Nittetsu Mining Co.,Ltd. FY2027 Q1 Earnings Report

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Executive Summary

The first quarter of the fiscal year ending March 2027 recorded double-digit growth in Revenue and Operating Income, resulting in higher revenue and higher profits. However, Ordinary Income remained largely in line with the previous year, while a considerable portion of the increase in Net Income was supported by extraordinary income, including gains on the sale of investment securities. Revenue amounted to ¥574.1B (¥461.3B in the same period of the previous year, YoY +24.4%), Operating Income was ¥50.9B (¥36.2B, YoY +40.5%), Ordinary Income was ¥44.7B (¥45.0B, YoY -0.6%), and Net Income attributable to owners of the parent was ¥47.8B (¥33.0B, YoY +45.0%). Revenue growth was led by volume expansion in the Metal segment (+41.8%). The decline in the SG&A ratio (11.4% versus 13.6% in the previous year) improved the Operating Income margin by +1.0pt to 8.9%. However, at the Ordinary Income level, a foreign exchange loss of ¥3.2B and equity-method investment loss of ¥0.5B exerted downward pressure, while Net Income was boosted by extraordinary income of ¥31.8B (including a ¥27.6B gain on the sale of investment securities).

Factors Affecting Business Performance

【Revenue】Revenue was ¥574.1B, up +24.4% year on year. By segment, Metal led company-wide growth with Revenue of ¥347.4B (60.5% composition ratio, +41.8%), followed by Mineral at ¥179.6B (31.3%, +4.7%) and MachineAndEnvironment at ¥42.4B (7.4%, +10.4%). Meanwhile, RealEstate at ¥6.9B (-5.5%) and RenewableEnergy at ¥4.8B (-1.2%) recorded modest declines in Revenue, indicating that growth was concentrated in Metal and Mineral.

【Profit and Loss】Operating Income was ¥50.9B (+40.5%), and the Operating Income margin was 8.9% (7.8% in the previous year, +1.0pt). Although the gross profit margin declined to 20.2% (21.5% in the previous year, -1.2pt), the SG&A ratio improved to 11.4% (13.6% in the previous year, -2.2pt), and cost efficiencies contributed to the higher profit margin. Ordinary Income was ¥44.7B (-0.6%), essentially flat, as increases in non-operating expenses, including a foreign exchange loss of ¥3.2B, interest expense of ¥2.4B, and equity-method investment loss of ¥0.5B, offset the growth in Operating Income. Profit Before Tax expanded to ¥75.7B, primarily due to extraordinary income of ¥31.8B (a ¥27.6B gain on the sale of investment securities and a ¥4.2B gain on the sale of fixed assets), while extraordinary losses were minimal at ¥0.8B. Net Income attributable to owners of the parent was ¥47.8B (+45.0%), but a considerable portion of the increase depended on non-recurring factors, with recurring earnings growth remaining limited to the Operating Income level. Overall, the Company recorded higher Revenue and profits, although the stagnation in Ordinary Income and reliance on extraordinary income warrant attention regarding earnings quality.

Segment Analysis

Mineral recorded Revenue of ¥179.6B (+4.7%) and Operating Income of ¥24.8B (-0.3%), with a profit margin of 13.8%. It was the Company’s largest earnings contributor and maintained stable profitability even amid Revenue growth. Metal recorded Revenue of ¥347.4B (+41.8%) and was the primary driver of company-wide growth. Although Operating Income increased substantially to ¥20.2B (+157.9%), its profit margin remained limited to 5.8%, indicating relatively low margins compared with its volume expansion. MachineAndEnvironment recorded higher Revenue of ¥42.4B (+10.4%), but Operating Income declined to ¥4.2B (-14.3%) and its profit margin fell to 9.9%, indicating that Revenue growth did not translate into higher profits. RealEstate generated extremely high profitability, with a 64.8% profit margin despite Revenue of ¥6.9B (-5.5%). RenewableEnergy also maintained a profit margin of 38.3%, although its scale was small. Profit margins vary significantly among segments, and the declining margins in Metal, which is driving growth, are weighing on the company-wide profit margin.

Key Financial Indicators

【Profitability】The Operating Income margin improved by +1.0pt to 8.9% from 7.8% in the previous year, while the Net Income margin, based on Net Income attributable to owners of the parent, increased by +1.2pt to 8.3% from 7.1% in the previous year. ROE was 3.1% based on actual results for the quarter. 【Cash Flow Quality】Extraordinary income of ¥31.8B (including a ¥27.6B gain on the sale of investment securities) accounted for approximately 42% of Profit Before Tax of ¥75.7B, exerting a significant upward effect on profits relative to Ordinary Income of ¥44.7B (-0.6%). 【Investment Efficiency】While Revenue grew +24.4%, work in process expanded to ¥297.7B (+47.6%) and construction in progress increased to ¥539.5B (+12.8%), making progress in investment recovery a key determinant of future asset efficiency. 【Financial Soundness】The Equity Ratio declined by -2.3pt to 48.4% from 50.7% in the previous year. Long-term borrowings increased to ¥530.7B (+18.7%), while current assets of ¥1,381.2B represented 181.8% of current liabilities of ¥759.6B, indicating that short-term payment capacity remains strong.

Cash Flow Analysis

Cash and deposits were ¥395.9B, down ¥38.7B (-8.9%) from ¥434.6B in the same period of the previous year. Expanded investment in work in process (+47.6%) and construction in progress (+12.8%), financing through increased long-term borrowings (+18.7%), and the increase in treasury stock holdings (from ¥13.4B to ¥43.6B) appear to have affected funding needs. Meanwhile, Accounts Payable increased to ¥347.7B (+40.0%), and the use of extended payment terms associated with expanded procurement absorbed part of the working capital burden. Inventories and work in process are increasing faster than Revenue growth (+24.4%), requiring monitoring of cash generation until project acceptance and delivery progress.

Earnings Quality

Ordinary Income was ¥44.7B, essentially flat at -0.6% year on year. The growth in Operating Income (+40.5%) was offset by deterioration in non-operating income and expenses, including a foreign exchange loss of ¥3.2B, interest expense of ¥2.4B, and equity-method investment loss of ¥0.5B. Profit Before Tax expanded to ¥75.7B, primarily due to extraordinary income of ¥31.8B (a ¥27.6B gain on the sale of investment securities and a ¥4.2B gain on the sale of fixed assets), while extraordinary losses were minimal at ¥0.8B. A considerable portion of the increase in Net Income attributable to owners of the parent, which was ¥47.8B (+45.0%), depended on this non-recurring extraordinary income and therefore differs in nature from growth at the Ordinary Income level. Comprehensive Income was ¥82.6B, including ¥76.3B attributable to owners of the parent, exceeding Net Income. However, valuation-related items, including other securities valuation difference of +¥13.7B, deferred hedge gains and losses of +¥8.4B, and foreign currency translation adjustments of +¥7.6B, contributed to this result, and should be distinguished from realized gains and losses.

Earnings Forecast and Guidance

Progress against the full-year Company forecast was 24.7% for Revenue (forecast: ¥2,325.0B), 36.3% for Operating Income (forecast: ¥140.0B), 38.9% for Ordinary Income (forecast: ¥115.0B), and 39.9% for Net Income attributable to owners of the parent (forecast: ¥120.0B). All were progressing above the simple quarterly allocation benchmark of 25%. However, the Company’s full-year forecasts themselves anticipate declines of -25.6% in Operating Income and -43.1% in Ordinary Income year on year. The key focus in evaluating progress will be how the impact of extraordinary income and non-operating income and expenses recorded in Q1 changes through the second half of the fiscal year. As of the current quarter, there were no revisions to the earnings forecast or dividend forecast.

Shareholder Returns

The Company’s planned annual dividend is ¥62, resulting in a Payout Ratio of 40.3% against planned EPS of ¥153.72. In the previous fiscal year, the total annual dividend was displayed as “-” due to the impact of a 1-for-5 stock split effective October 1, 2025, making a simple year-on-year comparison impossible. Treasury stock holdings increased from ¥13.4B to ¥43.6B, suggesting an expansion of shareholder returns in addition to dividends. However, the dividend-only Payout Ratio (40.3%) must be distinguished from the Total Return Ratio, which includes share repurchases.

Risk Factors

1. Increasing dependence on Metal: The Metal segment’s Revenue composition ratio reached 60.5% (¥347.4B / ¥574.1B), an increase from the previous year. Its Operating Income margin was 5.8%, lower than Mineral’s 13.8%, increasing the sensitivity of company-wide earnings to fluctuations in prices and volumes.

2. Decline in gross profit margin: The gross profit margin was 20.2%, down -1.2pt from 21.5% in the previous year. Although the Operating Income margin improved due to the decline in the SG&A ratio (11.4% versus 13.6% in the previous year), if cost pressures persist, Revenue growth may not translate into improved profit margins.

3. Accumulation of working capital: Work in process increased to ¥297.7B (+47.6%), construction in progress to ¥539.5B (+12.8%), and Accounts Payable to ¥347.7B (+40.0%). If project acceptance or commencement of operations is delayed, there is a risk that funds will remain tied up for an extended period.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The Company’s Operating Income margin and Net Income margin both exceeded the industry median, indicating relatively high profitability.

Growth and Capital Efficiency

The Revenue growth rate was well above the industry median, placing the Company among the high-growth group within the industry.

Source: Compiled by the Company

Key Points from the Financial Results

1. The Operating Income margin improved by +1.0pt to 8.9% from 7.8% in the previous year, primarily due to the decline in the SG&A ratio (-2.2pt), while the gross profit margin actually declined by -1.2pt. The change in the cost structure amid Revenue growth warrants attention.

2. The +45.0% increase in Net Income attributable to owners of the parent depended substantially on extraordinary income of ¥31.8B, centered on gains on the sale of investment securities, while Ordinary Income remained essentially flat (-0.6%). Underlying earnings growth was limited to the improvement at the Operating Income level.

3. Progress toward the full-year forecast was above the quarterly allocation benchmark, at 36.3% for Operating Income and 39.9% for Net Income. However, the full-year forecast itself anticipates a year-on-year decline in profits, and the key point to monitor going forward is how the extraordinary factors and changes in non-operating income and expenses recorded in Q1 are reflected in the second half of the fiscal year.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly available data using a residual income model (Ohlson-type model with an explicit 5-year fade period). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥2,020–¥2,136 at ±1% for the Cost of Equity, and ¥2,074–¥2,079 at ±0.1 for ω.

Notes:

• Because forecast ROE is below the Cost of Equity, the theoretical value is below Book Value Per Share.
• Net assets as of the end of the quarter are used; there is a timing gap relative to the full-year forecast.
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest rate reference month: 2026-07 / This value does not forecast or guarantee the future share price.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own responsibility, after consulting with professionals as necessary.

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