KOMATSU MATERE Co.,Ltd. FY2026 FY Earnings Report

Financial Highlights

• Net Sales: ¥41.56B
• Operating Income: ¥2.50B
• Net Income: ¥1.50B
• EPS: ¥38.51

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

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AI Financial Analysis

Executive Summary

Komatsu Matere delivered a solid topline and operating profit performance for FY2026 while bottom-line declined sharply due to large extraordinary losses and a higher effective tax burden. Revenue rose 5.2% year over year to 415.6bn JPY, led by the Fiber segment, and operating income increased 14.7% to 25.0bn JPY. Gross profit improved to 93.9bn JPY with a gross margin of 22.6%, up roughly 140bps versus the prior year. Operating margin expanded to 6.0% from 5.5%, an improvement of about 50bps, reflecting better mix and cost control within Fiber. Ordinary income rose 13.0% to 32.1bn JPY, supported by stable non-operating income including 3.94bn JPY of equity-method gains. Net income declined 48.9% to 15.0bn JPY as extraordinary losses of 13.08bn JPY, mainly loss on valuation of investment securities, more than offset extraordinary income of 5.78bn JPY. The effective tax rate was elevated at 39.4%, compressing the tax burden factor to 0.605 and further weighing on net. Cash generation remained positive with operating cash flow of 17.6bn JPY, yielding OCF/Net Income of 1.17x, though cash conversion versus EBITDA was soft at 0.43x. Free cash flow of 25.5bn JPY more than covered cash dividends of about 10.7bn JPY, but share repurchases of 12.8bn JPY pushed the total return ratio to an aggressive ~156% of net income. Balance sheet strength is high: current ratio 278%, quick ratio 258%, D/E 0.30x, and interest coverage 417x, indicating very low financial risk. Segment-wise, Fiber remains the core driver, contributing 94% of revenue and delivering double-digit operating profit growth and a 5.9% margin. Management guidance for the next fiscal year implies a sharp normalization in operating income to 15.0bn JPY (–40% YoY) on modest sales growth (+1.1%), suggesting caution on input cost trends, mix, or demand normalization. Earnings quality is mixed: recurring profitability and OCF are healthy, but dependence on investment securities valuations introduced significant P&L volatility this year. Capital efficiency remains modest with a 3.8% ROE and a ROIC flag at 4.9%, underscoring the need for improved asset turnover or margin uplift. Overall, the quarter’s verdict is: operationally resilient with improving margins, but bottom-line volatility from non-recurring items and modest capital efficiency temper the outlook.

Profitability Analysis

ROE of 3.8% decomposes into Net Profit Margin (3.6%) × Asset Turnover (0.80x) × Financial Leverage (1.30x). The most material change YoY is the compression of net margin from approximately 7.4% to 3.6% (–380bps), despite operating margin expansion of about +50bps to 6.0% and gross margin improvement of ~+140bps to 22.6%. The margin compression stems from extraordinary losses (notably 12.32bn JPY loss on valuation of investment securities) and a higher effective tax rate of 39.4%, which reduced the tax burden to 0.605. Operationally, the Fiber segment posted stronger mix and cost execution, supporting the improved operating margin, a driver that appears sustainable near term given segment profitability trends. The net margin drag is predominantly one-time in nature (valuation loss), and therefore not indicative of a deterioration in core operations. SG&A grew to 68.8bn JPY, but the SG&A ratio declined versus sales given revenue growth, indicating positive operating leverage.

Growth Assessment

Revenue grew 5.2% YoY to 415.6bn JPY, with Fiber up 5.2% and Other up 0.6%. Operating income rose 14.7% to 25.0bn JPY, driven by stronger Fiber segment profitability (segment OI +16.4% YoY). Ordinary income increased 13.0% to 32.1bn JPY on steady non-operating contributions including dividends, interest, and equity-method gains. Net income fell 48.9% to 15.0bn JPY due to large extraordinary losses, masking underlying operational improvement. EBITDA reached 40.8bn JPY (EBITDA margin 9.8%), and pre-goodwill amortization EBITDA was 41.4bn JPY, highlighting negligible goodwill amortization impact. Equity-method income was 3.94bn JPY, providing a stable lift within non-operating income. Management’s next-year guidance is conservative: sales +1.1% YoY to 420.0bn JPY but operating income –40.1% YoY to 15.0bn JPY, implying an operating margin of ~3.6% and signaling expected normalization of mix or cost headwinds. Sustaining gross margin gains and further SG&A efficiency will be key to offset guidance headwinds.

Financial Health

Liquidity is strong: current ratio 278.3% and quick ratio 258.3% indicate ample short-term coverage. Solvency is conservative: D/E 0.30x and interest coverage 417x (EBIT/interest expense), with covenant headroom further supported by EBITDA interest coverage of ~680x. Maturity mismatch risk is low with cash and deposits of 92.3bn JPY plus receivables of 66.8bn JPY comfortably exceeding current liabilities of 84.9bn JPY; accounts payable are 47.9bn JPY. Off-balance sheet obligations are not indicated. Investment securities represent 29.7% of total assets, a meaningful portfolio that can introduce valuation volatility into capital and earnings. Retained earnings declined to 283.2bn JPY, reflecting dividends, buybacks, and the lower net profit.

Notable B/S Changes

Treasury Stock: –383.0 to –94.9 (+75.2%) – Disposal/cancellation reduced contra-equity; aligns with active buyback and share-related actions. Intangible Assets: 18.0 to 24.0 (+33.3%) – Increased digital/IP investments; modest impact on asset mix but watch amortization. Retained Earnings: 320.0 to 283.2 (–11.5%) – Reflects dividends, buybacks, and lower net income; reduces internal capital buffer modestly. Goodwill: 3.03 to 2.42 (–22.6%) – Decline from amortization/adjustments under JGAAP; minimal balance limits impairment risk. Deferred Tax Assets: 9.08 to 6.77 (–25.4%) – Lower DTAs potentially from utilization or valuation changes; reduces cushion for future tax expense.

Cash Flow Quality

OCF was 17.59bn JPY versus net income of 15.00bn JPY (OCF/NI 1.17x), indicating good accrual quality. Cash conversion (OCF/EBITDA) was 0.43x, soft versus the >0.7 benchmark, reflecting working capital outflows (receivables +3.22bn JPY, payables –7.24bn JPY, inventories +1.93bn JPY) and higher cash taxes paid (10.61bn JPY). Free cash flow was 25.49bn JPY, covering dividends 2.41x and providing capacity for buybacks; however, underlying capital spending (purchase of noncurrent assets 34.47bn JPY) exceeded OCF, implying reliance on securities redemptions and portfolio cash flows within investing CF. No signs of aggressive working capital manipulation are evident; the accruals ratio of –0.5% is consistent with high-quality earnings.

Dividend Sustainability

DPS totaled 27 JPY (interim 14, year-end 13), equating to a calculated payout ratio of 70.6% on net income of 15.0bn JPY and ~39.24mn shares. FCF coverage is 2.41x, supportive of the dividend under current cash generation. Share repurchases of 12.77bn JPY lifted the total return ratio to about 156% of net income, above the sustainable threshold and reliant on ongoing FCF/investing inflows. Given guidance for lower operating income next year, maintaining this combined return pace may require continued balance sheet support; however, the strong liquidity and low leverage provide flexibility. Dividend policy appears stable, with management indicating a year-end DPS of 13 JPY in guidance.

Risk Assessment

Business risks include High segment concentration: Fiber accounts for 94.2% of revenue, elevating exposure to apparel/materials demand and customer concentration., Input cost and energy price volatility impacting gross margin sustainability in textiles., Equity-method income variability (3.94bn JPY) influencing ordinary income., Exposure to valuation swings in investment securities (29.7% of assets) affecting comprehensive income and potential extraordinary items..

Financial risks include Low cash conversion (OCF/EBITDA 0.43x) increases sensitivity to working capital cycles., Capital efficiency below benchmark (ROE 3.8%, ROIC 4.9%) may weigh on long-term value creation., Portfolio revaluation risk in investment securities can impact net assets and earnings volatility..

Key concerns include Guidance implies operating margin compression to ~3.6%, suggesting near-term profit normalization., Extraordinary loss on valuation of investment securities (12.32bn JPY) highlights P&L volatility from financial assets., Total return ratio (~156%) exceeded internal cash generation from operations and capex, raising sustainability questions if cash conversion remains weak..

Investment Implications

Key takeaways include Core operations strengthened: gross margin +140bps and operating margin +50bps YoY, led by Fiber., Bottom-line decline is largely non-recurring (valuation loss), not reflective of operational deterioration., Balance sheet is robust with high liquidity and low leverage, providing capital allocation flexibility., Cash conversion is the primary quality watchpoint; improving OCF/EBITDA is critical., Guidance is conservative, signaling margin normalization; execution on cost and mix will drive upside/downside..

Metrics to watch include OCF/EBITDA trend (target >0.7) and working capital turns (receivables/payables movements)., Fiber segment margin and order visibility., Investment securities valuation impacts on extraordinary items and OCI., Payout discipline: dividend coverage by FCF and scale of buybacks versus OCF., ROIC progression from 4.9% toward >7% medium-term..

Regarding relative positioning, Within Japanese textile/materials peers, Komatsu Matere exhibits above-peer balance sheet strength and improved operating margin but below-peer capital efficiency and cash conversion; earnings volatility is higher where portfolios of investment securities are sizable.