Third Quarter of Fiscal Year Ending March 2026 (FY2025-3Q) Revision to Consolidated Earnings Forecast

February 12, 2026

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Toyo Engineering Corporation President & CEO Eiji Hosoi

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• The earnings improvement measures announced at the time of the 2Q results- JPY 2.0 billion in expense reductions and JPY 3.0 billion in profit build-up from newly awarded projects - are progressing as planned; while domestic biomass-related projects have somewhat deteriorated, the impact has been offset by stronger-than-expected equity-method investment income.

• Based primarily on the current situation with the Brazil gas-fired power generation project, related losses are now expected to reach JPY 20.5 billion.

• As a result, consolidated net profit (loss) is expected to be JPY 17.5 billion for 3Q and JPY 15 billion for the full year, representing a downward revision of JPY 20 billion from the previous forecast.

• Order intake has reached the full-year target of JPY 400.0 billion as of 3Q.

• Considering these circumstances, we have decided to suspend the year-end dividend (initially expected to be JPY 25 per share).

  	Billions of Yen		2Q	3Q		Previous	Revised	Difference
  			FY2025	FY2025		FY2025 Forecast	FY2025 Forecast
  1	Net Sales		94	131.9		200	185	△ 15
  2	Gross profit		8	△ 2.3		25	4.5	△ 20.5
  3	Gross profit margin		8.5%	-1.8%		12.5%	2.4%	-10.1%
  4	Operating income		△ 4.2	△ 21		1.5	△ 20	△ 21.5
  5	Ordinary income		△ 1.9	△ 15.8		6.5	△ 13	△ 19.5
  6	Profit attributable to owners of parent		△ 3	△ 17.5		5	△ 15	△ 20
  7	New orders including equity method affiliates		364	403.6		400	400	0

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  ＊Project-related Losses in Brazil Since 2Q (Mainly the Power Generation Project)

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  Expected Changes in Net Profit from the Previous Forecast (2Q)

  
  
  

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  Deterioration in profitability on the Brazil power project

  SUMMARY OF PROJECT: The project is in the commissioning phase, with progress at 98.9% as of Feb 7, 2026

  Conclusion of Contracts	Type of contract	Site	Scope	Contract delivery date	Latest expected delivery date
  July 2022	Lump-Sum	Para, Brazil	Engineering, procurement, construction, commissioning	July 2025	April 2026

  BACKGROUND

  • Delays and substantial additional costs have arisen from a combination of factors, including those attributable to the customer. We have continued change-order discussions with the customer to revise the contract price and schedule (EOT) however, no final agreement has been reached. Accordingly, we had no choice but to initiate arbitration in July 2025.

  • Despite these circumstances, the customer has asserted claims for delay-related liquidated damages (LDs) and has fully suspended (withheld) contract payments since October 2025, resulting in a significant and growing balance of withheld receivables.

  • We will present our case appropriately in the arbitration proceedings and take all necessary steps to protect our contractual rights. The arbitration is expected to be lengthy, with final resolution likely to take approximately 4 to 5 years.

    KEY DOWNSIDE FACTORS IN 3Q FY2025

  • Considering the expected protracted arbitration process and the customer's financial situation, we reassessed the recoverability of the withheld receivables and the remaining contract balance on a conservative basis and adjusted our estimated total contract revenue downward to address future volatility risk.

  • Based on the most recent project status, we have carefully reviewed the costs required to complete the project and made additional cost provisions.

  • We also expect the deterioration in cash flow to lead to higher borrowings and increased interest expense.

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