Nippon Aqua FY2026 H1 Earnings Deep Dive: Procurement Dominance Amid Supply Uncertainty and the Multi-Faceted Growth Story Driven by 'U-MAX'

1. Overview of FY2026 H1 Earnings and Performance Highlights

Nippon Aqua Co., Ltd. delivered a robust performance for the first half (H1) of the fiscal year ending December 2026, with both revenue and profit metrics exceeding both year-on-year figures and the company's initial forecasts. Amid a market environment clouded by supply uncertainties for urethane raw materials due to Middle Eastern geopolitical tensions, the company’s formidable procurement capabilities and integrated construction system have proven successful, driving both market share expansion and higher unit prices.

Key H1 performance metrics and their comparisons to the previous year and forecasts are as follows:

• Net Sales : ¥16,972 million (+6.2% YoY / +6.6% vs. H1 forecast)
• Gross Profit : ¥3,838 million (+9.9% YoY / +12.0% vs. H1 forecast)
• Ordinary Profit : ¥1,150 million (+4.4% YoY / +36.1% vs. H1 forecast)
• Net Income : ¥755 million (+1.1% YoY / +31.9% vs. H1 forecast)

The "Earnings Highlights" slide above provides critical data illustrating the factors behind the H1 performance exceeding plans and the growth trajectory of each segment. The gross profit margin improved by 0.7 percentage points to 22.6% from 21.9% in the same period last year, reflecting higher unit prices for products and services and a shift toward higher value-added offerings (such as airtightness testing services and the expansion of Insulation Grade 6 compliance).

Progress toward the full-year targets (Net Sales of ¥37,000 million, Ordinary Profit of ¥2,910 million) stands at 45.9% for sales and 39.5% for ordinary profit. Given the company’s seasonal pattern—where construction completions are heavily weighted toward the second half, particularly Q4—reaching approximately 40% of the ordinary profit target by mid-year, while exceeding company forecasts by ¥305 million (+36.1%) , indicates a highly favorable trajectory toward achieving full-year goals.

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2. Procurement Strength and the Advantage of an Integrated System Amid Middle Eastern Tensions

A defining feature of these earnings is how the company has transformed external uncertainty into a "competitive advantage." With crude oil price volatility and Middle Eastern tensions keeping Naphtha CIF import prices and USD exchange rates at elevated levels, Nippon Aqua has demonstrated superior supply chain resilience while typical contractors struggle to secure raw materials.

The slide above is a vital structural diagram illustrating the robustness of the company's business model. The reasons for Nippon Aqua’s overwhelming advantage over competitors can be summarized in three points:

1. Largest Domestic Procurement Scale : The company controls a 44.4% share of domestic on-site foamed urethane raw materials, granting it powerful purchasing leverage over major overseas and domestic material manufacturers.
2. Global Procurement and Stockpiling via Multiple Suppliers : The company has built a diversified procurement network spanning the U.S., Japan, Spain, South Korea, Germany, and China. Furthermore, it maintains 26 stockpiling bases across Japan, ensuring a constant supply of raw materials.
3. Integrated System from Supply to Construction : Unlike other contractors facing supply shortages, Nippon Aqua manages the entire process from raw material procurement to on-site construction. This minimizes the risk of construction delays, earning the trust of property owners and major builders, which has accelerated the acquisition of projects previously handled by other contractors.

In response to rising raw material costs, the company has been passing these costs on to sales prices based on market trends, further strengthening its position as the unique partner capable of resolving raw material supply anxieties.

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3. New Urethane Insulation Board "U-MAX" and the "Marutto Aqua Foam" Strategy

An engine expected to significantly accelerate medium-to-long-term growth is the rollout of the proprietary urethane insulation board "U-MAX" and the strengthening of the "Marutto Aqua Foam" strategy.

With revisions to building energy conservation laws, demand for housing to meet Insulation Grades 6 and 7 is rising rapidly. In addition to conventional "on-site foamed urethane (Aqua Foam)" insulation, there is a surge in demand for "double insulation," which combines board materials for exterior insulation.

The slide above visualizes the growth model utilizing the "U-MAX" insulation board. To capture the market previously held by third-party insulation boards (glass wool or other urethane boards), the company is building its own manufacturing and supply system.

• Manufacturing Roadmap : Manufacturing, import, and sales via a South Korean partner factory and the completion of a Kyushu manufacturing base are set for 2026. A second manufacturing base is planned for 2027, and a third for 2028 (operated by the Toray Group).
• Sales Plan : The company aims for sales of ¥3 billion in 2027, ¥5 billion in 2028, and ¥10 billion by 2029.
• Significance of Market Expansion : Of the Japanese residential insulation market (totaling approximately ¥190 billion), the "on-site foamed urethane + insulation board" segment accounts for ¥72 billion . By localizing board production, the company is entering a massive market that exceeds its traditional on-site foamed urethane market (¥22 billion).

Additionally, the adoption rate of the "Airtightness Testing Service" provided during construction is expected to surge from 9.8% in 2024 to 24% in 2025, and to approximately 40% (forecast) in 2026 , contributing significantly to the increase in construction unit price per house (+5.8% effect).

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4. Performance Trends by Segment

The performance of each business segment in H1 shows distinct characteristics based on strategic focus areas.

① Detached Housing Segment (Steady Growth of Core Business)

• Net Sales : ¥8,125 million (+7.6% YoY)
• Gross Profit : ¥1,805 million (+9.0% YoY)
• Growth was driven by a 2% YoY increase in construction volume and a 6% rise in construction unit prices. Contributions included record-high orders from regional builders, expanded orders from major builders, the proliferation of Insulation Grade 6 and airtightness testing services, and the acquisition of projects from other contractors.

② Building Construction Segment (Progress Exceeding Plans)

• Net Sales : ¥4,542 million (-5.7% YoY / +6.3% vs. forecast)
• Gross Profit : ¥997 million (-6.8% YoY / +20.1% vs. forecast)
• Although revenue declined YoY as large projects were in the foundation stage, the steady execution of projects resulted in figures exceeding the initial forecast (¥4,274 million). The acquisition of projects from other contractors due to urethane supply concerns provided a solid floor for performance.

③ Waterproofing and Non-Residential Sectors

• Net Sales : ¥563 million (-10.0% YoY)
• Gross Profit : ¥82 million (+37.9% YoY)
• Despite some delays in construction starts due to supply constraints on related materials, renovation work for non-residential properties such as logistics warehouses, factories, and retail stores continued. Furthermore, the company secured and executed new large-scale projects for nationally important facilities (semiconductor factories, public sports venues, etc.), maintaining a high gross profit margin (14.6%).

④ Raw Material Sales, Auxiliary Materials, Machinery, and Others

• Raw Material Sales : ¥1,269 million (+43.4% YoY)
• Auxiliary Materials/Machinery Sales : ¥2,473 million (+17.3% YoY)
• As raw material and supply procurement became difficult for the entire market due to Middle Eastern tensions, Nippon Aqua leveraged its procurement advantage to significantly expand external sales of raw materials and auxiliary supplies.

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5. Expansion of Construction Capacity and Human Resources Strategy

The most critical foundation supporting the company's business expansion is "construction capacity." The primary differentiator from competitors is that the company does not merely buy and sell materials but employs its own in-house and exclusive craftsmen to perform on-site construction. Securing these resources directly translates to raising the ceiling on revenue.

Construction capacity has expanded robustly as follows:

• Dec 2021 : 948 people
• Dec 2023 : 1,052 people
• Dec 2025 : 1,256 people
• As of June 2026 : 1,256 people (854 certified construction shop staff, 265 construction management employees, 166 foreign technical interns/specified skilled workers)

Since 2023, the company has continued to add 100 personnel annually , including certified construction shop staff, and is actively recruiting and training foreign technical interns and specified skilled workers for construction management roles. By maintaining and expanding a high-quality construction system nationwide, the company is building an overwhelming barrier to entry against competitors.

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6. Summary of Future Growth Strategy and Full-Year Outlook

Through the H1 FY2026 results, Nippon Aqua has successfully transformed a challenging external environment—characterized by high raw material costs and supply uncertainty—into a growth opportunity by leveraging its procurement network, construction system, and product development capabilities.

Key initiatives moving forward are progressing steadily:

1. Market Development via "U-MAX" : Promoting "double insulation" proposals for detached houses and condominiums through the launch of sales and the deployment of manufacturing bases within 2026.
2. Capturing ZEH and Insulation Grade 6/7 Standardization : Driving the standard adoption of airtightness testing services (40% forecast for 2026) and Grade 6 (25% forecast for 2026) to further increase unit price per house.
3. Expansion into Non-Residential and Nationally Important Facilities : Increasing the construction ratio of non-combustible insulation "Aqua Moen NEO" and ultra-fast-curing waterproofing "Aqua Hajikun" to expand share in large-scale non-residential properties.

To achieve the full-year earnings forecast of ¥37,000 million in Net Sales (+22.3% YoY) and ¥2,910 million in Ordinary Profit (+4.1% YoY) , the company expects full-capacity construction during the peak demand period in the second half and the successful launch of "U-MAX." As a Prime-listed company, Nippon Aqua remains committed to sustainable growth and contributing to an energy-efficient society through its insulation technology.