| Metric | Current | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1777.4B | ¥1440.7B | +23.4% |
| Operating Income | ¥136.1B | ¥132.8B | +2.5% |
| Ordinary Income | ¥159.9B | ¥136.6B | +17.1% |
| Net Income | ¥313.2B | ¥74.9B | +318.0% |
| ROE | 27.0% | 8.0% | - |
For the fiscal year ended March 2026, Revenue was ¥1777.4B (YoY +¥336.7B +23.4%), Operating Income was ¥136.1B (YoY +¥3.3B +2.5%), Ordinary Income was ¥159.9B (YoY +¥23.3B +17.1%), and Net Income attributable to owners of the parent was ¥313.2B (YoY +¥238.3B +318.0%). While the company reported increases in both revenue and profit, the Operating Margin fell to 7.7% (down 1.5pt from 9.2% prior year), and the large increase in Net Income is attributable to Special Gains of ¥375.9B including ¥372.4B of gains on sales of fixed assets. Growth in the core Refractory Business and the Engineering Business drove overall revenue expansion, while SG&A ratio rose to 16.5% (up 1.3pt from 15.2%), reducing profitability.
[Revenue] Consolidated Revenue increased significantly to ¥1777.4B (YoY +23.4%). By segment, Refractories recorded ¥1109.0B (+15.7%), accounting for 62.4% of consolidated revenue, supported by robust demand from steel and nonferrous sectors and expansion of the consolidation scope through M&A. Engineering surged to ¥458.6B (+78.2%), growing to 25.8% of the company due to the consolidation effect of Brazil’s Reframax and increased project work. Insulation Materials decreased to ¥177.1B (-5.7%), and Advanced Equipment decreased to ¥41.0B (-5.5%), shifting the segment mix toward Refractories and Engineering. By region, Latin America expanded sharply to ¥286.0B (from ¥106.8B prior year, +167.9%), led by Brazil at ¥284.2B; Europe grew to ¥132.0B (from ¥50.9B, +159.2%); North America to ¥97.0B (from ¥77.6B, +24.9%). Domestic revenue was flat at ¥1014.2B (from ¥1009.2B, +0.5%), with growth driven by overseas operations.
[Profitability] Cost of sales was ¥1347.5B, yielding Gross Profit of ¥429.9B and a Gross Margin of 24.2% (down 0.2pt from 24.4% prior year). SG&A rose to ¥293.8B (from ¥218.7B, +34.4%), outpacing revenue growth (+23.4%), pushing the SG&A ratio to 16.5% (from 15.2%, +1.3pt). Increases were driven by M&A integration costs and goodwill amortization of ¥13.9B (from ¥4.3B), along with higher personnel and logistics costs. Operating Income was ¥136.1B (+2.5%), with an Operating Margin of 7.7% (down 1.5pt from 9.2%), indicating reduced profitability. By segment Operating Income: Refractories ¥85.8B (+11.5%, margin 7.7%), Engineering ¥27.1B (+68.2%, margin 5.9%) increased; Insulation Materials ¥24.8B (-24.1%, margin 14.0%) decreased; Advanced Equipment posted an operating loss of ¥1.1B, turning negative. Non-operating items were net income of ¥23.7B (non-operating income ¥38.9B less non-operating expenses ¥15.2B), aided by foreign exchange gains of ¥22.2B (no loss prior year) and increased interest income ¥6.8B (from ¥3.7B), resulting in Ordinary Income of ¥159.9B (+17.1%). Extraordinary items were net gains of ¥273.8B (Extraordinary Gains ¥375.9B, largely ¥372.4B gain on sale of fixed assets, less Extraordinary Losses ¥102.0B including impairment losses ¥97.2B), expanding Profit before Tax to ¥433.7B. After income taxes ¥171.4B (effective tax rate 39.5%) and non-controlling interests ¥1.5B, Net Income attributable to owners of the parent was ¥313.2B (+318.0%). However, most of the increase was from one-off gain on sale of fixed assets, and normalized profit levels are expected to be materially lower. Conclusion: revenue and profit increased, but operating-stage margins declined and Net Income growth was driven by one-off gains.
Refractories: Revenue ¥1109.0B (+15.7%), Operating Income ¥85.8B (+11.5%), margin 7.7%, securing stable earnings as the core business. Consolidation of Dynamix Casting Fluxes (U.S.) and steady core demand contributed, though margin slightly declined from 8.0% prior year. Engineering: Revenue ¥458.6B (+78.2%), Operating Income ¥27.1B (+68.2%), margin 5.9%, achieving rapid growth driven by consolidation of Reframax (Brazil) and increased project orders; however, margin fell from 6.3% prior year, indicating the need for project profitability control. Insulation Materials: Revenue ¥177.1B (-5.7%), Operating Income ¥24.8B (-24.1%), margin 14.0% (down 3.4pt from 17.4%), with demand decline and margin pressure. Advanced Equipment: Revenue ¥41.0B (-5.5%), operating loss ¥1.1B (prior year Operating Income ¥1.7B), requiring business structure review. Other (real estate leasing): Revenue ¥7.5B (-16.7%), operating loss ¥0.4B, small scale.
[Profitability] Operating Margin declined to 7.7% (from 9.2%, -1.5pt), driven by higher SG&A ratio and adverse segment mix. Gross Margin 24.2% (from 24.4%) was largely stable. Net Margin 17.6% (from 5.2%) appeared to improve materially due to gain on sale of fixed assets, while on an ordinary basis Ordinary Margin was 9.0% (from 9.5%) slightly down. ROE was 27.0% (from 11.3%) but heavily influenced by one-off gains; normalized ROE is estimated around 10%. [Cash Quality] Operating Cash Flow (OCF) was ¥138.6B versus Net Income ¥313.2B, yielding an OCF/Net Income ratio of 0.44x, indicating weak cash backing of profit. Working capital tied up due to Accounts Receivable increase -¥61.0B and Accounts Payable decrease -¥27.6B, DSO 102 days (from 99), DIO 91 days (from 97) worsened, and CCC 141 days (from 149) remained high. Free Cash Flow (FCF) ¥246.5B includes proceeds from sale of fixed assets ¥400.9B; sustainable generation is roughly OCF less CapEx around ¥43B. [Investment Efficiency] CapEx ¥95.8B was 1.34x depreciation ¥71.3B, indicating proactive growth investment. Goodwill ¥281.4B equals 24.3% of Net Assets and 1.36x estimated EBITDA (¥207.4B), within tolerable range, but JGAAP goodwill amortization ¥13.9B is about 6.7% of EBITDA and compresses profit. Total Asset Turnover 0.77x (from 0.74x) slightly improved. [Financial Soundness] Equity Ratio 50.0% (from 48.1%), Current Ratio 175.9% (from 184.5%), Quick Ratio 153.1% (from 159.5%) are healthy. Interest-bearing debt ¥394.5B, Debt/EBITDA 1.90x, Interest Coverage 10.1x (operating income basis) or 15.5x (EBITDA basis), indicating sufficient financial capacity. Short-term borrowings ¥166.2B and long-term borrowings ¥223.9B produce a short-term debt ratio of 42.1% (somewhat high), but Cash and Deposits ¥213.6B + Short-term Securities ¥52.4B can cover most short-term debt.
OCF was ¥138.6B (from ¥131.0B, +¥7.6B +5.8%) marginally higher, but OCF/Net Income ratio 0.44x versus Net Income ¥313.2B indicates weak cash generation. OCF subtotal (before working capital changes) was ¥178.4B; working capital deterioration—Accounts Receivable increase -¥61.0B, Accounts Payable decrease -¥27.6B, Inventory increase ¥19.2B—constrained cash. Income taxes paid ¥37.0B were also a cash outflow. Investing Cash Flow was +¥107.8B largely due to proceeds from sale of fixed assets ¥400.9B (one-off), offset by CapEx -¥95.8B and acquisition of subsidiary shares -¥192.2B. Sustainable investment capacity should be viewed as approximately OCF minus CapEx, around ¥43B. Financing Cash Flow was -¥260.5B, used for long-term debt repayment -¥103.6B, net decrease in short-term borrowings -¥124.1B, and dividend payments -¥41.0B. FCF ¥246.5B includes proceeds from sale of fixed assets and is therefore exceptional; normalized FCF is estimated around ¥50B. Cash and cash equivalents decreased from ¥266.3B at the beginning of the period to ¥262.1B at year-end, a decline of ¥4.2B; considering FX effects +¥9.9B, the substantive cash reduction is approximately ¥14B. Improving working capital efficiency and cash conversion post-M&A are key issues.
Of Ordinary Income ¥159.9B, Operating Income ¥136.1B was from core operations; net non-operating income ¥23.7B is largely driven by foreign exchange gains ¥22.2B and is sensitive to FX rates. Extraordinary Gains ¥375.9B are mainly comprised of gain on sale of fixed assets ¥372.4B and are non-recurring. Approximately 180% of Net Income attributable to owners of the parent ¥313.2B is attributable to Extraordinary Gains, and normalized Net Income is expected to decline to around ¥100B (company guidance). Comprehensive Income ¥334.5B exceeded Net Income ¥313.2B, aided by ¥42.9B of foreign currency translation adjustments and ¥24.0B of valuation gains on securities. Although OCF ¥138.6B versus Operating Income ¥136.1B yields a CF conversion rate of 101.8% on the surface, about ¥40B of cash was tied up by working capital from the OCF subtotal ¥178.4B, with extended collection and payment terms suppressing cash generation. The accruals (gap between profit and CF) are mainly due to working capital factors; there is no evidence of accounting earnings manipulation, but declining capital efficiency impairs earnings quality. Post one-off gain erosion, normalized profit levels and working capital normalization are key to improving earnings quality.
Full Year guidance: Revenue ¥1890.0B (YoY +6.3%), Operating Income ¥130.0B (YoY -4.5%), Ordinary Income ¥130.0B (YoY -18.7%), Net Income attributable to owners of the parent ¥100.0B (approximately flat on a base excluding prior-year one-offs). Revenue is expected to be supported by continued growth in overseas operations and Engineering, but Operating Income is forecast lower YoY reflecting the removal of one-off gains, higher SG&A, and non-recurrence of impairment benefits—indicating a normalized earnings level. Progress rates stand at Revenue 94.1%, Operating Income 104.7%, Ordinary Income 123.0%, already exceeding full-year forecasts, but the company adopts a conservative plan anticipating removal of one-off gains and seasonal factors in H2. EPS forecast ¥219.14, Dividend forecast ¥95 (Payout Ratio 43.4%), with returns planned in line with a progressive dividend policy targeting DOE 4%+ from FY2027. Company guidance reflects operating-level profits excluding special items such as gains on sale of fixed assets and is judged a realistic outlook.
Annual dividend ¥90 (interim ¥45 + year-end ¥45), total dividends ¥41.0B, Payout Ratio 15.8% (based on Net Income attributable to owners of the parent ¥313.2B). Because Net Income includes Extraordinary Gains, the effective payout ratio on normalized earnings (company forecast Net Income ¥100B) is approximately 41%, which is conservative. DOE (dividend on equity) is about 4.8%, already in line with the progressive dividend policy of "DOE 4%+ baseline" to be introduced from FY2027. Next fiscal year dividend forecast ¥95 (Payout Ratio 43.4%), planning increases under the progressive policy. FCF coverage (FCF ¥246.5B / Dividends ¥41.0B) is 6.0x and ample, but since FCF includes proceeds from sale of fixed assets, with normalized FCF around ¥50B the dividend coverage ratio would be about 1.2x, still sufficient. Shares outstanding 47,147 thousand, treasury stock 1,514 thousand, average outstanding during period 45,624 thousand, treasury stock ratio 3.2% (low); no share buybacks executed, but repurchases may be considered under the DOE policy. Dividend sustainability is considered secure given OCF around ¥140B and normalized Net Income around ¥100B, supporting the progressive policy.
Working capital efficiency deterioration risk: Accounts Receivable ¥497.8B (from ¥392.1B, +27.0%) and Inventory ¥152.1B (from ¥145.5B) increased, leading to DSO 102 days, DIO 91 days, CCC 141 days and worse turnover. Changes in regional mix (higher share of Latin America and Europe) have lengthened collection periods and caused inventory stagnation, materially impairing cash generation. OCF/Net Income ratio 0.44x is low, making improvement in working capital management urgent.
M&A integration and impairment risk: Goodwill ¥281.4B (from ¥149.6B, +¥88.1B) and intangible assets ¥490.6B (from ¥280.8B, +74.7%) increased sharply, raising intangible asset ratio to 33.3% of total assets. Goodwill of ¥80.0B in Engineering (Reframax consolidation) and ¥198.4B in Refractories (including Dynamix consolidation) have been recorded; delays in PMI or failure to realize synergies could trigger future impairment risk. The company recorded impairment losses ¥97.2B this period and has prior impairment experience (¥220M prior year), underscoring the importance of monitoring intangible asset profitability.
Dependence on one-off gains and margin deterioration risk: Of Net Income attributable to owners of the parent ¥313.2B, the gain on sale of fixed assets ¥372.4B accounts for the majority, and normalized profit may decline to about ¥100B (company forecast). Operating Margin worsened to 7.7% (from 9.2%, -1.5pt), and if SG&A ratio remains elevated at 16.5% (from 15.2%, +1.3pt), profitability will be further pressured. Segment issues include Insulation Materials margin decline to 14.0% (from 17.4%) and Advanced Equipment turning loss-making; portfolio review and cost control are urgent.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.7% | 7.8% (4.6%–12.3%) | -0.1pt |
| Net Margin | 17.6% | 5.2% (2.3%–8.2%) | +12.4pt |
Operating Margin is close to the industry median, but Net Margin temporarily far exceeds peers due to gain on sale of fixed assets. Normalized Net Margin is estimated around 6%, converging toward industry average.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 23.4% | 3.7% (-0.4%–9.3%) | +19.7pt |
Revenue growth significantly outpaces the industry median, driven by M&A and expansion of the Engineering business. The company ranks in the top decile for growth within the industry, but growth quality (margins and cash conversion) needs improvement.
※Source: Company compilation
M&A-driven growth strategy and integration risk: Consolidations in Engineering (Reframax) and Refractories (Dynamix) materially expanded revenue, but goodwill ¥281.4B and a 1.3pt rise in SG&A ratio are pressuring margins. Key items to watch are PMI progress and realization of synergies—whether segment margin improvements can exceed goodwill amortization burden (annual ¥13.9B). Ongoing monitoring of impairment risk and intangible asset profitability is required.
Room for improvement in working capital efficiency and cash generation: OCF/Net Income ratio 0.44x and CCC 141 days indicate deteriorated capital efficiency, driven by regional mix shifts (higher Latin America and Europe shares) and extended collection terms. Strengthening receivables management and inventory optimization can compress working capital and enable stable OCF generation above ¥150B. Improvements in cash conversion will directly support shareholder returns sustainability and growth investment capacity; quarterly CCC trends will be an important indicator.
This report was automatically generated by AI analyzing XBRL financial statement data and is a financial analysis document. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company from public financial statements. Investment decisions should be made at your own discretion and responsibility, and, if necessary, after consulting a professional advisor.