments for growth and shareholder returns, we intend to continue implementing them in a well-balanced and planned manner going forward.