| Metric | Current Period | Prior-year Period | YoY |
|---|---|---|---|
| Revenue | ¥325.4B | ¥348.8B | -6.7% |
| Operating Income | ¥33.2B | ¥42.9B | -22.7% |
| Ordinary Income | ¥37.1B | ¥46.0B | -19.3% |
| Net Income | ¥25.6B | ¥32.8B | -22.1% |
| ROE | 4.5% | 5.9% | - |
For FY2026 Q3 (cumulative), MORI IRON WORKS CO., LTD. reported Revenue of ¥325.4B (YoY -¥23.4B, -6.7%), Operating Income of ¥33.2B (YoY -¥9.7B, -22.7%), Ordinary Income of ¥37.1B (YoY -¥8.9B, -19.3%), and Net Income of ¥25.6B (YoY -¥7.2B, -22.1%), resulting in lower revenue and earnings. Operating Income declined at more than double the rate of the revenue decline, indicating adverse operating leverage. Ordinary Income was supported by ¥4.3B in non-operating income such as dividends received, moderating the decline. The full-year outlook calls for Revenue of ¥458.0B (YoY -0.7%), Operating Income of ¥46.0B (YoY -14.8%), and Net Income of ¥34.0B, but Q3 progress stands at 71.1% for Revenue, 72.2% for Operating Income, and 77.4% for Ordinary Income, implying that operating improvement in Q4 is a prerequisite for achieving targets.
[Profitability] ROE 4.5% (down from an estimated 5.8% in the prior-year period), Operating Margin 10.2% (down -2.1pt from 12.3% in the prior year), and Net Margin 7.8% (down -1.6pt from 9.4%) all indicate deteriorating profitability. A DuPont decomposition explains ROE of 4.5% as Net Margin 7.8% × Total Asset Turnover 0.458 × Financial Leverage 1.24x. [Cash Quality] Cash and deposits of ¥151.6B increased by +¥5.0B from ¥146.6B in the prior-year period, and cash coverage of short-term liabilities of ¥68.0B is 2.2x, indicating ample liquidity. [Investment Efficiency] Total Asset Turnover of 0.458 (down from 0.499) and inventories of ¥120.8B accounting for 17.0% of total assets reflect deteriorated inventory efficiency alongside declining sales. [Financial Soundness] Equity Ratio 80.4% (up +0.8pt from 79.6%), Current Ratio 396.0%, Interest-bearing Debt ¥19.8B, Debt-to-Equity Ratio 0.24x, and Interest Coverage 165.9x indicate an extremely sound financial structure.
Cash and deposits rose by +¥5.0B YoY to ¥151.6B, maintaining liquidity despite lower operating profit. Inferring cash movements from balance sheet changes, current assets increased by +¥10.9B YoY, with cash and inventories rising in particular, while current liabilities rose by +¥11.0B, including a +¥1.4B (+26.7%) increase in short-term borrowings. The increase in short-term borrowings suggests fluctuations in working capital needs; however, the cash/short-term liabilities ratio is a very high 22.3x, ensuring robust short-term liquidity. Investment securities total ¥280.3B, accounting for 39.5% of total assets, and the +¥5.5B increase in accumulated other comprehensive income indicates that valuation gains have strengthened equity. While the scale of dividend payments and share repurchases cannot be determined from in-period data, the depth of liquidity suggests dividend-paying capacity is secured in the short term.
With Ordinary Income of ¥37.1B versus Operating Income of ¥33.2B, the net non-operating gain is approximately ¥3.9B. This comprises non-operating income of ¥4.3B less non-operating expenses of ¥0.4B, with dividends received presumed to be the main contributor to non-operating income. Extraordinary gains of ¥0.2B and extraordinary losses of ¥0.3B are both small, indicating limited impact from one-off items. Against Profit before tax of ¥37.1B, the effective tax rate is approximately 31.2%, reflecting a standard tax burden. Due to no disclosure of Operating Cash Flow (OCF), the cash convertibility of earnings cannot be directly assessed, but the increase in cash balance suggests operating activities are at least generating minimum cash inflows. However, the coexistence of declining sales and rising inventories indicates a deterioration in working capital efficiency; improving the quality of earnings will require inventory reduction and expansion of OCF.
[Position within the industry] (Reference information; our analysis) We assess the company’s relative position within Manufacturing (65 companies, as of 2025 Q3). In profitability, ROE 4.5% is 0.4pt below the industry median of 4.9%, while the Operating Margin of 10.2% is +2.9pt above the median of 7.3%. The company maintains high operating efficiency, but ROE remains around the industry average due to a decline in asset turnover. The Net Margin of 7.8% is +2.4pt above the median of 5.4%, indicating relatively strong core earnings power. In soundness, the Equity Ratio of 80.4% is well above the median of 63.9%, placing the company toward the top in financial safety. The Current Ratio of 396.0% (3.96x) also far exceeds the median of 2.67x, indicating exceptionally strong short-term liquidity. The net debt/EBITDA multiple is -2.85x (effectively net cash), more conservative than the median of -1.11x, indicating a more defensive capital structure. In growth, the Revenue growth rate of -6.7% is below the median of +2.8%, placing the company among revenue decliners within the industry. Return on total assets (ROA-equivalent) is approximately 3.6%, roughly in line with the median of 3.3%. The company features high profitability and strong financial soundness within the industry but faces challenges in sales growth. (Industry: Manufacturing 65 companies, comparison: 2025 Q3, Source: our compilation)
Key takeaways from the results are as follows. First, Operating Income declined at more than triple the rate of the revenue decline, putting focus on revisiting the fixed-cost structure and the effectiveness of initiatives to restore sales. While the Operating Margin of 10.2% is high within the industry, it fell by 2.1pt YoY, necessitating continued monitoring of SG&A efficiency and gross margin trends. Second, the combined ¥280.3B in investment securities (39.5% of total assets) and ¥151.6B in cash totals ¥432B, reaching 60.8% of total assets, indicating a significant tilt toward financial assets in the asset mix. While non-operating income such as dividends received supports earnings, efficient allocation to core operating assets remains an issue. Third, the +26.7% YoY increase in short-term borrowings, though small in scale, suggests changes in short-term funding needs; it is worthwhile to check for any changes in working capital management and funding policies. Regarding the level of the payout ratio and the sustainability of dividend funding, it is desirable to confirm the company’s dividend policy and the relationship between retained earnings and FCF through additional disclosures.
This report is an earnings analysis document automatically generated by AI based on XBRL financial statements. It does not constitute a recommendation to invest in any particular security. The industry benchmark is reference information compiled by our firm based on publicly available financial statements. Please make investment decisions at your own risk and consult a professional as necessary.