Thye Ming Industrial reported consolidated Q2 2026 revenue of NT$2.57 billion (approximately $80.8 million), marking a 14-quarter high and representing 29.5% year-over-year growth compared to NT$1.99 billion (approximately $62.6 million) in Q2 2025, according to the company's earnings call. The strong revenue performance was driven by continued momentum in shipments and emerging capacity benefits from the company's Vietnam operations at the My Phuoc Industrial Park in Ho Chi Minh City, which has an annual capacity of 65,000 metric tons. Combined sales volumes from Taiwan and Vietnam bases exceeded all prior four quarters, reaching 35,357 metric tons in Q2 2026.
Monthly revenue trends show concentrated growth in May and June, with revenues of NT$850 million and NT$910 million (approximately $28.6 million each) respectively. The year-over-year growth rate accelerated from 18.7% in April to 53.1% in June. This momentum continued into July 2026, with monthly revenue surging to NT$1 billion (approximately $31.5 million), up 62.5% year-over-year, demonstrating Vietnam's transformation from backup capacity into a second growth engine for the group.
However, the quarter revealed a significant paradox: while revenue expanded sharply, gross margin contracted substantially. Q2 2026 gross margin declined to 8.6%, a sharp drop of 4.6 percentage points from 13.2% in Q2 2025. First-half 2026 gross margin stood at 8.8% compared to 12.9% in the first half of 2025.
Most notably, first-half operating profit of NT$304 million (approximately $9.6 million) actually fell below the NT$414 million (approximately $13.0 million) recorded in H1 2025, despite revenue growing 16.8% year-over-year. This represents a decline in core operating profit exceeding 26%. Thye Ming management attributed the margin compression to international price volatility affecting the cost of goods sold ratio, which rose above 91% compared to 86.8% in the prior-year period.
According to company spokesperson Tung Hsin-yuan, there is a timing lag between raw material procurement inventory costs and market spot prices. When LME lead prices enter a downtrend, previously accumulated high-cost inventory sharply compresses margins in the short term. Management stated that as high-cost inventory is gradually depleted and subsequent purchases reflect lower acquisition costs, gross margin will naturally recover to normal levels, but emphasized this recovery takes time and cannot be meaningfully improved within a single quarter.
A significant portion of first-half net income growth came from non-operating items rather than core business performance. First-half net income reached NT$272 million (approximately $8.6 million), up 28.8% year-over-year. Non-operating items showed a dramatic reversal, swinging from a loss of NT$142 million in H1 2025 to a gain of NT$34.78 million in H1 2026.
Management attributed this swing to improved foreign exchange conditions, noting that as long as exchange rates remain stable, non-operating income can maintain a positive contribution. Thye Ming's balance sheet reflects a solid financial position characterized by high equity and low leverage. Total assets stood at NT$6.75 billion (approximately $212.1 million), with a debt ratio of 21% and equity ratio of 79%.
Cash and cash equivalents totaled NT$1.39 billion (approximately $43.7 million), and net working capital reached NT$4.6 billion (approximately $144.6 million). However, the cash flow statement revealed a potential concern: first-half operating activities generated a net cash outflow of NT$262 million (approximately $8.2 million), primarily due to an increase in financial assets. Management explained that the company purchased highly liquid monetary assets and that this does not reflect deterioration in core operating cash flow.
Investing activities saw an inflow of NT$11.6 million from maturing time deposits, while financing activities generated a net inflow of NT$199 million from a specialized government loan with a very low interest rate. Thye Ming's board has approved a 2026 cash dividend of NT$5 per share, with an ex-dividend date of October 1 and payment date of October 29. Based on first-half earnings per share, the payout ratio reaches 117%, demonstrating the company's commitment to maintaining dividend levels even if drawing on retained earnings.
Management emphasized the company's long-term cash-dividend-centric distribution approach, noting consistent high payout ratios from 2016 through 2025. The global lead market fundamentals present structural headwinds. According to the latest forecast from the International Lead and Zinc Study Group (ILZSG), global refined lead demand in 2026 is projected at 13.72 million metric tons, while supply is expected to reach 13.83 million metric tons, resulting in a surplus of 109,000 metric tons, widening from a 75,000-ton surplus in 2025.
The oversupply is primarily driven by continued capacity expansion in China, India, Japan, and Kazakhstan, while demand growth has slowed due to declining Chinese lead-acid battery exports. LME lead prices remain range-bound, oscillating within $1,900 per metric ton plus or minus $100. From the 2025 full-year average of $1,963 and first-half 2025 average of $1,958, prices declined slightly to $1,929 in the first half of 2026, but management noted this does not deviate significantly from fundamental levels.
In July, global LME inventories surged from approximately 200,000 metric tons to nearly 400,000 metric tons due to carry-trade arbitrage operations, briefly driving prices down. Management indicated inventory is now being steadily drawn down, and prices are expected to gradually recover. The US Dollar Index maintains a clear negative correlation with lead prices, with metal prices rebounding when the dollar weakens.
Management distilled the quarter's core messages into three points: volume growth led the way through Vietnam expansion driving record revenue, margin recovery lags behind as high-cost inventory digestion remains incomplete, and non-operating items provided a floor through foreign exchange gains. Management did not provide specific financial guidance but indicated that gross margin recovery will follow a gradual upward trajectory rather than a sharp rebound. Key metrics to watch include whether the 62.5% year-over-year revenue growth recorded in July can be sustained through the latter half of Q3 and whether gross margin demonstrates a clear inflection point for recovery in the second half of 2026.
Thye Ming's near-term profit recovery will depend more on its own inventory management and Vietnam capacity efficiency gains than on tailwinds from the external price environment, given the projected 109,000-ton supply surplus and structural ceiling keeping LME prices suppressed near $1,900 per metric ton.
Source: finance.biggo.com