EBARA CORPORATION (6361) Q2 2026 Earnings Call Transcript

EBARA CORPORATION FY2026 Second Quarter Financial Results Presentation Held August 14, 2026 Summary of Q&A Questioner 1 Q: Regarding 2Q operating profit in the Energy business, could you provide more details on the cost increase and profit impact caused by operational losses at the Jeannette plant in the U.S., as mentioned on page 22 of the presentation materials? What specific costs were incurred? Hosoda: As we continue to operate and maintain manufacturing facilities in the U.S., we have been making ongoing capital investments based on the view that modernization and automation are essential over the medium to long term to enhance productivity and reduce reliance on manual operations. Due to differences between labor environments in the U.S. and Japan, recovering from disruptions through manual effort is more difficult in the U.S., which resulted in several loss-related costs. The impact in 1H amounted to a little over JPY 1 billion. However, we have largely resolved these issues during 1H and therefore do not expect any significant negative impact in 2H. Miyaki: The direct causes of the operational and additional costs were very basic machining errors and process management mistakes. Behind these issues were large-scale equipment replacements and personnel reallocations associated with the automation and labor-saving initiatives currently underway. While these factors were incorporated into our initial plan, our response proved insufficient. Equipment replacement and automation projects under EPlan 2028 are being completed step by step. Although significant losses were incurred in 1H, we now have a clear path toward resolution. In 3Q and 4Q, we will focus on ensuring that we achieve the operating profit targets we have presented. The JPY 3 billion downward revision to our full-year operating profit forecast reflects a combination of operational losses at the U.S. plant and the impact of the Middle East situation. Q: Of the JPY 3 billion downward revision to full-year operating profit, is it correct to assume that roughly two-thirds, or about JPY 2 billion, is attributable to operational losses and approximately JPY 1 billion to additional Middle East-related impacts? Hosoda: Yes, that understanding is correct.

Questioner 2

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Q: Regarding order trends in the Precision Machinery business, there appeared to be notable movements in both equipment and components orders between 1Q and 2Q. Could you discuss changes by region, customer type, and memory versus logic customers, as well as your outlook for 2H and next fiscal year? Hosoda: Equipment orders increased rapidly in 1Q and moderated somewhat in 2Q. Part of the 2Q demand was brought forward into 1Q, but overall order levels remain very strong. Component orders, while less visible due to their smaller scale, have increased for four consecutive quarters. Components typically benefit from market expansion with some delay compared to equipment, and we believe we are steadily capturing that growth. We expect order levels in 2H to remain at least as strong as in 1H, which is why we revised our full-year forecast upward. Based on this order growth, our priority is to ensure steady production execution. Nambu: As with our peers, we saw substantial demand from customers during 1H. In addition to logic customers, where we have traditionally been strong, memory customers have also placed very robust orders. Equipment orders have increased more sharply than component orders because customers have tended to place orders earlier to secure production slots as investment appetite rises. We also expect component orders to remain on an upward trajectory. For 2H, we continue to expect strong demand, as reflected in our revised full-year orders target of JPY 550 billion. We are also gaining confidence that next year could be a very strong year, although we will continue to update our outlook based on market conditions.

Questioner 3 Q: To what extent do your latest orders forecasts reflect the rapid increase in investment by Chinese companies and NAND-related customers in the Precision Machinery business? Nambu: We are certainly aware of the strong investment activity in China. We also recognize that NAND investment, while smaller than DRAM, has gradually become more active. Although we do not disclose specific figures, our full-year orders forecast takes both Chinese investment trends and NAND-related demand into consideration. Q: Do you expect orders from China to increase sharply from here? Nambu: Our assumption is not for a sharp increase but rather for demand to remain at approximately current levels. Q: In large-scale Chinese investments such as foundries and flash memory projects, which areas would have the greatest positive impact on your business performance?

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Nambu: Not only in China but globally, our products are already widely adopted by logic customers. We are currently strengthening our promotion efforts toward memory customers as well. As memory investment recovers, we expect this to provide a positive contribution to our business.

Questioner 4 Q: Regarding Revenue in the Precision Machinery business, is there potential for further upside in the 2H? Also, how do you assess your outlook compared with WFE market growth expectations of +18% and peers forecasting growth in the high-30% range? Hosoda: The forecast we presented represents what we believe is the most probable revenue outcome at this stage. While market expansion and order growth are clearly evident, lead times have also lengthened. Accordingly, we have reflected only the portion we believe can realistically be recognized as revenue during the current fiscal year. Nambu: Equipment products require a certain delivery lead time, which means that most of the orders received during 1H will contribute to revenue in the next fiscal year. While we continue working to shorten lead times, we believe our current forecast is the most appropriate. In addition, while our WFE market growth assumption is +18%, our own planned revenue growth rate is +24.2%, which we believe compares favorably with the market.

Questioner 5 Q: What are the current lead times for equipment and components? Also, why was the upward revision to operating profit limited to JPY 3.5 billion despite a JPY 25 billion upward revision to full-year revenue? Nambu: Lead times vary depending on specifications and order conditions but currently range from approximately six to twelve months. For equipment, customers have increasingly placed orders earlier to secure production capacity. Component lead times are generally shorter than equipment lead times, but customer factory utilization rates remain very high. Regarding profitability, a significant portion of the revenue increase comes from components, which generally have lower margins than equipment. In addition, project mix affected profitability. We will continue making efforts to improve the operating profit ratio, but JPY 3.5 billion is currently our most realistic estimate for the increase in operating profit.

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Questioner 6 Q: Orders in the Precision Machinery business appear to be running ahead of the EPlan 2028 target of just over JPY 500 billion in revenue. Can production be supported with existing facilities? Nambu: Regarding capacity, including the new building completed last year, we currently have sufficient production capability to meet demand throughout the duration of the current medium-term management plan. Q: According to page 28 of the presentation materials, the Middle East situation had a negative impact of JPY 1.6 billion in 1H, with some recovery expected in 2H and a full-year impact of negative JPY 1 billion. Given that the situation in the Middle East has not fully stabilized, could you discuss the impact on the Energy business, the likelihood of achieving 2H plan, and your outlook for 2H orders? Hosoda: While uncertainty in the Middle East remains, customers are adapting to the situation, and activities such as the acceptance of parts for the Service & Support (S&S) business, which had previously been postponed, are beginning to resume. As a result, we expect gradual revenue recognition in 2H. Orders are improving both in quantity and quality, including profitability at the time of order intake. Although the timing of large orders can create fluctuations between halves, the medium-term outlook remains very favorable. Miyaki: The JPY 1.6 billion negative impact in 1H was primarily due to products that had already been ordered but could not be shipped because of customer-side logistics constraints. These are expected to be recognized in 2H. The reason we forecast a full-year impact of negative JPY 1 billion is that our original plan assumed emergency inspection and service work would occur in 2H, as in a typical year. However, given the current uncertainty, we have conservatively assumed that such upside will be less likely. More broadly, order trends differ between the Products business and the Service & Support business. In the Products business, several large projects originally expected in 2H were brought forward into 1H at customers' request, resulting in a 1H weighting. In the S&S business, particularly parts-related operations, orders were also stronger than expected in 1H as customers accelerated purchases to secure inventory amid market uncertainty. However, because maintenance plans and parts demand are generally based on long-term inspection cycles, we expect 2H order trends to remain within our original full-year assumptions.

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Questioner 7 Q: In the Precision Machinery business, what drove the upward revision to 2H revenue and profit expectations compared with your view at the end of 1Q? Nambu: Demand remained extremely strong in 2Q. Accordingly, we reviewed production plans for both equipment and components and factored in increased S&S demand resulting from higher customer utilization rates, which supported the upside revision. Q: In the Environmental Solutions business, the operating profit ratio has remained around 13%, supported partly by contingency reversals. Can this be considered a sustainable profit level? Hosoda: Given the nature of construction projects, contingency reversals occur on an ongoing basis when actual project costs come in below assumptions. Improved profitability in lifeextension projects has also contributed. However, further analysis is needed before concluding that an operating profit ratio of around 13% can be maintained consistently. Ota: Compared with last year, contingency reversals contributed less to profit growth, while expansion in life-extension and maintenance businesses provided a stronger earnings boost. Since profitability is influenced by project mix, we are cautious about assuming that a 13% operating profit ratio can be maintained on a continuous basis. We will continue implementing initiatives to improve profitability across the business. Questioner 8 Q: With full-year orders now expected to exceed JPY 1.2 trillion, is there a possibility of achieving the E-Plan 2028 revenue target of JPY 1.2 trillion ahead of schedule? If so, would you announce targets for the next medium-term plan earlier? Also, what is the status of additional capacity expansion investments? Hosoda: The JPY 1.2 trillion revenue target applies to the consolidated group. While order momentum is certainly ahead of expectations, some businesses have lead times exceeding one year, meaning these orders will not immediately translate into revenue next fiscal year. It is true that we are tracking ahead of schedule from a revenue perspective, but we remain committed to executing the initiatives laid out over the three-year plan period and achieving our overall targets through a comprehensive assessment of all factors, not just revenue. Regarding production capacity, the expansion of the Kumamoto plant completed last year provides sufficient capacity for the foreseeable future. Nevertheless, we are continuously evaluating additional capital investments ahead of future market growth.

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Questioner 9 Q: Revenue increased by JPY 41.9 billion year on year in 1H. How much of this increase was attributable to foreign exchange effects? Also, how much did foreign exchange contribute relative to 1H revenue plan? Fuchida: Compared with the same period last year, the Japanese yen weakened by approximately JPY 10 against the U.S. dollar. We estimate that the resulting positive foreign exchange impact on total revenue was approximately JPY 20 billion. Relative to our 1H revenue plan, we believe that a large portion of the upside was attributable to foreign exchange effects.

Questioner 10 Q: Regarding the new chiller product capable of operating at minus 60 degrees Celsius, is this intended as a replacement for existing products, or is it an entirely new product category? Also, what are its competitive advantages? Hosoda: This new chiller is a new market entry for us. It leverages EBARA’s thermal management and pump technologies to provide precise temperature control in ultra-low-temperature applications such as cryogenic etching. Nagata: Traditional etching processes typically operate at temperatures around minus 30 degrees Celsius. However, demand for even lower temperatures is increasing to enable more precise etching processes. Against this backdrop, we launched a new product capable of operating at minus 60 degrees Celsius. This temperature range is also a relatively new frontier for competitors, and many companies are currently developing products in this area. The product's greatest differentiator is its energy efficiency. Compared with conventional competing products, power consumption can be reduced by 30% to 50%, providing a significant competitive advantage.

Questioner 11 Q: Regarding the impact of the Middle East situation on the Energy business, the full-year impact appears larger than the forecast announced in May. Could you explain why? Miyaki: Compared with our May forecast, which assumed 1H impact of negative JPY 1.4 billion and no material impact on full-year earnings, shipment delays increased somewhat, resulting in 1H impact of negative JPY 1.6 billion. For the full year, we revised our assumption to negative

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JPY 1 billion because the emergency inspections and related upside benefits previously anticipated for 2H now appear less likely to materialize.

Questioner 12 Q: Regarding the Precision Machinery business, could you comment on progress in increasing product value-added and improving profitability at the time of order intake? Nambu: We are actively pursuing initiatives to enhance product value-added. However, these measures require development and customer qualification before they are broadly adopted. Therefore, the current JPY 550 billion orders forecast is primarily driven by higher sales volumes of existing products. Looking ahead, we will continue pursuing cost reductions and product enhancements to drive ongoing improvements in profitability.

Questioner 13 Q: Could you explain the reasons behind the improvement in operational losses at the Jeannette plant in the U.S. and the measures being taken to prevent recurrence? Nambu: We have completed root-cause identification and implemented individual countermeasures for issues related to new equipment installations and personnel reassignments. We therefore view these as one-time issues. For 2H, we are strengthening operational management and improving the supply chain, and we are confident that the situation is being brought under control. Over the medium term, we will implement more extensive automation initiatives, such as those outlined on page 26, as a permanent solution.

End of Q&A

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