Hirose Electric : Transcript of Financial Results Briefing for FY2025 2nd Quarter

Q2 Financial Results Briefing for the Fiscal Year Ending March 2026 November 6, 2025

(Total: 64 minutes, Presentation: 20 minutes, Q&A: 44 minutes)

Shin Kamagata President and Representative Director Kosei Matsunaga Director, Group President, Administration

Group

Rie Yamada Manager, Corporate Communication &Investor Relations Office

Hideaki Shimizu Corporate Communication & Investor Relations Office

My name is Yamada, and I will be your facilitator today. Today's event is held online. Thank you for your cooperation.

First, let me provide you with an overview of the event. This is the presentation material we will be using today for the financial briefing. Please be sure to download the PDF file from the link on your screen and keep it handy for your reference. Similarly, there is a link to the financial results that were recently disclosed on the TSE on November 4. For those who would like to access the Notice of Revision of Full-year Earnings Forecasts and other supplemental materials, please visit our investor relations website.

I will begin by presenting the financial results for H1 of the fiscal year ending March 31, 2026, based on the materials. Our President, Mr. Kamagata, will inform you about the revision of the earnings forecast for the latter half of the year. We will take your questions in the remaining time. Mr. Kamagata and Mr. Matsunaga will address questions as they arise. The closing time is set to 11:30 AM.

I will now move on to the prepared presentation. Please look at page three first. Performance summary.

Results for Q2. Overall sales were strong, totaling JPY102.02 billion, up 7.9% YoY. Increases in metal and other material costs, labor costs, and other factors pushed down profits, resulting in a cumulative operating profit of JPY20.46 billion, down 7.9% YoY.

Operating margin was 20.1%. By segment, sales to the general industrial equipment market maintained a recovery trend and exceeded the initial plan. Business for Automobiles and mobility-related also remained strong. On the other hand, for the smartphone market, while volume growth was in line with expectations,

both sales and operating profit were affected due to price response and other factors. Orders received totaled JPY106.15 billion, up 8.8% YoY.

Next, page four shows quarterly sales and profit trends.

In Q2, sales were JPY53.05 billion, operating profit was JPY10.63 billion, and operating margin was exactly 20%.

Page five is a summary of the financial results. As reported earlier, sales for H1 were JPY102.02 billion, up 7.9% from the same period last year. The operating profit was JPY20.46 billion, down 7.9%. The operating margin was 20.1%. The profit before profit taxes was JPY22.1 billion. The net profit was JPY15.52 billion. The equity ratio was 88.4%, and net profit per share was JPY459.37.

As shown in the lower right-hand corner, the actual exchange rates were JPY146.04 for USD1, JPY168.06 for EUR1, and JPY10.5 for KRW100.

Page six summarizes the major changes from the previous year. Of the JPY7.5 billion increase in sales, JPY5.9 billion came from general industrial machinery, negative JPY0.6 billion from smartphones and mobile terminals, negative JPY0.4 billion from consumer mobile devices, and an additional JPY1.9 billion from automotive mobility.

The cost of sales ratio deteriorated by 3.2 points to 57.9% from 54.7% last year. Mainly, the variable cost ratio increased from 38.1% to 41.2%, which was affected by material and purchase costs increase. Other changes included a depreciation ratio of 7.7% to 7.8% and a labor cost ratio of 7.5% to 7.8%.

SG&A expenses increased by JPY1.64 billion, mainly due to an increase in distribution costs. The rate worsened by 0.1 points to 21.8%. The financial account balance was negative JPY180 million, compared to negative JPY590 million due to foreign exchange gains/losses, and interest profit decreased slightly, resulting in a total increase of JPY10 million.

This is followed by an analysis of Q2 year-to-date changes versus the same period last year on page seven. Foreign exchange effects were negative JPY3.19 billion in sales and negative JPY2.01 billion in operating profit. The increase in personnel expenses was JPY2.2 billion, depreciation and amortization expenses increased by JPY610 million, and the increase in the volume of goods increased by JPY3.06 billion, resulting in a negative JPY1.76 billion decrease in operating profit.

Continued on page eight is the B/S assets section. Cash has decreased due to share buybacks and capital expenditures. Inventories were plus JPY0.8 billion. The impact of foreign exchange rate fluctuations is included, and the Company's view is that the real increase is slight.

Tangible fixed assets increased by JPY3.13 billion due to an increase in production facilities and other assets.

Next, page nine provides information on liabilities and net assets. As for the liabilities, there was a total increase due to an increase in the provision for other bonuses and an increase in deferred tax liabilities. Treasury stock in the net assets section is the result of the share buyback program that has been underway since August of this fiscal year through the end of September.

Continuing on. Page 10 is the capital expenditure and depreciation. Capital expenditures in H1 totaled JPY10.3 billion, and depreciation was JPY7.9 billion. There is no change to the FY2024 forecast of JPY23 billion in capital expenditure and JPY16.5 billion in depreciation and amortization.

No information is provided in the document. R&D expenses for the Q2 cumulative period were JPY6.6 billion, actual. The forecast of R&D expenses for FY2025 remains unchanged at JPY14 billion.

Continuing on, page 11, employee headcount. The number of employees has increased significantly since the end of FY2025, adding 214 people in Japan. This includes 140 employees of SER, a company we acquired as a subsidiary at the end of July 2025.

Continuing on, page 12, stock distribution trends. Treasury stock rose from 4.97% to 5.94%, which is due to share repurchases. In addition, the percentage of foreign corporations decreased to 37%.

Continuing on page 13, here are the results by sector.

Initially, sales will be for general industrial machinery. Sales for H1 were JPY28.5 billion, a YoY increase of 26% and a slight increase of 2% in Q2 compared to Q1. Although the recovery trend is still not as strong as expected, it has maintained a recovery trend and exceeded our initial forecast of JPY50 billion for the full year.

Next, page 14 provides information on smartphone mobile devices. Sales in Q2 were JPY12.2 billion, up JPY1.8 billion from JPY10.4 billion in Q1, due to seasonality, but not as much growth as expected. Although the volume of goods increased as expected, sales were affected by the price response of a certain customer.

Continuing on page 15, this section is for consumer and mobile devices. The sub-segment notebook PC and tablet market slowdown, among other factors, resulted in a YoY decline of 2% in the Q2 cumulative period. This segment also experienced seasonal growth in Q2 from Q1, resulting in JPY9 billion in Q2.

Next is page 16, for automotive and mobility-related products. Q2 was JPY13.7 billion, and the cumulative total is JPY26.5 billion, an increase of 8% from the same period last year in H1, or JPY26.5 billion as a percentage of the total, or 26%. We believe that this is a steady transition.

Page 17 shows sales trends for telecommunications infrastructure equipment and office equipment. We have nothing special to comment on here.

The remaining slides will be presented by President Kamagata.

First, I am sure that you are already familiar with our earnings forecast for the current fiscal year. We have made an upward revision this time. Sales were JPY191 billion in May, and we revised them upward to JPY200 billion. The Company has also revised its operating profit forecast upward by JPY38.5 billion to JPY40 billion.

The operating profit margin is 20%. Pre-tax profit is 43 billion, or 21.5%. Net profit is 15%, JPY30 billion. Net profit per share is JPY891.76.

The assumptions of exchange rate for our full-year forecast for FY2025 are JPY147 for USD1, JPY171 for EUR1, and JPY10.5 for KRW100.

Page 19, please. This is a waterfall graph comparing the operating profit forecast for FY2025 against the operating profit for FY2024. This is a new analysis we prepared this time.

From left to right, no figures are included for volume increases and other positive areas. Think about JPY13 billion, roughly JPY2.5 billion in foreign exchange impact, JPY1.6 billion in depreciation of equipment, and about JPY2.9 billion or JPY3 billion in personnel expenses. We included an incentive for increased sales as well as an increase in base salary due to the increased challenges in hiring human resources.

Procurement is approximately JPY5 billion. Ms. Yamada has already addressed this earlier. There is a small increase in warehousing and distribution costs due to increased logistics at the point of rise and purchase of gold and other metals. The price fluctuation is estimated to be approximately JPY4 billion.

Next page, please. We have slightly revised our sales forecast for this year by sector.

From left to right, general industrial machines. Full recovery is yet to be achieved. We believe that the current situation is slightly more positive than we had expected at the beginning of the period, especially for Japanese companies. As of May, we were looking at about 7% plus. As of November, we are forecasting JPY57.5 billion at plus 23%.

We were looking at a negative 3% or JPY45 billion in May for the smartphone business. We are taking a slightly stricter look ahead here and estimate a negative 7%, or JPY43 billion.

Consumer sales were estimated at JPY32 billion, or a negative 8%. The negative side is slightly smaller, at negative 5%, or JPY33 billion.

The automobile sector was up 7% from the previous year as of May, but we have revised our forecast to JPY54.5 billion, an increase of 11%, taking into account the fact that sales are good compared to that we had expected at the beginning of the period.

Page 21, please. This is HIROSE's triennial exhibition that we had this year. We hope some of you visited the event. We had 5,700 visitors, an increase of more than 1,000 people compared to the event three years ago in 2022. It indicates a strong interest in our products and concepts.

We will bring the exhibition to the Osaka venue in November and will continue to meet the needs of our growing number of visitors. We've already begun exploring new connector needs based on conversations with customers in Yokohama. We recognized the importance of connecting these sessions with new products. Hence, we're actively applying our full operational capabilities.

Next page, please. This is the latest information, and I was unsure if this news would become available to share with you today. I am pleased to report that it's here just in time.

CES Innovation Awards. HIROSE will receive this award in 2026 for the new connector. This is our fifth product to receive this type of award following the same awards in 2020, 2022 and 2023. We are committed to supplying the automotive market with connectors for EVs and hybrids to meet the needs of our customers.

That's all from me.

In this material, there are descriptions based on current estimation by Hirose Electric. Hirose cautions you that a number of important risks, uncertainties and others could cause actual results to differ materially from those discussed in the *forward - looking statements. Thank you for your understanding. *Forward-looking statements include, but are not limited to, those statements using words such as "believe," "expect," "plans," "strategy," "prospects," "forecast," "estimate," "project," "anticipate," "aim," "may" or "might" and words of similar meaning in connection with a discussion of future operations, financial performance, events or conditions. These statements are based on management's assumptions and beliefs in light of the information currently available to it.