| Metric | Current Period | Prior-Year Period | YoY |
|---|---|---|---|
| Revenue | ¥3043.4B | ¥2992.9B | +1.7% |
| Operating Income | ¥173.7B | ¥120.2B | +44.6% |
| Profit Before Tax | ¥184.8B | ¥119.1B | +55.2% |
| Net Income | ¥129.6B | ¥93.3B | +38.9% |
| ROE | 5.2% | 3.8% | - |
For the fiscal year ended March 2026, Revenue was ¥3,043.4B (YoY +¥50.5B +1.7%), Operating Income was ¥173.7B (YoY +¥53.5B +44.6%), Ordinary Income was ¥140.4B (YoY +¥8.1B +6.1%), and Net Income attributable to owners of the parent was ¥112.5B (YoY +¥34.3B +43.8%), representing a strong result of higher revenue and substantial profit growth. Revenue grew only modestly, but gross margin improved to 15.2% (from 13.3% a year earlier, +1.9pt) and operating margin to 5.7% (from 4.0% a year earlier, +1.7pt), reflecting successful price normalization and cost reductions. The core Steel (Hagane) Company delivered Operating Income of ¥81.6B (+52.5%), and the Forging (Kitaeru) Company delivered ¥66.5B (+169.6%), with these two businesses driving profit growth. Conversely, the Stainless Company’s Operating Income declined sharply to ¥4.0B (-82.9%), widening profitability dispersion across segments. Non-operating items included financial income of ¥15.8B exceeding financial expenses of ¥8.4B, and newly recorded equity-method investment gains of ¥3.8B, supporting Profit Before Tax to grow to ¥184.9B (+55.2%).
Revenue: Revenue of ¥3,043.4B (+1.7%) remained modest. By segment, Forging (Kitaeru) Company increased to ¥1,348.2B (+7.4%), with sustained demand for automotive part billets and the like. Smart Company also grew to ¥221.1B (+7.4%). In contrast, Steel (Hagane) Company declined slightly to ¥1,055.7B (-1.1%), and Stainless Company fell to ¥388.9B (-11.7%) with weakness in special steel hot-rolled products and stainless market conditions. Overall, volume declines were largely offset by maintained pricing, resulting in slight revenue growth.
Profitability: Cost of goods sold was ¥2,580.0B (prior year ¥2,593.5B), a -0.5% decline despite revenue growth, leading to Gross Profit of ¥463.4B (gross margin 15.2%, prior year 13.3%) — a +16.0% increase. Reductions in raw material costs, production efficiency improvements, and price normalization boosted gross margin by +1.9pt. Selling, general and administrative expenses were ¥283.7B (+4.6%), rising faster than revenue and increasing the SG&A ratio by +0.3pt to 9.3%, but gross margin gains offset this, producing Operating Income of ¥173.7B (+44.6%) and an operating margin of 5.7% (+1.7pt). By segment, Steel (Hagane) posted Operating Income of ¥81.6B (margin 7.7%, +52.5%), Forging (Kitaeru) ¥66.5B (margin 4.9%, +169.6%), and Smart ¥13.8B (margin 6.2%, +65.5%), all contributing significant profit increases. Stainless, however, recorded Operating Income of ¥4.0B (margin 1.0%, -82.9%) with marked profit erosion due to market softness and adverse product mix. Non-operating items included financial income ¥15.8B (prior year ¥8.7B) surpassing financial expenses ¥8.4B (prior year ¥9.8B) and a newly contributing equity-method investment profit of ¥3.8B (not recorded prior year), lifting Ordinary Income to ¥140.4B (+6.1%). From Profit Before Tax of ¥184.9B, after deducting income taxes of ¥55.3B, Net Income was ¥129.6B (+38.9%) and Net Income attributable to owners of the parent was ¥112.5B (+43.8%). In summary: modest revenue growth with substantial profit increases.
Steel (Hagane) Company recorded Revenue of ¥1,055.7B (-1.1%) but Operating Income improved significantly to ¥81.6B (+52.5%), with operating margin rising to 7.7% (from 5.3%, +2.4pt), making it the largest contributor to consolidated profit. Price normalization for special steel hot-rolled products and cost reductions boosted profitability. Forging (Kitaeru) Company posted Revenue ¥1,348.2B (+7.4%), Operating Income ¥66.5B (+169.6%), and operating margin 4.9% (from 2.5%, +2.4pt), achieving strong revenue and profit growth driven by improvements in volume and profitability centered on automotive billet products, marking the highest segment profit growth rate. Smart Company expanded steadily with Revenue ¥221.1B (+7.4%), Operating Income ¥13.8B (+65.5%), and operating margin 6.2% (from 4.0%, +2.2pt), supported by stable demand for electronic functional materials and magnet-applied products. In contrast, Stainless Company saw Revenue ¥388.9B (-11.7%), Operating Income ¥4.0B (-82.9%), and operating margin 1.0% (from 5.9%, -4.9pt), with market softness and deteriorating product mix. The gap in operating margins across segments has widened — Steel 7.7%, Smart 6.2%, Forging 4.9%, Stainless 1.0% — making an early turnaround in Stainless crucial for further company-wide margin improvement.
Profitability: Operating margin 5.7% (from 4.0%, +1.7pt) and Net Income margin 4.3% (from 3.1%, +1.2pt) improved markedly. The improvement in gross margin to 15.2% (from 13.3%, +1.9pt) — driven by price normalization and cost reductions — is the primary factor. ROE was 4.8% (prior year 3.2%, above multi-year average) and improved but remains below the industry average of 6.3%, indicating room for further enhancement.
Cash Quality: Operating Cash Flow / Net Income ratio was 5.78x, indicating high quality, with an accrual ratio of -13.5% and very strong cash generation. However, a substantial reduction in pension assets (approx. ¥290.5B adjustment) inflated Operating Cash Flow, so normalized levels should be discounted. Free Cash Flow was ¥477.4B, covering dividends of ¥61.3B by 7.8x, and total shareholder return (dividends + buybacks totaling ¥323.9B) was well covered.
Investment Efficiency: Total asset turnover was 0.76x (Revenue ¥3,043.4B / average total assets for the period approx. ¥3,995B), broadly stable. ROA (on Ordinary Income basis) improved to 4.6% (from 2.8%, +1.8pt). Capital expenditures were ¥143.1B, below depreciation of ¥180.4B, yielding a CapEx/Depreciation ratio of 0.79, indicating a conservative posture focused on maintenance and renewal.
Financial Health: Equity Ratio was 59.2% (from 58.0%, +1.2pt), D/E ratio improved to 0.60x (from 1.11x), and Debt/EBITDA was about 1.3x (interest-bearing debt ¥474.7B / estimated EBITDA about ¥354B), indicating sound leverage. Interest coverage was about 20.7x (Operating Income ¥173.7B / financial expenses ¥8.4B), showing minimal interest burden. However, short-term borrowings of ¥244.1B (+39.1%) exceeded long-term borrowings of ¥230.7B (-50.9%), raising the short-term debt ratio to 51.4% and increasing refinancing dependency. Working capital metrics are somewhat sluggish: DSO approx. 75 days, DIO approx. 76 days, DPO approx. 64 days, and CCC approx. 87 days, suggesting room to compress receivables and inventory.
Operating Cash Flow was ¥650.3B (prior year ¥253.5B, +156.5%), a substantial increase and approximately 5.0x Net Income, indicating very high cash generation. Operating cash flow subtotals were ¥681.3B (prior year ¥278.6B), with a significant contribution from a ¥290.5B decrease in assets related to retirement benefits, reflecting temporary uplift from pension remeasurements and investment performance fluctuations. Working capital movements aided cash inflows: inventory decreases ¥6.8B, trade receivables decreases ¥23.3B, and trade payables increases ¥9.5B, reflecting improved collection and inventory reduction. After deducting income taxes paid of ¥34.7B, Operating Cash Flow reached ¥650.3B. Investing Cash Flow was -¥172.9B, driven by CapEx -¥143.1B (prior year -¥214.7B), a 33.3% reduction year-on-year, intangible asset acquisitions -¥23.5B, and equity-method investment acquisitions -¥65.2B (new item). Proceeds from sales of investment securities ¥103.6B partially offset these outflows, and net decrease in time deposits -¥49.0B also contributed, resulting in FCF of ¥477.4B (prior year ¥74.4B, a large improvement). Financing Cash Flow was -¥516.4B, with principal outflows including net decrease in short-term borrowings -¥12.1B, long-term debt repayments -¥111.1B, treasury stock acquisition -¥262.6B (prior year -¥43.9B, large increase), and dividend payments -¥61.3B (dividends to shareholders -¥61.3B, dividends to non-controlling interests -¥9.8B). Short-term borrowings inflow of ¥280.0B supported refinancing, and cash and cash equivalents decreased slightly to ¥335.7B (prior year ¥362.8B, -¥27.0B). The large increase in Operating Cash Flow bolstered FCF and covered dividend and buyback outlays, but normalized sustainability should be judged conservatively excluding pension-related one-offs.
Quality of earnings improved at the operational level, with Operating Income ¥173.7B as the core driver of recurring profitability. Non-operating items—financial income ¥15.8B exceeding financial expenses ¥8.4B, and equity-method investment gains ¥3.8B (newly recorded)—are all small relative to Revenue (<1%) and play a supplementary role. The gap between Ordinary Income ¥140.4B and Net Income ¥112.5B is primarily due to income taxes of ¥55.3B; there were no material extraordinary items. Operating Cash Flow ¥650.3B is 5.0x Net Income, with an accrual ratio of -13.5% ((Net Income - Operating Cash Flow)/Total Assets), indicating high cash backing. However, the ¥290.5B reduction in pension-related assets inflated Operating Cash Flow; excluding this non-recurring factor, the substantive Operating Cash Flow is estimated at around ¥360B, still about 2.8x Net Income and healthy, but should be normalized in forecasts. Financial income likely includes interest and dividend receipts of ¥9.2B and gains on sales of investment securities, and is within the scope of recurring investment returns. Comprehensive Income of ¥390.1B significantly exceeded Net Income ¥129.6B, with Other Comprehensive Income of ¥260.5B (pension plan remeasurement ¥61.4B, FVOCI net change ¥129.9B, foreign operation translation differences ¥30.9B, equity-method OCI ¥38.3B) bolstering equity. The large positive comprehensive income primarily reflects valuation gains and should be evaluated separately from profit-and-loss-based profitability.
The company's plan for FY ending March 2027 calls for Revenue ¥3,100.0B, Operating Income ¥175.0B, Net Income attributable to owners of the parent ¥113.0B, EPS ¥176.51, and dividend ¥75.00. Versus current-period results (Revenue ¥3,043.4B, Operating Income ¥173.7B, Net Income attributable to owners of the parent ¥112.5B, DPS ¥145), the plan implies Revenue +1.9%, Operating Income +0.7%, and Net Income +0.4% — modest increases — and a year-end dividend of ¥75 (from this year’s year-end ¥76, a slight reduction) signaling stabilization. Progress rates are approximately Revenue 98.2%, Operating Income 99.3%, and Net Income 99.5%, indicating the plan is in a conservative range. The plan appears to assume a bottoming of the Stainless Company and maintained profitability of the two core businesses (Steel and Forging), while factoring uncertainty in raw material and energy costs and continued increases in SG&A, prioritizing margin defense. Payout Ratio is expected to decline to about 42.5% (dividend ¥75 / EPS ¥176.51), down from last period’s high payout ratio of 83%, suggesting normalization of total return.
This period’s dividend totaled ¥145 (interim dividend ¥69, year-end dividend ¥76), a substantial increase from prior period’s total ¥70 (interim ¥35, year-end ¥35) — +107.1%. Against Net Income attributable to owners of the parent ¥112.5B, total dividends were about ¥93.5B (based on shares outstanding 64,521 thousand less treasury shares 274 thousand), implying a Payout Ratio of approximately 83% — high. The company executed treasury stock acquisitions of ¥262.6B (prior year ¥43.9B, large increase), bringing total shareholder returns to about ¥323.9B. FCF ¥477.4B comfortably covered total shareholder returns, and FCF coverage of dividends alone was 5.1x, indicating ample coverage. However, total return exceeded Net Income substantially; while this was absorbable this period due to abundant Operating Cash Flow and ¥103.6B proceeds from sales of investment securities, future periods will require balanced adjustments considering business investment needs and market volatility. The company plans a dividend of ¥75 for the following period (down from ¥145 this period), indicating an intent to normalize total return. The company also executed treasury stock cancellation of ¥251.4B, aiming to improve capital efficiency and shareholder value.
Stainless business profitability deterioration: Stainless Company’s Operating Income was ¥4.0B (-82.9%), operating margin 1.0% (from 5.9%, -4.9pt), with market softness and adverse product mix. Despite representing 12.8% of revenue, its low profitability constrains company-wide margin improvements; prolonged market weakness or intensified competition would depress consolidated margins. The widening margin gap across segments (Steel 7.7%, Smart 6.2%, Forging 4.9%, Stainless 1.0%) necessitates a rapid Stainless turnaround.
Refinancing risk from short-term debt concentration: Short-term borrowings of ¥244.1B (+39.1%) exceed long-term borrowings of ¥230.7B (-50.9%), with a short-term debt ratio of 51.4% and heightened refinancing dependency. Although cash of ¥335.7B exceeds short-term borrowings, coverage versus total current liabilities of ¥920.1B is only 36.5%, limited, making working capital compression and reallocation to long-term funding urgent. Rising interest rates would increase short-term borrowing costs and related risks.
Working capital stagnation risk: With DSO ~75 days, DIO ~76 days, and CCC ~87 days, working capital turnover is sluggish. Accounts receivable ¥621.2B and inventories ¥537.6B account for 29.0% of total assets. Prolonged receivable and inventory stagnation would raise working capital needs and pressure Operating Cash Flow. Although accounts receivable improved by ¥23.3B and inventory decreased by ¥6.8B this period, SG&A ratio rose (+0.3pt) and SG&A ¥283.7B (+4.6%) grew faster than revenue (+1.7%), underscoring the need for cost control.
Revenue & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| ROE | 4.8% | 6.3% (3.2%–9.9%) | -1.5pt |
| Operating Margin | 5.7% | 7.8% (4.6%–12.3%) | -2.0pt |
| Net Income Margin | 4.3% | 5.2% (2.3%–8.2%) | -0.9pt |
Profitability metrics are below industry medians, with operating margin -2.0pt and ROE -1.5pt, indicating significant room for improvement.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 1.7% | 3.7% (-0.4%–9.3%) | -2.0pt |
Revenue growth lags the industry median of 3.7% by -2.0pt, indicating slower growth momentum.
※ Source: Company compilation
The effects of price normalization and cost reductions are evident — gross margin improved by +1.9pt and operating margin by +1.7pt — and the two core businesses (Steel and Forging) achieved substantial operating income increases (Steel +52.5%, Forging +169.6%). Operating Cash Flow ¥650.3B (5.0x Net Income) and FCF ¥477.4B demonstrate robust cash generation, adequately covering total shareholder return of ¥323.9B. However, a ¥290.5B reduction in retirement benefit assets boosted Operating Cash Flow; normalized substantive Operating Cash Flow is estimated around ¥360B, and sustainability should be carefully assessed for the coming year.
Stainless Company’s Operating Income ¥4.0B (-82.9%), margin 1.0% (from 5.9%, -4.9pt) shows sharp profit deterioration and widening inter-segment profitability gaps. Despite accounting for 12.8% of revenue, Stainless’s limited profit contribution constrains consolidated margin gains. Short-term debt ratio 51.4% and the shift from long-term to short-term borrowings (long-term borrowings -50.9% vs short-term borrowings +39.1%) increase refinancing risk. Working capital turnover (DSO 75 days, DIO 76 days) is sluggish, indicating substantial scope for receivables and inventory compression.
The company plan (Revenue ¥3,100B, Operating Income ¥175B, Net Income ¥113B, DPS ¥75) is conservative to flat versus this year’s results and assumes a bottoming in Stainless and maintained profitability in core businesses. Payout Ratio is projected to fall to about 42.5%, down from 83% last period, signaling normalization of total returns. Key future focuses will be: early recovery of Stainless, lengthening short-term borrowings to long-term funding, improving working capital turnover, containing SG&A ratio, and reallocating CapEx to enhance capital efficiency (ROIC 4.1%). Continued price pass-through, raw material and energy cost trends, DSO/DIO movements, and progress on lengthening short-term borrowings will be mid-term value drivers.
This report is an earnings analysis document automatically generated by AI after analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the firm based on publicly disclosed financial statements. Investment decisions are your own responsibility; please consult a professional advisor as needed before making investment decisions.