| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1483.1B | ¥1693.3B | -12.4% |
| Operating Income / Operating Profit | ¥49.1B | ¥84.4B | -41.8% |
| Ordinary Income | ¥48.1B | ¥81.2B | -40.8% |
| Net Income / Net Profit | ¥20.3B | ¥48.5B | -58.2% |
| ROE | 1.9% | 4.5% | - |
The fiscal year ended March 2026 closed with Revenue ¥1,483.1B (YoY -¥210.2B -12.4%), Operating Income ¥49.1B (YoY -¥35.3B -41.8%), Ordinary Income ¥48.1B (YoY -¥33.1B -40.8%), and Net Income attributable to owners of the parent ¥20.3B (YoY -¥28.2B -58.2%), resulting in lower sales and profits due to a softer steel market and weakening demand. SG&A remained essentially flat at ¥136.2B despite the revenue decline, causing a relative rise in fixed-cost burden and deterioration of operating leverage. Operating margin fell sharply to 3.3% (prior year 5.0%) and net margin to 1.4% (prior year 2.9%), putting profitability well below the industry median. Conversely, Operating Cash Flow (OCF) expanded to ¥152.7B (YoY +107.9%)—7.5x Net Income—driven mainly by working capital release centered on inventory reduction, and Free Cash Flow (FCF) was ample at ¥104.2B. Cash and deposits rose to ¥232.4B (YoY +51.5%), Current Ratio 327%, and Equity Ratio 71.6%, further strengthening the financial base.
[Revenue] Revenue declined to ¥1,483.1B (YoY -¥210.2B -12.4%). By segment, Steel accounted for ¥1,458.6B (-12.5%), representing 98.3% of total; Engineering ¥16.9B (-10.6%); Real Estate ¥13.9B (+0.2%). The contraction in the steel business drove the overall decline, primarily due to weaker construction and manufacturing demand and a softer steel market. Revenue from customer contracts totaled ¥1,473.3B, and other revenue (e.g., real estate rental income) was ¥9.7B. After intersegment eliminations, external customer sales were entirely domestic, indicating limited geographic diversification.
[Profit & Loss] Operating Income was ¥49.1B (YoY -¥35.3B -41.8%), a decline that outpaced the sales drop. Cost of sales was ¥1,297.7B, with a cost-of-sales ratio worsening to 87.5% (prior year 87.0%), and gross margin fell to 12.5% (prior year 13.0%), down 50bp. SG&A remained largely flat at ¥136.2B, but SG&A ratio rose to 9.2% (prior year 8.1%) due to lower sales, causing operating margin to deteriorate by 1.7pt to 3.3% (prior year 5.0%). Non-operating items were a net -¥1.0B (non-operating income ¥3.8B, non-operating expenses ¥4.9B); dividend income ¥0.9B and equity-method investment income ¥0.5B provided support, while interest expense ¥1.9B was a burden. Ordinary Income settled at ¥48.1B (YoY -40.8%). Extraordinary items were net -¥14.1B (extraordinary gains ¥0.7B, extraordinary losses ¥14.8B). The main extraordinary loss was ¥5.2B for disposal of fixed assets, a one-time cost related to replacement of aging equipment that depressed Net Income. Profit before tax was ¥34.0B; after deducting income taxes of ¥9.3B, Net Income was ¥20.3B (YoY -58.2%). Comprehensive income was ¥39.4B, exceeding Net Income, with other comprehensive income contributions of ¥5.4B in valuation differences on available-for-sale securities and ¥9.4B adjustment related to retirement benefits. In conclusion, the company experienced lower sales and profits, with margin compression driven by worsening gross margin and rising fixed-cost burden.
Segment profit (on an Ordinary Income basis) was: Steel ¥42.2B (prior year ¥78.2B, -46.1%), Engineering -¥0.2B (prior year ¥0.4B), Real Estate ¥6.9B (prior year ¥7.0B, -1.6%). The Steel segment’s profitability deteriorated sharply—¥1,458.6B revenue vs. Ordinary Income margin 2.9% (prior year 4.7%). Engineering slipped into a small loss as declining sales and fixed-cost burden pressured profits. Real Estate remained highly profitable and stable with an Ordinary Income margin of 49.2% on ¥13.9B revenue, supported by steady rental income. Consolidated Ordinary Income after company-wide adjustments was ¥48.1B, which equals segment profits totaling ¥48.8B less company-level non-operating net items of -¥0.7B. The company is highly dependent on the Steel business, and the Steel segment’s market sensitivity drives consolidated performance.
[Profitability] Operating margin was 3.3%, down 1.7pt from 5.0%, with margin compression due to higher cost-of-sales ratio and higher SG&A ratio. Net margin was 1.4%, down 1.5pt from 2.9%, with extraordinary losses also weighing on profitability. ROE was 1.9%, down sharply from 5.4%, driven by deteriorating net margin and lower total asset turnover. ROA (on Ordinary Income basis) was 3.2%, down 2.2pt from 5.4%. [Cash Quality] Operating CF / Net Income was an extremely high 7.5x, with inventory reduction of ¥72.4B and receivables reduction of ¥12.6B releasing working capital and generating cash far exceeding accounting profit. FCF / Net Income was 5.1x, indicating strong cash generation. [Investment Efficiency] Total asset turnover fell to 0.97x (prior year 1.14x), as lower sales and asset growth—especially cash—reduced efficiency. Inventory turnover days improved to 87 days (prior year 122 days), reflecting inventory optimization. Accounts receivable turnover days extended to 79 days (prior year 72 days), slightly lengthening the collection cycle. Accounts payable turnover days extended to 43 days (prior year 36 days), lengthening the payment cycle and improving working capital. [Financial Soundness] Equity Ratio improved to 71.6% (prior year 70.7%), supported by higher net assets and slight total asset increase. Current Ratio is 327%, Quick Ratio 286%, and liquidity is very ample; cash ¥232.4B is 9.2x short-term borrowings of ¥25.2B. Interest-bearing debt (short-term borrowings ¥25.2B + long-term borrowings ¥60.0B) totals ¥85.2B, Debt/Equity is 7.8%, Net D/E is -13.5% (net cash), indicating low leverage. Interest coverage (Operating Income / interest expense) is 25.8x, so interest burden is minimal.
OCF expanded materially to ¥152.7B (prior year ¥73.5B, +107.9%). OCF before working capital changes totaled ¥181.1B, driven by non-cash charges including Depreciation ¥30.6B and Profit before tax ¥34.0B. Working capital changes contributed approximately ¥98B of release—Inventory decrease ¥72.4B (compression of finished goods, raw materials, and work-in-process), Accounts Receivable decrease ¥12.6B, and Accounts Payable increase ¥13.4B—boosting OCF. After deducting corporate taxes paid ¥19.8B, OCF was ¥152.7B. Investing Cash Flow was -¥48.5B, primarily due to Capital Expenditures ¥50.8B. Purchase and sale of investment securities (purchases ¥3.7B, sales ¥6.3B) were net positive, and proceeds from sale of fixed assets ¥1.7B also contributed inflows. Free Cash Flow was ample at ¥104.2B (OCF ¥152.7B + Investing CF -¥48.5B). Financing Cash Flow was -¥25.2B, mainly due to dividend payments ¥16.3B and long-term debt repayments ¥5.5B. Proceeds from long-term borrowings ¥70.0B were inflow, but overall Financing CF was slightly negative. As a result, Cash and Cash Equivalents increased by ¥78.99B, ending the period at ¥232.3B. The quality of OCF is very high, with inventory compression and receivables collection generating cash far above accounting profit; however, the working capital release is partly one-off, and as inventory and receivables approach trough levels, contributions are likely to normalize. Capital expenditures remain active at 1.66x depreciation, continuing replacement of aging equipment and efficiency investments.
Operating Income ¥49.1B indicates core business earning power; non-operating items were a minor net -¥1.0B, so Ordinary Income ¥48.1B is largely derived from core operations. Of non-operating income ¥3.8B, dividend income ¥0.9B and equity-method investment income ¥0.5B were main components; non-operating income represented 0.3% of sales, so Ordinary Income quality depends primarily on Operating Income. Extraordinary items were net -¥14.1B: extraordinary gains ¥0.7B (gain on sale of investment securities ¥5.9B, gain on sale of fixed assets ¥0.2B) versus extraordinary losses ¥14.8B (including disposal of fixed assets ¥5.2B), which depressed Net Income. The extraordinary loss scale is about 73% of Net Income ¥20.3B, indicating one-off factors significantly affected earnings variability. Comprehensive income ¥39.4B exceeded Net Income ¥20.3B, as other comprehensive income ¥19.1B (valuation differences on available-for-sale securities ¥5.4B, adjustments related to retirement benefits ¥9.4B, etc.) was added. The gap between Net Income and Comprehensive Income is driven by increases in valuation differences, reflecting valuation gains on marketable securities and pension assets. OCF ¥152.7B is 7.5x Net Income, showing cash generation far exceeding accounting profit. Accrual (Net Income - OCF) is -¥132.4B (negative), indicating a cash-led earnings structure with low accruals. Overall, Ordinary Income quality is high as it stems from core operations, but the occurrence of extraordinary losses increases Net Income volatility and warrants attention.
The forecast for the fiscal year ending March 2027 is: Revenue ¥1,570.0B (YoY +5.9%), Operating Income ¥34.0B (YoY -30.8%), Ordinary Income ¥20.0B (YoY -58.4%), Net Income attributable to owners of the parent ¥35.0B (YoY +72.5%), EPS 64.56円, Dividend ¥13.0円 (prior year ¥14.0円). Revenue is expected to increase, but Operating Income margin is anticipated to further decline to 2.2% as the plan conservatively factors in continued uncertainty in steel market conditions and sustained high raw material and energy costs. The large projected increase in Net Income assumes absence of extraordinary losses; on an Ordinary Income basis, profit is expected to decline. The progress rate for Operating Income (this period result ¥49.1B / next fiscal year plan ¥34.0B) is 144.4%, but this is not directly comparable as the current-period figure is for the completed fiscal year and the plan pertains to the next fiscal year. The next fiscal year plan Operating Income ¥34.0B is below this period’s result ¥49.1B, suggesting limited recovery in price spread. Dividend is expected to be reduced to ¥13.0円, implying a payout ratio of approximately 20.1% against planned EPS ¥64.56円, reflecting a conservative return policy aligned with lower profit levels.
Annual dividend was ¥14.0円 (interim ¥8.0円, year-end ¥6.0円), a ¥4.0円 cut from the prior year dividend ¥18.0円. Total dividends relative to Net Income ¥20.3B amounted to ¥7.6B (weighted average shares outstanding during period 54,202 thousand shares × ¥14), producing a payout ratio of approximately 38.0%. Despite the profit decline, the payout ratio remains relatively moderate, and dividend payments ¥16.3B against FCF ¥104.2B yield an FCF coverage of 6.4x, indicating very high sustainability. Cash and deposits ¥232.4B correspond to 14.3 years of dividend payments, and strong liquidity supports the capacity to maintain dividends. No share buybacks were disclosed; shareholder returns consist solely of dividends. Next fiscal year dividend forecast is ¥13.0円, a ¥1.0円 reduction from this period, and the payout ratio versus forecast Net Income ¥35.0B is about 21.4%. Total return ratio equals the payout ratio since returns are comprised only of dividends. Debt/EBITDA is 1.07x, Net D/E is -13.5% (net cash), indicating ample financial flexibility and high dividend-maintenance capability.
Steel market volatility risk: The Steel business accounts for 98.3% of Revenue, and a softer steel market deteriorated gross margin to 12.5% (prior year 13.0%). Operating margin 3.3% is 4.4pt below the industry median 7.8%, and the high market sensitivity is pressuring profitability. If raw material prices remain elevated and the pace of passing through higher costs to selling prices is slow, operating margin may decline further.
Transience of working capital releases: This period’s OCF ¥152.7B relied on inventory reduction ¥72.4B and receivables decline ¥12.6B, producing cash 7.5x Net Income. Inventory has been compressed to ¥116.0B (prior year ¥171.9B) and inventory turnover days improved to 87 days (prior year 122 days), but as inventories approach a bottom, working capital release contributions will shrink and OCF is expected to normalize. Continued capital expenditure ¥50.8B and maintaining dividend payments ¥16.3B require a recovery in recurring OCF generation.
Burden of replacing aging fixed assets: Cumulative depreciation rates are high—Buildings 77%, Tools and Equipment 88%—and Capital Expenditures ¥50.8B are 1.66x Depreciation ¥30.6B, indicating ongoing replacement investment. Disposal of fixed assets cost ¥5.2B as an extraordinary loss, and one-off costs related to replacing aging equipment depressed Net Income. Continued replacement investments are expected, posing ongoing risk to cash flows and profits via both Investing CF and potential extraordinary losses.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 3.3% | 7.8% (4.6%–12.3%) | -4.4pt |
| Net Margin | 1.4% | 5.2% (2.3%–8.2%) | -3.8pt |
Both operating and net margins are well below industry medians, placing profitability in the lower range for manufacturing.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -12.4% | 3.7% (-0.4%–9.3%) | -16.1pt |
Revenue growth lags the industry median by -16.1pt, reflecting pronounced weakness in steel demand.
※ Source: Company aggregation
Recovery in price spreads and gross margin is key to improving profitability. Operating margin 3.3% trails the industry median 7.8% by -4.4pt, primarily due to deterioration in cost-of-sales ratio to 87.5% (prior year 87.0%). Recovery in the steel market, progress in passing through selling prices, and stabilization of raw material costs will drive gross margin improvement. Effects from Capital Expenditures ¥50.8B (1.66x Depreciation) on yield improvement and cost efficiency will also be a mid-term factor for margin improvement.
Sustainability of working capital management and normalization of cash generation are focal points. This period generated OCF ¥152.7B (7.5x Net Income) via inventory compression ¥72.4B and receivables reduction ¥12.6B, but with inventory turnover at 87 days and receivables at 79 days, room for further inventory compression is shrinking. Going forward, recovery in recurring cash generation through higher sales and margin improvement will determine sustainability of dividends and continuation of replacement investments.
A strong financial base provides downside resilience. Equity Ratio 71.6%, Current Ratio 327%, Cash ¥232.4B (9.2x short-term borrowings), Debt/EBITDA 1.07x, and Interest Coverage 25.8x indicate solid financial flexibility and minimal interest burden. Even under next fiscal year’s profit decline forecast (Operating Income ¥34.0B, Ordinary Income ¥20.0B), the company plans a dividend of ¥13.0円, and high FCF coverage supports dividend maintenance. In a market recovery, there is room to deploy financial capacity for proactive investment and increased shareholder returns.
This report is an earnings analysis document automatically generated by AI from XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions are your own responsibility; please consult professionals as needed.