<Hua Xin Earnings Call> Extraordinary Gains of Approximately NT$8.5 Billion Boost First-Half Profit to NT$12.6 Billion, EPS of NT$2.85 Sets New Record High

Hua Xin (1605-TW) held its earnings conference today (7th). Benefiting from equity investments and gains from divestments, Hua Xin's second-quarter after-tax net profit reached NT$9 billion, with earnings per share (EPS) at NT$2.04. The company's first-half after-tax net profit totaled NT$12.628 billion, representing nearly a tenfold year-on-year increase, with EPS reaching NT$2.85—both second-quarter and first-half results achieving record highs for the same period in history.

Hua Xin's second-quarter revenue was NT$49.6 billion, up 21% quarter-on-quarter and 7% year-on-year. Gross margin stood at 7.6%, down 0.2 percentage points from the previous quarter but up 0.3 points year-on-year. Operating margin improved to 1.5%, up 0.2 points quarter-on-quarter and 0.4 points year-on-year. After-tax net profit surged to NT$9 billion, increasing 1.52 times quarter-on-quarter and 17.51 times year-on-year, with EPS at NT$2.04.

For the first half of the year, revenue totaled NT$90.718 billion, down 0.61% year-on-year. Gross margin was 7.66%, down 0.1 percentage point year-on-year, while operating margin was 1.4%, down 0.18 points year-on-year. Despite this, after-tax net profit soared to NT$12.628 billion, up 9.81 times year-on-year, with EPS at NT$2.85.

Hua Xin noted that all three major business segments—stainless steel, electrical wires and cables, and resources—achieved quarter-on-quarter revenue growth, driving overall second-quarter and first-half performance. The stainless steel segment benefited from rising raw material prices; the electrical wires and cables business was boosted by AI-related market opportunities; and the resources segment saw increased nickel pig iron (NPI) prices and volumes.

Regarding second-quarter profitability, the core businesses showed mixed results: stainless steel and resources were roughly break-even, while the electrical wires and cables segment continued to generate profits. However, the primary profit driver came from equity investments and gains on asset disposals, which together contributed approximately NT$8.5 billion.

Looking ahead to the third quarter, Hua Xin expects stable performance across all divisions. For stainless steel, Taiwan’s product prices are expected to remain firm due to sustained high nickel metal prices, leading to performance comparable to Q2. In China, supply constraints under anti-overcapacity policies have kept raw material prices elevated, supporting selling prices, with Q3 performance expected to match Q2 levels. In Europe, the Carbon Border Adjustment Mechanism (CBAM) has driven up product prices, and reduced import quotas under safeguard measures provide protective benefits. However, summer maintenance (‘shu xiu’) impacts will be deferred to Q4.

Additionally, subsidiary SMP recently signed a long-term contract with Rolls-Royce. Hua Xin stated that products supplied to Rolls-Royce are high-grade and highly profitable. Although SMP currently accounts for less than 20% of overall European market sales, it delivers the strongest profitability. An expansion plan is underway, aiming to double SMP’s production capacity by 2028 through the addition of higher-precision equipment.

For the resources segment, Indonesia’s ongoing restrictions on nickel mining permits are expected to keep nickel pig iron output, prices, and operational conditions similar to Q2 levels in Q3.

As for the electrical wires and cables business, rapid advancements in AI applications—from data center expansions and grid upgrades to energy infrastructure development—are expected to sustain power demand growth. Thus, Q3 performance is projected to remain at Q2 levels.

Regarding the submarine cable project, Hua Xin reported that the first cable was installed by the end of last year and entered certification in May this year. Certification is expected to be completed by July next year, enabling mass production and shipment according to operator schedules. This project is anticipated to contribute approximately NT$10 billion in annual revenue going forward.