Kobe Steel,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.18T
• Operating Income: ¥62.56B
• Net Income: ¥57.94B
• EPS: ¥159.49

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Integrated Analysis

Analysis integrating XBRL data (GPT-5) and PDF earnings presentation (Claude)

Executive Summary

Kobe Steel (5406) reported FY2026 Q2 consolidated results under JGAAP showing a mixed picture: top-line contraction and margin compression at the operating level, but headline net income growth aided by non-operating factors. Revenue declined 5.4% YoY to ¥1,181.4bn, reflecting softer demand and/or price normalization across key product lines. Gross profit reached ¥206.7bn (gross margin 17.5%), indicating resilience in product spreads but downshifts from prior highs. Operating income fell 19.5% YoY to ¥62.6bn, compressing the operating margin to roughly 5.3%, suggesting cost pass-through challenges and/or lower utilization. Ordinary income of ¥57.7bn came in below operating income due to financial costs and other non-operating items, including ¥6.8bn of interest expense. Net income, however, increased 11.0% YoY to ¥62.8bn, implying the presence of extraordinary gains and/or tax effects that offset the weaker operating trend. The DuPont profile indicates a calculated ROE of 5.02% (net margin 5.32%, asset turnover 0.416x, leverage 2.27x), consistent with the reported ROE. Liquidity is comfortable with a current ratio of 154.9% and quick ratio of 125.8%, and working capital of ¥501.7bn supports near-term obligations. Leverage is moderate with debt-to-equity of 1.32x and interest coverage at 9.2x, which remains acceptable for a cyclical industrial. Based on net income and income tax, the implied effective tax rate is about 22.6%, though the provided standardized “effective tax rate” metric shows 0.0% due to disclosure limitations. Cash flow figures (OCF/FCF) are not disclosed in this dataset; thus, earnings-to-cash conversion cannot be assessed here. Dividend information is also not disclosed (DPS and payout shown as 0), so dividend capacity and policy cannot be evaluated from this extract. Balance sheet strength and liquidity provide buffers amid a softer operating backdrop, but cyclical exposure and energy/raw material cost volatility remain key variables. The quarter’s net income strength versus operating income suggests non-operating/extraordinary contributions, which may not be recurring. Overall, the company is profitable with adequate liquidity and manageable leverage, but operating momentum softened, and the sustainability of net profit depends on underlying segment recovery and cost dynamics. Data gaps, particularly around cash flows and depreciation, limit the depth of quality-of-earnings analysis.

From Earnings Presentation: 2025年度第2四半期決算は、経常利益576億円（前年同期比-132億円）と減益だが、政策保有株式売却等の特別利益により当期純利益628億円（同+62億円）と増益を達成。在庫評価影響が△105億円と悪化し、固定費増も響いた。年度見通しは、上期増益(前回比+76億円)と米国関税リスク縮小（下期+20億円）を織り込むも、在庫評価影響悪化△85億円等により経常利益1,100億円と前回並みを維持。当期純利益も1,000億円で据え置き。フリーCFは運転資本改善と投資時期ずれで1,000億円に上方修正し、D/Eレシオは0.65倍程度へ改善見込み。中間配当40円決議、年間配当80円の方針変更なし。下期は自動車需要増（米国関税影響縮小）を見込むが、建築・土木は低調継続。経常利益は上期576億円から下期523億円へ減少見通しで、鉄鋼メタルスプレッド悪化、電力の燃料費調整時期ずれ剥落、定期点検日数増等が響く。配当性向は31.5%で中計目標30%程度に沿う。ROICは5%程度を維持するが、資本コストとの対比で改善余地あり。

Financial Analysis

Profitability

ROE decomposition (DuPont): Net profit margin 5.32% × asset turnover 0.416 × financial leverage 2.27 = ROE 5.02%. Operating margin is roughly 5.3% (¥62.6bn / ¥1,181.4bn), down YoY alongside revenue, indicating weaker operating leverage in the period. Gross margin at 17.5% suggests spreads remain positive but likely normalized from peak levels. The decline from operating income to ordinary income is driven by non-operating costs, notably ¥6.8bn interest expense, partly offset by other items. Net income exceeds ordinary income, implying extraordinary gains and/or lower tax/one-off effects; this boosts NPM but may be non-recurring. Interest coverage stands at 9.2x (operating income / interest), indicating adequate headroom despite a cyclical environment. Margin quality is mixed: core margins compressed YoY, while the net margin benefited from below-the-line items. Operating leverage appears negative this period as revenue contraction translated into a larger decline in operating income (-19.5% YoY), consistent with fixed-cost burden in heavy industry. Lack of disclosed depreciation/amortization (reported as 0) prevents EBITDA-based cross-checks; actual D&A is likely material for this asset-intensive business.

Growth

Revenue fell 5.4% YoY to ¥1,181.4bn, pointing to softer volumes and/or price normalization in steel/aluminum and related businesses. Operating income declined 19.5% YoY to ¥62.6bn, indicating that cost normalization and weaker utilization outpaced any cost savings, and price-cost spreads tightened. Net income rose 11.0% YoY to ¥62.8bn, likely aided by extraordinary gains or tax/one-off effects, rather than core profit growth. Sustainability of net profit growth is therefore uncertain without a rebound in operating profit. With asset turnover at 0.416x, the company remains capital intensive, and top-line recovery will be a key driver of ROE improvement. Near-term outlook hinges on end-market demand (automotive, construction, machinery), raw material and energy price trends, and FX. The sequential trajectory was not provided; thus, visibility on momentum within the half-year is limited. Given the cyclicality of the portfolio, a stabilization of spreads and improved utilization would be needed to re-expand operating margins. Non-operating contributions that supported net income this term may not recur, making underlying operating recovery essential for sustained growth.

Financial Health

Total assets ¥2,842.9bn and total equity ¥1,252.3bn imply financial leverage of ~2.27x (consistent with DuPont input). Total liabilities are ¥1,654.0bn, yielding a debt-to-equity ratio of 1.32x (provided), consistent with moderate leverage for a heavy industrial. Liquidity is solid: current ratio 154.9% and quick ratio 125.8%, supported by current assets of ¥1,416.3bn vs current liabilities of ¥914.6bn. Working capital is sizeable at ¥501.7bn, providing flexibility for operations and seasonal swings. Inventories of ¥265.9bn represent a meaningful portion of current assets (~18.8% of total assets, ~18.8%? and ~18.8% of CA about 18.8%; specifically ~18.8% of CA and ~9.4% of total assets), indicating sensitivity to demand and pricing cycles. Interest coverage of 9.2x suggests manageable debt service capacity at current earnings levels. The reported equity ratio of 0.0% in the dataset reflects non-disclosure in that field rather than actual zero; economically, equity is substantial at ¥1.25tn. Overall solvency appears adequate, though the capital structure remains geared and sensitive to cyclical EBITDA swings.

Cash Flow

Operating cash flow, investing cash flow, and free cash flow are not disclosed in this dataset (zeros denote unavailable data). As such, OCF/Net Income and FCF coverage cannot be reliably assessed here. Given the large asset base and the sector’s capex intensity, true depreciation and capex are likely material despite undisclosed D&A/CF figures. Working capital stands at ¥501.7bn with inventories at ¥265.9bn; changes in inventories, receivables, and payables will be key determinants of cash conversion but are not available for this period. Earnings quality appears mixed: operating profit declined while net profit increased, implying non-operating/extraordinary effects; without OCF data, we cannot verify cash realization of earnings. Monitor future disclosures for OCF, capex, and FCF to validate the sustainability of earnings and the company’s ability to self-fund investments.

Dividend Sustainability

Dividend per share (DPS) and payout ratio are shown as 0 in this extract due to non-disclosure; therefore, we cannot assess current dividend distributions or coverage. Without OCF and capex data, free cash flow coverage of dividends cannot be evaluated. Policy outlook cannot be inferred from the provided data; historically, such companies balance dividends with cyclical earnings and capex needs, but no specific policy data is provided here. For a robust assessment, track disclosed DPS, payout ratio, OCF, and capex in subsequent filings.

Business Outlook

下期は自動車需要が米国関税影響縮小により前回比増加を見込むが、建築・土木は人手不足に伴う中小型案件の着工遅れで引き続き低調。鉄鋼は4Q鉄鉱石価格$88決着済みで足元並み想定、メタルスプレッドは悪化見通し。アルミ板は飲料缶需要減少継続、自動車向けディスク販売増。建機は日本・中国で需要減、北米は堅調。機械は中国内需減退と米国関税の投資時期不透明感あるも一般産業国内は堅調。電力は真岡発電所の定期点検日数増（法定点検）と燃料費調整時期ずれ剥落で減益だが、売電価格一過性増益が下支え。為替前提は下期USD145.0円、EUR170.0円、元20.0円。年度設備投資1,300億円、減価償却費1,250億円で維持更新水準。

Management Guidance

経営陣は「上期は在庫評価影響悪化と固定費増で減益だが、機械売上増と素材系価格転嫁進展が下支え。下期は鉄鋼メタルスプレッド悪化と電力の増益剥落で減益見通しだが、米国関税リスク縮小と自動車需要回復でダウンサイドは限定的。FCF改善により財務改善（D/Eレシオ0.65倍程度）とROIC5%程度を確保。配当は中計方針の配当性向30%程度に沿い年間80円を維持。中長期的には資本効率改善（ROIC向上）と政策保有株式削減、運転資本効率化でキャッシュ創出力を高める」方針を示す。上期純利益628億円は政策保有株売却益と土地売却益で増益だが、下期は特別利益縮小で純利益371億円見込み。年度1,000億円（ROE8%程度）を目指す。

Strategic Initiatives

• 運転資本改善：素材系での棚卸資産削減と機械系での入金前倒しによりFCF 1,000億円確保（前回700億円から+300億円）。
• 政策保有株式の売却：上期に日本製鉄等の政策保有株売却益154億円計上。年度175億円の売却益見込みで資本効率改善と財務改善を両立。
• 米国関税リスク対応：建設機械で米国販社の関税負担と販売価格転嫁対応。素材系は自動車向け完成車輸出減リスクを△20%→△10%へ縮小。
• 脱炭素・DX：中長期的にはCO2削減と製造DX推進（詳細は本資料では限定的だが、CDP気候変動Aリスト獲得、DX銘柄2025選定を強調）。
• 価格転嫁：素材系で原料高・コスト高を販売価格に転嫁進展。溶接・素形材で価格転嫁が進展したが、数量減と固定費増で相殺。
• 設備投資コントロール：年度計上1,300億円、支払1,400億円で維持更新中心。投資の時期ずれでFCF改善に寄与。

Risk Assessment

Business Risks:

• Cyclical demand in steel, aluminum, copper, and machinery end-markets (automotive, construction, machinery).
• Raw material and energy price volatility (iron ore, coking coal, electricity/LNG) affecting spreads.
• Foreign exchange fluctuations (USD/JPY) impacting input costs and export competitiveness.
• Utilization rate sensitivity and operating leverage in an asset-intensive footprint.
• Competitive pricing pressure domestically and globally amid capacity shifts.
• Potential environmental regulation/carbon cost increases requiring additional capex.
• Project execution risk in machinery/power-related businesses.

Financial Risks:

• Moderate leverage (debt-to-equity 1.32x) with earnings cyclicality can pressure credit metrics in downturns.
• Interest rate and refinancing risk; interest coverage at 9.2x could tighten if operating income weakens.
• Working capital volatility tied to inventory and receivables may strain cash in downcycles.
• High maintenance and strategic capex needs can compress FCF in weaker periods.
• Dependence on non-operating/extraordinary gains in this period to support net income.

Key Concerns:

• Operating income declined 19.5% YoY despite only a 5.4% revenue decline, indicating margin pressure.
• Net income growth (+11.0% YoY) appears assisted by non-operating/extraordinary items, raising sustainability questions.
• Lack of disclosed cash flow data prevents validation of earnings quality and dividend capacity.
• Exposure to raw material and energy costs that can quickly alter margin trajectory.

Risk Factors from Presentation:

• 米国関税リスク：年度△30億円（直接輸出△10億円、間接輸出△15億円、その他△5億円）。下期リスク△20億円を織り込むも、自動車完成車輸出減想定を△20%→△10%へ下方修正済み。
• 在庫評価影響：年度△135億円（鉄鋼△125億円、アルミ板△10億円、素形材+5億円）。下期は鉄鋼△55億円、アルミ板△20億円、素形材±0億円で悪化見通し。
• 鉄鋼メタルスプレッド悪化：下期に鉄鋼で+25億円の在庫評価悪化要因に加え、スプレッド縮小で収益圧迫。
• 電力の燃料費調整時期ずれ剥落：上期+40億円の増益影響が下期はほぼゼロとなり、定期点検日数増（法定点検）も響く。
• 建築・土木需要の低調：人手不足に伴う中小型案件の着工遅れで需要減。溶接・鉄鋼に影響。
• 自動車生産の変動：上期は米国関税影響で国内・海外減少リスクがあったが、下期は縮小見込み。個別車種の販売減（素形材）も懸念。
• 建設機械需要の地域差：日本（レンタル需要低迷長期化）、中国（政府主導農地整備工事伸び悩み）、欧州（景気悪化）、東南アジア（資源安でインドネシア減）で減少。北米は堅調。
• 機械需要の不透明感：中国内需減退、米国関税に伴う投資時期の不透明感。一般産業国内は堅調だが海外は低迷。
• 原料価格変動：鉄鉱石・強粘炭・一般炭の市況変動。3Q鉄鉱石$88決着済み、4Qは足元並み想定。
• 為替変動：下期USD145円、EUR170円、元20円想定。円安進行は輸出採算改善だが原料コスト増も両面。
• 固定費増加：労務費等の固定費を中心にコスト増加し、数量減との組み合わせで負の営業レバレッジ。

Investment Implications

Key Takeaways:

• ROE of 5.02% is modest and driven by leverage and net margin support from below-the-line items.
• Core profitability softened: operating margin ~5.3% with -19.5% YoY operating income decline.
• Liquidity is sound (current ratio 154.9%, quick ratio 125.8%) and interest coverage acceptable at 9.2x.
• Non-operating/extraordinary effects likely buoyed net income; sustainability into future periods is uncertain.
• Data gaps (OCF, FCF, D&A, DPS) limit assessment of cash conversion and shareholder returns.

Metrics to Watch:

• Segment operating income and spreads (steel/aluminum) and utilization rates.
• Raw material and energy input costs vs selling prices (ASP spread) and FX (USD/JPY).
• Operating cash flow, capex, and free cash flow; OCF/NI conversion ratio.
• Inventory days and working capital intensity.
• Interest coverage and leverage (net debt/EBITDA when disclosed).
• Extraordinary items and tax rate normalization.
• Equity ratio and capital allocation (debt reduction vs investment vs dividends).

Relative Positioning: Within Japan’s cyclical metals and machinery cohort, Kobe Steel’s 5% ROE and 9x interest coverage indicate mid-pack profitability and adequate credit headroom, but below top-tier peers on returns; liquidity is solid, while operating momentum this term lags given sharper YoY operating profit decline.

Supplementary Insights (Key Highlights)

• 上期実績：経常利益576億円（前年-132億円）だが、在庫評価影響△105億円が主因。純利益628億円は政策保有株売却益154億円と土地売却益66億円により増益。
• 年度経常利益1,100億円：上期増益+76億円と米国関税リスク縮小+20億円を織り込むも、在庫評価影響悪化△85億円で前回並み据え置き。
• フリーCF 1,000億円に上方修正(前回700億円)：運転資本改善と投資時期ずれで+300億円改善。D/Eレシオは0.65倍程度へ改善見込み（前回0.7倍程度）。
• 中間配当40円決議、年間配当80円（配当性向31.5%）で中計目標30%程度に沿う。政策保有株式の削減を継続。
• 米国関税リスク：年度△30億円（上期実績△10億円、下期リスク△20億円）に縮小。自動車向け完成車輸出減リスクを△20%→△10%へ下方修正。
• 下期見通し：経常利益523億円（上期比△53億円減）。鉄鋼メタルスプレッド悪化+25億円、電力の燃料費調整時期ずれ剥落と定期点検段差△110億円、在庫評価影響△110億円が主因。
• 素材系：鉄鋼は年度45億円（上期85億円から下期△40億円）、在庫評価影響△125億円と米国関税で減益。アルミ板は△45億円、素形材50億円。建機85億円で前回並み。
• 機械系：機械400億円（一般産業向け堅調）、エンジニアリング120億円（還元鉄大型案件受注も案件構成差で減益）。電力360億円（売電価格一過性増益+10億円で前回比+10億円）。

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis