Good afternoon, everyone. Now, I would like to start the second quarter earnings call by SCREEN Holdings for the year ending in March 2027. Thank you very much for your participation despite your busy schedule. I am Nakamura, the master of ceremony for today. I am the Deputy Head of the Investor Relations and Communication Strategy Division. Before the presentation, let me give you some housekeeping information.
For this event, in addition to Japanese lines, we have the English line. We provide simultaneous interpretation into English for the investors from abroad. Your camera and microphone are disabled. After the presentation, when we go into the Q&A session, your microphones will be enabled. Let me give you another notice about the Q&A session later. When you ask questions, please refrain from mentioning specific customers or competitors by name or discussing any company-specific details.
This event is for the institutional investors and analysts. As was notified, the attendees from the media, please refrain from asking questions. Recorded data, including the Q&A session, will be available on our website on November 2nd, Monday. Please find it for your views. Now, let me introduce today's presenters. Goto Masato, Representative Director, President, and Chief Executive Officer.
This is Goto. Thank you for your participation.
Ishimura Manabu, Managing Executive Officer, Chief Financial Officer.
I am Ishimura.
Chiho Otobe, Senior Executive Officer, Head of Communication Strategy, and Head of IR.
This is IR. Thank you very much for your participation.
Now, let me invite CFO Ishimura to give you the consolidated business results and forecast. Mr. Ishimura, please.
Let me explain the summary of FY 2027 second quarter earnings. This is the summary of consolidated earnings. Net sales is +12.5% YoY, and it was JPY 308.4 billion. OP was increased by 17.4%, and it was JPY 54.5 billion. OP margin increased by 0.8% YoY, so it is 17.7%. As for entire company, sales and profit both increased YoY, and SPE sales and profits grew YoY.
Slide or delayed projects already fully posted in second quarter, and GA also booked sales and profit rose, both in equipment and recurring business, and record high orders were received. Other net income and ordinary income are shown here. The ordinary income increased by 9.1%, and it is JPY 55.9 billion, and net income increased by 5.8%, so it is JPY 37.7 billion. Both ordinary income and net income rose.
Here is the composition of group sales by destination for 2Q. The China percentage was 27%, but it has grown to 38%. If you compare against the second quarter last year or first half of last year, Europe and Korea increased, and North America increased. This is group sales by segment. First quarter, SPE was lower in first quarter.
However, in 2Q, it is 84.8% again, so we see the increase of the SPE percentage. If you compare to the first half of last year, it has grown from 79.7% to 81.5%. Roughly speaking, 80% is coming from SPE. There is no change for that. This is the consolidated earnings by segment. SPE, the net sales is JPY 251 billion, increased by 32 from previous year. This is 15% growth. OP income is JPY 57.5 billion, increased by 8.8, which is 18.2%.
OP margin is 22.9%, improvement of 0.6 point. Both sales and profit grew. The sales for memory rose, for North America and Korea. Delayed project from last year were fully posted in 2Q. Moving on to GA, the net sale is JPY 29.1 billion, which is increase of JPY 3.3 billion from last year. The OP income is JPY 1.7 billion, increased by JPY 0.4 billion. Again, sales and profit both grew. Sales of equipment and the recurring business both increased.
Next one's FT. The net sales is JPY 19 billion, which is - JPY 4.4 billion from last year, and the percentage is -18.9%. We had a very strong sales last year, so sales and profit both fell. However, sales were mainly driven by OLED and LCD. The advanced packaging is now progressing as planned. Next is PE.
The net sale is JPY 7 billion, which is increase of JPY 1.5 billion, and OP income was -JPY 0.1 billion. The profit has improved slightly, but still in red. We are having strong order toward second half, so both sales and profit is going to rise towards second half. Next is the financial standing. This is balance sheet. The asset is JPY 522 billion, so compared to first quarter, it's increased by JPY 249 billion.
Equity ratio is now 65.9%. We are maintaining about 90%, sorry, 60%. This is cash flow. 2Q was -JPY 10.9 billion, and free cash flow was -JPY 16 billion. We are receiving strong order in SPE, and the operating cash flow is now needed more, so that's why it's -JPY 10.9 billion. The entire first half was -JPY 1.9 billion.
The operating cash flow is now increasing due to the strong order, and once this is established as a sales, the cash flow will also improve going forward. Next is R&D expenses and CapEx . As to R&D, JPY 11.4 billion in 2Q, so mainly due to SPE, it landed as planned. CapEx is JPY 7.7 billion, so the IT and R&D manufacturing was the area of the investment.
For CapEx , we have made the growth investment in Nagaokakyo, so compared to the forecast in July, it's raised from JPY 47 billion to JPY 58 billion. Next is the OP, operating income. First half last year and first half this year is compared. The first half last year was JPY 46.7 billion, and due to sales and capacity utilization, it's increased by JPY 12 billion, so profitability also increased. This is JPY 5 billion. This is mainly came from SPE.
However, fixed cost due to the growth investment, like R&D and personnel cost, and some measures responding to the increased production, this is -JPY 10.5 billion. Exchange rate impact is +JPY 1.5 billion, mainly due to GA. The operating income of the first half was JPY 54.5 billion. Next is business forecasts.
For the first half, the result is JPY 308 billion, which is -JPY 8.6 billion, and OP is JPY 54.5 billion, which is -JPY 1.5 billion. For sales, there was some delivery timing, which is delayed to second half, but basically, we are taking the installation basis accounting, so that's why we see some delay. OP and ordinary income hasn't been changed from the July. Looking at segments, SPE is -JPY 8.7 billion. The installation is delayed, that's why. In the full year, as an entire group, it's JPY 743 billion, so no change from last time.
The OP income is maintained at JPY 156 billion and 21.1%, again, maintained from last time announcement. SPE, GA, and PE, no change. However, only for FT, sales is expected to go down, so sales by JPY 1 billion, so JPY 42 billion. The OP income is now expected to be JPY 1 billion. Others are adjusted in other areas, so the entire company-wise, it is no change.
This is analysis operating income gross forecast. It was JPY 122 billion last year, and sales and capacity utilization account for 70% increase, and profitability was slightly down due to the mix of the product. This is - 4.5%. Fixed cost has, we started investment for the R&D, et cetera. So it is - JPY 32 billion. Exchange rate is + 0.5%, so there is marginal impact. The operating income is guided as JPY 156 billion. Annual dividend outlook.
The first half interim dividend is JPY 60. No change from the announcement in May and July. Year-end dividend, because we have not changed the profit guidance, it is JPY 123, so annual dividend will be JPY 183. That concludes my part. Thank you.
Mr. Ishimura, thank you very much for your presentation. I would like to invite President Goto to give us the business environment and outlook.
Let me explain the business environment and outlook in detail. For year ending March 2027, full year outlook. From the overview, we are seeing the record high order intake. Following the strong growth of the market for this fiscal year and next fiscal year, we can expect the strong performance.
As was mentioned by Ishimura a moment ago, given this market situation, in order to achieve the higher performance, we want to have the scalable production framework to accommodate further capacity expansion and move into the next growth phase. We are making preparation to answer the greater demand from the market.
As for the SPE, as you know, mainly from the AI, the leading-edge logic and memory manufacturing are now placing the greatest importance on cleaning. With various nodes and the memory structure changes, we are going to outperform WFE market growth in sales. We will capture the business opportunities. Under such situations, we acquired the property in Nagaokakyo, and we have the new production capacity there.
We started the renovation of this facility, and we will make the investment into SPE facilities and equipment so that we can enhance our production capacity rapidly. Last year, we opened ATCA, our research and development hub in United States, and delivery of the equipment started there. Utilizing these, we are going to further strengthen the competitiveness of our SPE business by integrating the manufacturing and development. That is what we are doing in general. Next please.
This is the business overview of SPE and the market trends and outlook. As you know, WFE market has been very strong. In calendar year 2026, $ 155 billion is expected. If the 2025 actual is $ 124 billion, about 25% growth is expected. For the calendar year 2027, a further growth is expected. More than $200 billion is expected. By application, investment trend is like this.
For the foundry, not only for the leading-edge GPU and CPU, but also the peripheral devices are expecting or receiving the robust investment. So foundry in general are receiving the strong investment. Same for the logic. So leading-edge investment, we accelerating, and various manufacturers are planning the investment, which leads the market growth. Next, memory. As you know, the market is still having the shortage of memory.
For the AI application, HBM and DRAM for the server are now receiving the investment and raising the market. In addition to that, the conventional DRAM, such as DDR, is also in a shortage. So, market is growing in order to complement such shortage. Then the investment also gaining momentum now. So memory in general is also seeing the very active investment. Image devices. For the automotive device and industrial applications, the market is now finally recovering with some visibility.
So, the investment plan are now being reviewed, and we now see the actual investment plan is start to work. Other devices, or the power devices. Given such a situation, the power management is required. So, power management and other peripheral equipments are now receiving the investment. So, by the various device manufacturers, we now see the practical plan of the investment.
Next is advanced packaging. Investment in WLP remains solid, and also for the panel package, or PLP. Toward the mass production, evaluation of the equipment is now being done. So, as we planned, what we expect to the investment in the PLP is also moving. The China market, the investment in mature node remains at high level.
In China, the foundry and manufacturers are planning the investment. Given the shortage of memory in these days, DRAM and NAND production in China will be enhanced. That is one factor behind the growth of WFE. Next page, please. This is a composition of equipment sales by application for SPE. You can find the figures for the second quarter, and the one for the foundry was 40%, and followed by DRAM. These two have been leading the market.
When we see the second quarter, Q- on- Q, you can find the significant growth of DRAM. Also, for YoY, the situation is same. So, these two have been driving the market. Next page, please. This is the sales trend of post-sales. Given the situation, customers are now having the higher utilization ratio. So, we see the strong and steady performance of the post-sales, and we achieved a record high sales in the second quarter.
Mainly due to the utilization of the customer, there may be some fluctuations, but we can expect the upward growth of the post-sales. This is the SPE composition of sales by destination. When you see this slide, you can find, as was reported by Ishimura-san a moment ago, we saw a slight growth toward China. So, Japan, Taiwan, China are now leading the market.
In addition to that, although the proportion is small, that absolute value with North America has been growing. Next page, please. This is the composition of sales by application forecast. Foundry will continue to lead the market, especially in expectation for the second half, more than half of the sales will come from the foundry. For the full year forecast, which is on the very right side, the sales for the foundry will be more than half, followed by DRAM.
This is the current forecast of sales by application. Next page, please. This is the post-sales trend for SPE. As I mentioned earlier, because of the higher utilization ratio at customer site, we now see the strong sales of the major component and customers' production capacity increase and higher efficiency. We can offer the proposals for that.
Including these activities, as you can see here, the post-sales is expected to achieve the record of high growth. Next page, please. Next page is the SPE's composition of sales by destination forecast. Same as the previous page, the second half expectation and the expectation haven't changed. We have the same kind of expectation for the full year.
Sales to China will be 36% for the full year, followed by Taiwan. I mentioned that in North America, we are now seeing the big growth. Customers in North America, or non-American customers who are based in North America, will continue to make investment. We expect the growth of sales in North America. In this way, we expect the sales proportion for the full year in this way. These are the highlights.
Given this market situation, we have to enhance our production capacity further. We now have the new location in Nagaokakyo. To contribute to the production capacity increase, we have to make the preparation. We're going to spend JPY 25 billion so that we can increase the capacity related to the semiconductor industry.
We already started this project. From the second half of the next fiscal year, we can expect the actual contribution. The main purpose of this new investment is to respond to the new demand coming from the market. This is a production capacity increase to make ourselves prepared for the further market increase. Next page, please. This is an image of the capacity expansion.
When the market is expected to grow by 20%, including the preparation for the future demand, we are going to increase the production capacity by about 1.3 x in the phase I, and as a first stage, the phase I. We are also planning to have the phase II . By having these two phases, we are going to increase our production capacity so that we can continue to answer the demand from the market.
Next page, please. This is a sales trends and forecast of GA. Mainly in U.S., the equipment for the digital printing POD remained strong. In Europe, there was some delay, but now we see the stronger inquiry from the market. From the analog printing equipment, there's a shift to the digital printing equipment. We'll capture this opportunity to increase the sales of the digital printing equipment.
In order to secure the stable profit, we will enhance our recurring business so that we can enhance our profitability. As for the recurring business sales, as you can find in a full-year forecast on the very right side, we would like to achieve more than half of the sales coming from the recurring business so that we can stabilize our profitability. Next page, please. This is the FT sales trends and forecast.
As for the sales, mainly with the OLED equipment, sales has been promoted so that we can secure the stable profits. Sales of the equipment for OLED is now stabilized. I think we can secure the stable business, and we'd like to stabilize the profits too. From April, advanced packaging is now moved to the FT, and the performance of the advanced packaging has been in line with expectation.
Through synergies with advanced packaging business, we'd like to further expand this business. Next page is PE. With PE, we have struggled, but finally, the market started to recover, so we now have the inquiries from the customers. Demand from the server is increasing, and the communication connecting the servers or optical transceiver is needed in a large volume. Mainly with this, we are now receiving the inquiries.
From the second half of this fiscal year, we are now preparing our production capacity, expecting the increase of demand. We will capture the opportunity of the recovery of the market so that we can stabilize this business. By doing so, we're going to achieve the full-year target. Next page, please. These are the recent SCREEN Group news. These were already announced and publicized, so I will not go into the details.
These are the news releases we have made so far. Today, as you can find at the very bottom, we made an announcement that we have the additional production capacity in Nagaokakyo. The details was already mentioned. Please come to our homepage to find some more details. Next page, please. Among these, let me pick up some topics. This is the joint research with company called Yaqumo for the development of optical modules for the quantum computers.
This is the quantum computing R&D project by NEDO. This is a joint research partnership with Yaqumo, who was selected by NEDO for that project. Next generation, a module for the next generation quantum computer will be jointly developed so that in the field of the quantum computing, we can have the presence and can be prepared for the future development. Next page, please.
Next topic is about the acquiring shares in Atomis, startup which develops and manufactures MOFs. This is a Kyoto University startup. As you know, MOF is a theme for which the Nobel Prize was given or awarded. MOF is a metal-organic framework or metal material, porous metal material, which can absorb the various types of gases.
By utilizing this MOF, we'd like to make a research into the separating, absorbing, recovering of various types of gases technologies so that we can utilize for the c reation of the new value of hope to address the global challenges, environmental challenges. This is about the Annual Report, I would like to invite Otobe-san to talk about it.
Thank you very much for your presentation. This is about the Annual Report 2026. We uploaded it on the website in September. You can find the Japanese and English version. Based on the reflection of the previous fiscal year, we have major contents, but you can find the new updates for this fiscal year. The picture is President Goto, also you can find CFO Ishimura's comment in the Annual Report.
Please go to the website and find our Annual Report. What we want to achieve in mid-to-long term, also the ESG type of information can be found. Next page, please. This is about the small group meetings hosted by SCREEN. After the earnings call, two weeks after the earnings call, we usually host these events.
This time, after the first half, we have Goto and Ishimura as the speakers for these sessions. Together with the IR team, we would like to have the Q&A session with you. Today, we have one hour for this event. Please understand these small group meetings as a kind of follow-up meetings for today. We had the ones for the institutional investors, but we would like to invite analysts for the coming group meetings.
We have the two meetings, one in Japanese and one in English. The English speakers or participants from abroad, or anybody can be welcome to either of these meetings. Please utilize these opportunities of small group meetings to talk with us. Next page, please. Thank you very much. Please go to page 17 of the presentation. Let me make additional comment.
Regarding WFE, Goto explained. Please go to page 17. The image in calendar year 2026. We were saying how much percentage of increase is expected. However, the breakdown of entire portion, the cutting-edge foundry is maybe about $50 billion. Logic foundry is maybe $20 billion, and DRAM is $40 billion, slightly less than $40 billion. NAND is increasing recently, maybe mid-$10 billion. The power and others is maybe slightly over $30 billion. Breakdown is including China market. Please refer to that. Thank you very much.
Thank you very much, Otobe-san. Now we want to address and take questions. Due to interest of time, we are going to limit the number of questions to two per person. In order to answer questions of as many participants as possible, I would like to ask your cooperation. If you have questions, please use the hand raise button in Teams and let us know. First is Yoshida-san from CLSA Securities, please.
Thank you. I am Yoshida from CLSA. For WFE, I have a question about WFE. In 2027, the market is expected to grow at 30%, maybe due to memory, mainly. Mix-wise, it is not so advantageous for your company. However, it is going to grow equivalent to WFE, or maybe over WFE. I want to ask you the driver to achieve that, maybe in terms of application or the region and share.
I am Goto. Originally, SCREEN had limited exposure in memory. When memory grows, SCREEN did not grow so much. However, as you know, the memory generation is now progressing. Now, HBM. Different from legacy time, there are new technologies incorporated.
Compared to the general memory, where we have the limited exposure, now we have high-function memory, where SCREEN exposure is getting higher. It was used to be said that when memory grows, SCREEN does not grow so much. But I hope you will get rid of this kind of legacy image, and we can also grow together with the memory. The cutting-edge logic is growing at the same time.
The miniaturization of the device or packaged device, we will see a bigger term for the cleaning. That is why we will see more opportunity, and that is why we have the opportunity to grow together with WFE growth or more than WFE growth. Is there any impact of the regional mix?
For regional mix, like Asian customer was used to invest in Asian countries, but sometimes they are going to the States and Europe. If you look at quarterly basis, there were some ups and downs in different regions. But in general, there are some geopolitical factors, but there is no strong or weak reason for any specific area. Maybe which device is needed is more making impact.
Thank you. My second question is, the end of this fiscal year is the end of your midterm plan, and next midterm plan will be announced. After first half, do you have any thought for next midterm plan? Any change? For example, the investment in Nagaokakyo, the investment need is now getting stronger. However, do you think this will impact the dividend policy? Or, if you have any comment for the return or the earnings for next midterm plan, would you please share?
This is Goto again. Next midterm plan starting from next fiscal year, now we are trying to prepare the draft. We have already the main points, and the concrete measures are now under consideration and discussion. Originally, we hope this midterm plan is the investment, and next midterm plan is the harvest. But market condition or market situation Sorry, we have some noise. We are very sorry. Probably we need to continue investment next midterm plan phase.
First, the growth investment and investment for the R&D, we will secure, and the profit we gain, how we will split. We will consider about the dividend, because we get often questions from investors and analysts. Once we are decided, we are going to announce about our dividend policy. Thank you very much.
Thank you Yoshida-san. Please mute your microphone when we are responding to your question. Thank you very much for your cooperation. Next, let me invite Mr. Shibano from Citigroup.
This is Shibano from Citigroup Securities. Thank you for this opportunity. My first question is that in your presentation, you said you have been receiving that record high order intake. You do not disclose the figures, but I understand that. When you say the record high order intake, but also the outlook into the WFE for the next year, also this year, are revised.
But haven't changed the full year target for this fiscal year. I want to ask you why you do not revise your full year target. Also, please comment your view on the capacity, and in next fiscal year, can we expect a scenario that you can expect the sharp increase of sales in next fiscal year?
This is Goto. Let me answer your question. Given the market situation, as I have been saying, the order intake has been quite strong, and this is true. As I have been repeatedly saying, we are going to outperform the growth of the WFE. Basis of that, I'm sorry I cannot give you the specific figures, but we have the plan or target of the sales for the second half, and that will be the plus alpha on the WFE growth.
We are now receiving the actual inquiries from the customers, which allow us to have that kind of expectation. You may think that the growth is not enough to reflect that strong inquiry, but actually, we are now receiving the inquiry, but that will be turned into the actual sales after the spring of next fiscal year. We expect the greater contribution, not in this fiscal year, but in next fiscal year.
Rather than trying to increase the sales rapidly in this fiscal year, to increase the sales in next fiscal year, we are going to make the preparation, necessary preparation, in this fiscal year, including the reorganization of manufacturing at our main factory in Hikone, and also the renovation of the Nagaokakyo new facility. In order to capture the coming opportunities, we are now making the preparation. The actual increase of the sales will be seen, the actual sales are gradually seen from the later part of the second half of this fiscal year, and actual contribution will be in next fiscal year.
Thank you very much for your answer.
Regarding that point, in this fiscal year, the possible shipment of the sales, the equipment which can be recorded as sales, I think the customers want to have the equipment as soon as possible, but you think that you are not in a phase to rush to ship the products. For this fiscal year, it is better not to expect the scenario will gradually deviate from the one you are showing to us now. Of course, there is a possibility we may outperform the expectation or the forecast at this moment.
Depending on how urgently our customers want our product, or if our equipment serves as a kind of bottleneck for customers' production, we cannot take the responsibility as a supplier. Still keeping this possibility of achieving greater than the original expectation, we are continuing to do the business.
The current target is not fixed, but we are not going to rush to achieve the greater sales. We continue to answer the demand steadily, and also at the same time, we are now making the preparation so that we can have that very efficient production capacity, so that we can meet the greater demands in the coming years.
Thank you very much. The next question is about the coming new midterm management plan. In your Annual Report, I think we can find the concept which we will find in the new midterm management plan. Portfolio reorganization, you have been talking about it since the past, and I think that is one topic we may expect. Reorganization of the business, of [inaudible], what kind of reorganization or restructuring can be possible? For example, GA, in mid to long term, what growth scenario you can have about the GA? Would you describe this to us?
The details of the business portfolio, I am sorry I cannot go into the details here, but what we want to have is a more efficient resource allocation and cash allocation. We have to decide how we make the investment and to achieve the better contribution to business. We are trying to reorganize our business portfolio, and we started that process already.
When the new midterm management plan is ready and publicized to you, maybe at the end of March next year, at that time, I think we can give you the kind of outline of the business portfolio or reorganization, especially regarding the electronics field and GA field.
These are the different types of the industries, and we expect a different type of growth. Separating these two, we are going to give you what kind of reorganization we will have. We will make the preparation for that announcement, please wait for that.
Thank you very much.
This is Otobe, let me add. Goto-san mentioned the new midterm management plan would be ready by the end of March. I am sorry, by the end of March, the whole midterm management plan is not ready, we will give you the outline. We will have the IR Day as usual. The outline of midterm management plan, which will be ready in late March, is just the outline. The whole MTP, including the figures, will be available at the time of the earnings call in May next year.
Thank you very much. I understood.
Thank you.
Thank you, Shibano-san. Tamura-san from Morgan Stanley MUFG, please.
Hi, I am Tamura from Morgan Stanley. I want to ask about the result in Q2, second quarter. SPE was slightly lower, the top line. However, if you look at your business involvement, this is just a timing issue, as you have explained today. I just want to ask you again about the reason or background of this. In different applications, maybe foundry is now a bit weak. I want to ask if I am right. The sales guidance of this year, from the last quarter, the foundry is now looking a bit weak toward entire market. Again, if this is just a timing issue, and it's going to grow to our next fiscal year, I just want to confirm.
I want to answer about second quarter. Basically, we have to wait until installation will complete for sales accounting. It depends on the sales timing, sorry, installation timing. Therefore, there's nothing delayed, but just the timing is delayed for sales recognition. For foundry, you said it may be weak. Due to this quarterly timing, we may see some fluctuation and going up and down. However, as I mentioned earlier, the cutting-edge logic of foundry, we are seeing strong order coming, continued.
This is just a timing issue. The logic of foundry is needed to support many different industry. You may think this is slightly weak, but if this is weak, it will cause big impact. Just due to the timing, there is sometimes high and sometimes low, but generally speaking, the logic foundry, they are the market driver. I hope you can take more broader eye on that in order to understand the entire picture.
How about full year? If you look at full year, it's still weakish. It's expected to grow next year?
Yeah, that's right.
Thank you very much. Earlier, already some other people asked question about capacity and material procurement. Plan was maintained same, but you said there are some upside towards second half. The lead time of your company at this moment for material procurement, I want to understand the situation better. Thank you.
Yes, the lead time of equipment, of course, depends on the equipment. However, roughly speaking, it's four to five months. As I said earlier, there are some things which is shorter and some other things which is longer, but in general, it's four to five months. That's our lead time to deliver to customer.
Material procurement, honestly, we cannot say it's all no problem. Some things are getting short just gradually. Not instantly we have any issue this fiscal year, but maybe for expansion of production, from next fiscal year, we are now making effort in order to procure necessary materials. We are not ready completely now. Also, some panel to the control device is short, like PCB, the lead is now short in the world.
We are suffering from the similar situation. Yeah, we are facing the similar situation. We want to make sure that it doesn't cause any trouble for our manufacturing. We hope the huge shortage that we have experienced in the COVID time will not reoccur. Not only us, but we are working together with all the WFE makers, so we don't want to lag behind from this kind of initiative.
Maybe it is not easy to answer next fiscal year, how much upside do you have. Sorry, how much upside can be supported if you have any numeric. Next fiscal year, if market grow this much, we have already made some assumption. We would like to be ready for that kind of growth. We cannot talk about the specific numbers. But the market growth that we are expecting next fiscal year, we are going to be aligned, or we are going to go up. This is what we can secure, I believe. Thank you.
Thank you.
Thank you, Tamura-san. Next, let me invite Mr. Shimamoto from Okasan Securities.
This is Shimamoto from Okasan. I have two quick questions. First one is about the delayed project, and I think the scale of the business about JPY 20 billion in sales.
Yes. Your understanding is correct.
Thank you very much. And next question is about the SPE sales in the second half. When you divide it into the third quarter and the fourth quarter, how do you expect the sales.
From first or second quarter, we did see the growth, and we also expect a gradual increase from the third to the fourth quarter. We expect a slightly greater sales in the fourth quarter. Maybe the proportion can be the 60 to 40. About close to that.
Understood. Thank you very much. That is all from me.
Thank you very much, Mr. Shimamoto. The next person is last person that we will take questions. Yamamoto-san from SBI, please.
Yes, this is Yamamoto from SBI. I have one question. The sales recognition, you will recognize at the time of installation. Investor, the growing order in China is now expected, but if you continue this kind of recognition basis, when you have a large body of order, then probably they have to store in warehouse. If you keep this installation basis, it will be maybe not favorable for your company. Do you have any thoughts about changing this recognition timing of the revenue.
Yes. It is actually the completion of installation basis, not the acceptance basis. Once we deliver and when they install in customer side, that is the timing that we recognize the sales. For this is accounting guideline. If the situation surrounding us is changing, we will just discuss with auditing firm, what is the appropriate. Depending on the progress of situation, it may be changed. But at this moment, we cannot say this is the plan, but we will just try to reflect the environment, and we have been always discussing with auditing firm. That is what we can share now.
Thank you very much.
Thank you, Yamamoto-san. We have some more time, so I want to take one more question. Mr. Nakanomyo from Jefferies Securities, please.
Can you hear me?
Yes, please go ahead.
Thank you for the opportunity. I have one question. The delayed project in the second quarter, how much profit level did you have? Profitability was 27%, and is that the one with a higher profitability than that? I think the profitability of that delayed project was an average, not too high or not too low. In that sense, the 27% in the second half, given the profitability in the second quarter, you can achieve this expected profitability for the second half.
Yes. The figures we are setting for the second half are the ones which are very realistic. It depends on the sales scale, but JPY 430 billion plus JPY 360 billion of sales with SPE, we can achieve this level of the profitability.
Related to that, I have another question. I am sorry for this repeated question, but for this fiscal year, FY 2026, sales growth excluding this delayed project seems lower than that of the WFE growth. Is this way of seeing the situation wrong? If it is so, what is the reason behind this lower growth than WFE for this fiscal year?
There are various ways to see the situation. To produce the things in this fiscal year and to sell the products in this fiscal year, there are so many factors related. When you just see the figures, you may have such kind of comment or interpretation. But as of potential, we have the production which allows us to exceed or outperform the WFE growth. The figures of the sales are shown, and as we have been saying, what we are doing right now is to be prepared for the growth in next fiscal year. You can find as data and the results of what we are doing right now in next fiscal year. Please wait for that moment.
Thank you very much. I understood.
Thank you very much, Mr. Nakanomyo. Although there are some other investors who are raising their hands, we are very sorry, but we have to close this Q&A session now. Thank you very much for your participation. Now we conclude the second quarter earnings call for the year ending in March 2027 by SCREEN Holdings Co., Ltd. Thank you again for your participation despite your busy schedule.