| Metric | Current Period | Year-Ago Period | YoY |
|---|---|---|---|
| Revenue | ¥578.35B | ¥569.06B | +1.6% |
| Operating Income | ¥20.41B | ¥31.31B | -34.8% |
| Ordinary Income | ¥22.66B | ¥28.76B | -21.2% |
| Net Income | ¥13.13B | ¥38.79B | -66.1% |
| ROE | 1.0% | 2.9% | - |
The April–June 2026 quarter posted higher revenue but lower earnings, as deteriorating profitability in the Steel & Aluminum and Power segments and a higher tax burden weighed on earnings. Revenue was ¥578.35B (+1.6% YoY), Operating Income was ¥20.41B (-34.8%), and Ordinary Income was ¥22.66B (-21.2%). Net income attributable to owners of the parent fell sharply to ¥12.20B (-68.4%), while consolidated Net Income, including non-controlling interests, was ¥13.13B (-66.1%). This reflected the decline in extraordinary income, including gains on sales of investment securities, from ¥20.61B in the previous period to ¥2.71B, as well as the increase in the effective tax rate to 48.2% from 14.7% in the prior-year period. Cost of sales increased 3.1%, outpacing the 1.6% increase in Revenue, resulting in a gross margin of 15.9%, down 1.2pt from the previous year.
【Revenue】Revenue was ¥578.35B, representing a 1.6% YoY increase. By segment, revenue growth was led by Advanced Materials at ¥92.55B (+21.8%), Engineering at ¥39.75B (+22.9%), and Welding at ¥26.29B (+16.1%). Conversely, Power at ¥34.87B (-24.0%), Machinery at ¥59.77B (-9.7%), and Steel & Aluminum at ¥250.19B (-3.0%) recorded revenue declines, resulting in a mixed performance across segments.
【Profit and Loss】Operating Income declined to ¥20.41B (-34.8%), while Ordinary Income fell to ¥22.66B (-21.2%). By segment, Steel & Aluminum swung from a profit of ¥5.49B in the previous year to a loss of ¥2.34B, reducing earnings by ¥7.83B. Power also deteriorated by ¥6.90B, from ¥8.57B to ¥1.68B, while Machinery deteriorated by ¥4.23B. In contrast, Advanced Materials, Engineering, and Welding contributed ¥8.03B, ¥4.89B, and ¥1.42B, respectively, partially offsetting the declines. Between Ordinary Income and Net Income attributable to owners of the parent, extraordinary income declined from ¥20.61B in the previous period to only ¥2.71B in the current period, while the effective tax rate increased to 48.2% from 14.7%, causing the decline in Net Income to exceed that in Ordinary Income. Overall, the current period recorded higher revenue but lower earnings.
Segment profit (before adjustments) for Steel & Aluminum fell into the red at -¥2.34B, compared with a profit of +¥5.49B in the prior year, making it the largest factor behind the deterioration in company-wide earnings. Power declined to +¥1.68B from +¥8.57B, while Machinery fell to +¥6.28B from +¥10.51B. In contrast, Advanced Materials rose sharply to +¥8.11B from +¥0.07B, Engineering to +¥6.06B from +¥1.17B, and Welding to +¥2.33B from +¥0.92B. Construction Machinery was essentially flat at +¥0.92B, compared with +¥1.21B in the prior year. The combined contribution from the improving segments, approximately +¥15.6B, almost absorbed the deterioration in Steel & Aluminum and Power, totaling approximately -¥14.7B. However, the deterioration in Machinery and in company-wide adjustments (-¥2.42B) remained, resulting in a ¥6.10B decline in Ordinary Income overall. The diversification of earnings sources within the business portfolio can be viewed as a structure that mitigates the impact of weakness in any single segment.
【Profitability】The Operating Income margin was 3.5%, down 2.0pt from 5.5% in the prior-year period, while the Net Income margin, based on income attributable to owners of the parent, was 2.1%, down 4.7pt from 6.8%.【Cash Quality】Extraordinary income of ¥2.71B accounted for 22.2% of Net Income attributable to owners of the parent of ¥12.20B. Although one-off factors decreased compared with extraordinary income of ¥20.61B in the previous period, the increase in the effective tax rate to 48.2% from 14.7% reduced the efficiency of converting Ordinary Income into Net Income.【Investment Efficiency】ROE was 1.0% for the quarter, before annualization, indicating that capital efficiency remained low.【Financial Soundness】The Equity Ratio was essentially unchanged at 46.8%, compared with 46.4% in the prior year. Total assets of ¥2,830.15B and net assets of ¥1,325.11B indicate that the financial foundation remained stable.
Cash and deposits were ¥17.62B, down 6.9% from ¥18.92B in the prior-year period. Trade receivables, comprising accounts receivable and notes receivable, declined 16.2% YoY to ¥36.25B, indicating progress in cash collection. Meanwhile, inventories increased 5.7% YoY to ¥27.08B, with inventory accumulation placing pressure on working capital. Trade payables, comprising accounts payable and notes payable, increased 2.8% YoY to ¥37.39B, indicating some use of payment terms. Interest-bearing debt declined overall, including long-term borrowings of ¥41.13B (-4.0%) and commercial paper of ¥2.00B (-23.1%), pointing to a reduction in liabilities. Improved collection of trade receivables supported cash generation, while the increase in inventories partially offset that benefit, leaving room to improve working capital efficiency.
Non-operating income consisted mainly of dividends received of ¥2.09B, equity-method investment income of ¥5.05B, and foreign exchange gains of ¥0.27B. Total non-operating income of ¥12.82B represented only 2.2% of Revenue, indicating no excessive dependence. Extraordinary income consisted solely of a ¥2.71B gain on the sale of property, plant and equipment, accounting for 22.2% of Net Income attributable to owners of the parent of ¥12.20B. In the previous period, the Company recorded extraordinary income of ¥20.61B, including gains on sales of investment securities, and the resulting reversal of one-off gains contributed materially to the sharp YoY decline in earnings. The effective tax rate rose significantly to 48.2% from 14.7%, and the deterioration in the conversion of profit before tax into Net Income is also a point to note when assessing earnings quality. Comprehensive income was ¥13.64B, compared with ¥9.73B in the prior year, exceeding consolidated Net Income of ¥13.13B. Foreign currency translation adjustments of +¥2.91B made a positive contribution exceeding the -¥3.84B valuation difference on securities. In the previous period, foreign currency translation adjustments were significantly negative, leaving Comprehensive Income well below Net Income of ¥38.79B. The reversal in the direction of the gap between Net Income and Comprehensive Income across the two periods is noteworthy.
The quarter included a revision to the earnings forecast. The full-year Company plan calls for Revenue of ¥2,690.0B (+10.4% YoY), Operating Income of ¥150.0B (+15.5%), Ordinary Income of ¥120.0B (-1.1%), EPS of ¥252.09, and a dividend of ¥80. The Q1 progress rates were 21.5% for Revenue and 18.9% for Ordinary Income, versus 13.6% for Operating Income and 12.2% for Net Income attributable to owners of the parent, all below the simple 25% run rate. Progress in Operating Income and Net Income was particularly slow, making profitability improvement toward the second half a prerequisite for achieving the full-year plan.
The full-year dividend forecast is ¥80 per share, with no revision to the dividend forecast. Based on the Company’s forecast EPS of ¥252.09, the Payout Ratio is approximately 31.7%, a reasonable level for the plan. As of the current quarter, no disclosure regarding share repurchases had been made, and dividends remain the primary form of shareholder returns.
Deterioration in Steel & Aluminum segment profitability: Segment profit fell from a profit of +¥5.49B in the prior-year period to a loss of -¥2.34B, becoming the primary driver of the ¥6.10B decline in company-wide Ordinary Income. Market conditions, raw material prices, and product mix trends will determine the extent of future earnings recovery.
Declining revenue and profitability in the Power segment: Revenue was ¥34.87B (-24.0%), while segment profit contracted sharply to +¥1.68B from +¥8.57B in the prior year. The decline in fixed-cost absorption accompanying lower revenue appears to have been a background factor in the deterioration in profitability.
Bottom-line compression due to the higher effective tax rate and reduced one-off gains: The effective tax rate rose to 48.2% from 14.7%, while extraordinary income declined from ¥20.61B to ¥2.71B. The combination of these factors caused the decline in Net Income attributable to owners of the parent (-68.4%) to be significantly greater than the decline in Ordinary Income (-21.2%).
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Income Margin | 3.5% | 8.7% (4.2%–14.2%) | -5.2pt |
| Net Income Margin | 2.3% | 7.0% (3.2%–10.6%) | -4.8pt |
| The Company’s Operating Income margin and Net Income margin were both below the industry median, placing profitability toward the lower end of the industry. |
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 1.6% | 6.2% (-1.1%–14.6%) | -4.7pt |
| The Revenue growth rate was also below the industry median, indicating that top-line growth remained relatively modest. |
※Source: Compiled by the Company
Q1 progress toward the full-year plan was 13.6% for Operating Income and 12.2% for Net Income, both below the simple 25% run rate. Monitoring progress under the plan’s weighting toward the second half will therefore be a key point based on the earnings data.
By segment, deteriorating profitability in Steel & Aluminum, Power, and Machinery contrasted with earnings growth in Advanced Materials, Engineering, and Welding, highlighting the diversification of earnings sources within the business portfolio.
Extraordinary income declined from ¥20.61B in the previous period to ¥2.71B in the current period, while the effective tax rate rose to 48.2%. As a result, the decline in Net Income (-68.4%) was significantly greater than the decline in Ordinary Income (-21.2%), and the difference in changes between the Ordinary Income and Net Income stages can be identified from the earnings data.
This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson-type model with an explicit five-year fade). It is not a forecast of the market share price or a recommendation to take any specific investment action.
| Scenario | Theoretical Share Price |
|---|---|
| bear | ¥3,076 |
| base | ¥3,140 |
| bull | ¥3,205 |
| Calculation Assumption | Value |
|---|---|
| Book Value per Share (BPS) | ¥3,356 |
| Adjusted Forecast EPS | ¥234.7 |
| Cost of Equity r | 9.27% (10-year Japanese government bond 2.77% + Equity Risk Premium 6.00% + Size Premium 0.50%) |
| Residual Income Persistence Factor ω / Explicit Forecast Period | 0.62 / 5 years |
| Assumed Payout Ratio | 31.7% |
| Forecast EPS Reliability Adjustment | ×0.931 (based on the Company’s historical guidance achievement rate) |
| Implied PBR / PER |
Sensitivity: ¥3,053–¥3,232 at ±1% for the Cost of Equity, and ¥3,133–¥3,145 at ±0.1 for ω.
Notes:
(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-07 / This value does not predict or guarantee future share prices.)
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. The industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with a professional as necessary.
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| 0.94x / 13.4x |
These are mechanically computed values based on a residual income model. They are not a forecast of market prices or a recommendation of any investment action, and do not predict or guarantee future share prices. Historical values are computed retrospectively using current guidance-achievement statistics.