#Hong Kong #fiscal results #Highway Holdings #OEM Business

Highway Holdings Reports Second Quarter Results for Fiscal Year 2026

Highway Holdings Limited, listed under Nasdaq as HIHO, has officially announced its financial results for the second quarter of fiscal year 2026, ending on September 30, 2025. The company has experienced significant challenges, reflected in its declining sales and operating loss, primarily driven by ongoing market pressures.

Key Financial Highlights

In the second quarter, Highway Holdings generated net sales amounting to $1.18 million. This figure represents a substantial drop from the $2.11 million reported in the same quarter of the previous year. The company also faced a net loss of $373,000, translating to a loss of $0.08 per diluted share, compared to the prior year’s net income of $231,000, or $0.05 per diluted share.

Market Pressures and Business Adjustments

The chairman and CEO, Roland Kohl, highlighted several pressing issues impacting the business. The reorganization of a major customer's production facilities has dramatically curtailed Highway Holdings’ long-term Original Equipment Manufacturer (OEM) business. This adjustment has resulted in a substantial portion of revenue shifting to the customer’s own motor manufacturing operation in Czechia. Although the company maintains a minority stake in this OEM relationship, revenues have been significantly affected, leading to an evaluated shift in its overall business strategy.

“This situation, while challenging, compels us to explore new opportunities and adapt our operations accordingly,” stated Kohl. He noted that while the OEM business faces reductions, another customer has recently approved mass production of its motor products, suggesting a potential balance in the long run, despite interim dip in sales.

The company is presently focused on continuing manufacturing in China, which may unfortunately necessitate workforce reductions at its Myanmar plant, a factor that has raised concerns about operational stability.

Positive Developments

On a more positive note, Highway Holdings has secured a notable order from a long-standing customer in the gaming industry, indicating a revival of its previous business engagements. However, the timeline between the loss of the old business and the acquisition of new orders remains a challenge as the company strives to replace lost revenue streams.

Kohl underscores the nature of Highway Holdings as an OEM supplier where success is closely tied to the performance of its customers. The firm has been actively seeking acquisition opportunities to mitigate risks linked to over-dependence on singular customers. While negotiations with multiple German firms have proven complex, Kohl remains optimistic about a promising acquisition deal that could lead to beneficial synergies.

Future Directions

Alongside these developments, Highway Holdings is exploring entry into the Chinese market, a significant pivot that marks a departure from its usual export focus. The firm is assessing how to best integrate its manufacturing capabilities within this vast marketplace. Additionally, it is evaluating a potential new income stream aimed at catering to the fast-growing elderly demographic in China, which would involve cautious testing to ensure viability without incurring excessive costs.

In an effort to restore stability and sustainable revenue growth, these initiatives are positioned at the forefront of Highway Holdings' strategic direction. Although the transition phase may impose limitations on existing operations, the leadership asserts that the path undertaken is aligned with long-term objectives of fortifying the company's market standing.

Financial Summary and Outlook

Gross profit for the second quarter of fiscal year 2026 was reported at $301,000, down from $834,000 the previous year, which translates to a gross profit margin of 25.5%. The selling, general, and administrative expenses saw a slight increase to $843,000. Despite these difficulties, the company's balance sheet remains robust, with assets totaling $8.37 million and cash holdings exceeding $5.6 million.

In conclusion, while Highway Holdings navigates through a turbulent market with noted setbacks, multiple initiatives and sustained focus on strategic growth may place the company on a promising trajectory as it heads into future quarters.