KOMATSU MATERE Co.,Ltd. FY2027 Q1 Earnings Report

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Executive Summary

This was a “lower revenue, higher earnings” quarter, with earnings growth secured despite a decline in revenue. Revenue stood at ¥96.0B (down -4.6% YoY), while gross margin improved to 25.0% (up +2.3pt from 22.7% in the previous year). Primarily as a result, Operating Income increased to ¥8.5B (up +10.5%), Ordinary Income to ¥11.4B (up +19.4%), and Net Income attributable to owners of the parent (hereinafter the same) to ¥8.2B (up +19.8%), all representing double-digit growth. The penetration of pricing policies and improvement in product mix in the core Fiber Business drove higher profitability.

Factors Affecting Business Performance

【Revenue】The core Fiber Business (93.7% of total) declined to ¥94.9B (YoY -4.7%), serving as the primary factor that pushed down total revenue of ¥96.0B (YoY -4.6%). The non-core Other segment increased revenue to ¥6.4B (YoY +4.4%), but its small scale limited its impact on overall results.

【Profit and Loss】Cost of sales decreased to ¥72.0B (¥77.8B in the previous year), and gross margin improved to 25.0% from 22.7% in the previous year, an increase of +2.3pt. SG&A expenses were ¥15.5B (¥15.1B in the previous year, +2.6%), causing the SG&A ratio to rise by +1.1pt to 16.1%. However, the improvement in gross profit exceeded this increase, and the Operating Income margin expanded by +1.2pt to 8.9%. In non-operating items, equity in earnings of affiliates of ¥1.4B (¥0.8B in the previous year) and dividend income of ¥1.0B contributed to results, expanding the Ordinary Income margin to 11.9% (+2.4pt). Extraordinary losses were minimal at ¥0.2B (losses on disposal of fixed assets, etc.), and the impact of temporary factors was limited. The effective tax rate declined slightly to 26.9% from 27.6% in the previous year, resulting in Net Income of ¥8.2B (YoY +19.8%). In conclusion, this was a lower-revenue, higher-earnings quarter.

Segment Analysis

Fiber reported revenue of ¥94.9B (93.7% of total, YoY -4.7%), Operating Income of ¥8.3B (YoY +11.9%), and a margin of 8.7% (7.5% in the previous year). Despite the decline in revenue, segment profit increased by double digits as a result of improved margins, supporting the effectiveness of pricing policies and product-mix improvement. Other reported revenue of ¥6.4B (6.3% of total, YoY +4.4%), Operating Income of ¥0.2B (YoY -26.9%), and a margin of 3.0% (4.2% in the previous year). Profitability deteriorated despite higher revenue, leaving the profitability of non-core businesses as an ongoing issue.

Key Financial Indicators

【Profitability】The Operating Income margin was 8.9% (7.7% in the previous year), the Ordinary Income margin was 11.9% (9.5% in the previous year), and the Net Income margin was 8.5% (6.7% in the previous year), all improving. The improvement originated with the gross margin, which rose to 25.0% from 22.7% in the previous year.【Cash Flow Quality】Cash and deposits were ¥82.1B, down ¥10.2B from ¥92.3B in the previous year. Accounts receivable decreased to ¥57.3B (¥66.8B in the previous year), while accounts payable decreased to ¥41.4B (¥47.9B in the previous year), indicating that changes in working-capital items affected the cash balance.【Investment Efficiency】ROE was 2.0% (based on Q1), EPS was ¥21.45 (¥17.17 in the previous year, +24.9%), and BPS was ¥1,061.29 (¥1,042.52 in the previous year, +1.8%).【Financial Soundness】The Equity Ratio increased to 78.5% from 76.8% in the previous year. With total assets of ¥510.1B and net assets of ¥400.7B, and current assets of ¥219.8B versus current liabilities of ¥73.9B, both the financial base and liquidity remain robust.

Cash Flow Analysis

Cash and deposits were ¥82.1B, declining by ¥10.2B (-11.1%) from ¥92.3B in the same period of the previous year. Accounts receivable decreased to ¥57.3B (¥66.8B in the previous year), while inventories edged up to ¥17.5B (¥17.0B in the previous year) and accounts payable declined to ¥41.4B (¥47.9B in the previous year). The reduction in trade payables appears to have affected cash management. Investment securities increased to ¥158.9B (¥154.0B in the previous year), indicating that a portion of held assets was allocated to securities investments. Treasury stock increased to ¥13.3B (¥9.5B in the previous year), with funds also allocated to shareholder returns. Total assets were ¥510.1B, slightly contracted from ¥519.4B in the previous year, while net assets increased to ¥400.7B from ¥398.9B in the previous year. The Equity Ratio rose to 78.5%, and the Company’s financial condition remained broadly stable.

Quality of Earnings

Of Ordinary Income of ¥11.4B, core Operating Income accounted for ¥8.5B, supplemented by ¥2.9B in non-operating income (including equity in earnings of affiliates of ¥1.4B and dividend income of ¥1.0B). Because equity-method income and dividends are affected by the performance and dividend policies of investee companies, they entail somewhat greater volatility than Operating Income and should be monitored accordingly. Extraordinary losses were limited to ¥0.2B (losses on disposal of fixed assets, etc.), with a limited impact on Profit Before Tax of ¥11.2B; the contribution from temporary factors was small. Comprehensive Income was ¥10.5B, exceeding Net Income of ¥8.1B. This gap was primarily attributable to valuation differences on securities turning positive at ¥2.4B (negative ¥0.8B in the previous year), which should be assessed separately from core operating profitability.

Earnings Forecasts and Guidance

Progress against the Full-Year forecast was 22.9% for Revenue (¥96.0B/¥420.0B), while Operating Income was 56.8% (¥8.5B/¥15.0B), Ordinary Income was 49.6% (¥11.4B/¥23.0B), and Net Income was 40.6% (¥8.2B/¥20.0B). Profit items therefore significantly exceeded the standard quarterly progress benchmark of 25%. The Full-Year plan anticipates declines of -40.1% YoY in Operating Income and -28.3% YoY in Ordinary Income, making it conservative compared with the YoY earnings growth trend achieved as of Q1. Although the earnings forecast was revised during the quarter, the dividend forecast was not revised.

Shareholder Returns

The annual dividend forecast is ¥27, resulting in a Payout Ratio of 51.5% based on the Full-Year EPS forecast of ¥52.46. As of the end of Q1, treasury stock had increased to ¥13.3B (¥9.5B in the previous year), indicating that shareholder returns through share repurchases are also progressing in parallel. The dividend-only Payout Ratio is 51.5%, while the Total Return Ratio, including share repurchases, is higher. Given the financial base of an Equity Ratio of 78.5% and cash and deposits of ¥82.1B, there are no significant concerns regarding dividend sustainability.

Risk Factors

1. Business concentration risk: The Fiber Business accounts for 93.7% of Revenue, creating a structure in which supply-demand and pricing trends in this business significantly affect overall results.

2. Sustainability risk relating to pricing and product-mix policies: The improvement in gross margin (+2.3pt) was primarily driven by pricing policies and an expanded mix of high-value-added products. If maintaining prices becomes difficult during a period of slowing demand, the sustainability of profitability improvements could be affected.

3. Valuation risk associated with investment securities: The Company holds ¥158.9B in investment securities, and market fluctuations may affect valuation differences on securities and Comprehensive Income.

Industry Benchmark (For Reference; Compiled by the Company)

Both the Operating Income margin and Net Income margin are significantly above the industry median, indicating that profitability is relatively high within the industry.

The Revenue growth rate is significantly below the industry median, indicating that the lack of top-line growth is particularly notable within the industry.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. Despite lower revenue, the Company secured increases of +10.5% in Operating Income and +19.4% in Ordinary Income as gross margin improved by +2.3pt, quantitatively confirming the effectiveness of its pricing policies and product-mix strategy.

2. Progress toward the Full-Year forecast was 56.8% for Operating Income and 49.6% for Ordinary Income, significantly exceeding the quarterly benchmark of 25%, making the Full-Year plan appear conservative.

3. Comprehensive Income of ¥10.5B exceeded Net Income of ¥8.1B, supported by an increase in valuation differences on securities. However, this should be evaluated separately from core operating profitability.

Theoretical Stock Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type, explicit five-year fade). It is not a forecast of the market stock price or a recommendation of any specific investment action.

Sensitivity: ¥915–¥967 for ±1% in the cost of equity, and ¥936–¥943 for ±0.1 in ω.

Notes:

• Because Net Income progress against the Full-Year forecast (41%) exceeds the standard benchmark (25%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies with leading progress tend to outperform forecasts; adjustments may be excessive for businesses with strong seasonality).
• 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 difference relative to the Full-Year forecast).

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value does not forecast or guarantee future stock prices)

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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 disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with professionals as necessary.

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