Kurimoto,Ltd. FY2027 Q1 Earnings Report

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Executive Summary

The key features of the quarter were higher revenue, higher profit, and a significant improvement in the operating margin. It should also be noted that gains on the sale of investment securities boosted net income. Revenue was ¥29.07B (+6.0% YoY), Operating Income was ¥1.84B (+67.1%), Ordinary Income was ¥1.81B (+75.2%), and Net Income attributable to owners of the parent was ¥2.28B (+46.5%). The primary drivers of profit growth were the improvement in the gross margin (28.3%, +1.8pt YoY) and higher revenue and profit in both the Lifeline and IndustrialMaterials segments. In addition, gains on the sale of investment securities of ¥1.54B boosted net income.

Factors Affecting Performance

【Revenue】Revenue was ¥29.07B, up +6.0% YoY. By segment (total basis including intersegment transactions, totaling ¥29.11B), Lifeline generated revenue of ¥14.80B (50.8% composition ratio, YoY +11.5%) and IndustrialMaterials generated ¥8.27B (28.4%, YoY +10.5%), driving revenue growth, while MachinerySystem slowed to ¥6.05B (20.8%, YoY -11.7%).

【Profit and Loss】Operating Income was ¥1.84B (YoY +67.1%), and the operating margin improved to 6.3% from 4.0% in the previous year, an improvement of +2.3pt. The gross margin improved to 28.3% from 26.5%, up +1.8pt, while the SG&A ratio was held broadly flat at 22.0% versus 22.5% in the previous year. These were the primary drivers of profit growth. Segment profit increased significantly at Lifeline to ¥1.31B (YoY +121.6%, margin 8.8%) and at IndustrialMaterials to ¥0.60B (+45.4%, margin 7.3%), while MachinerySystem declined to ¥0.12B (-70.9%, margin 2.0%), weighing on company-wide profit. Ordinary Income was ¥1.81B (+75.2%); non-operating expenses of ¥0.18B, including interest expenses of ¥0.09B, were almost fully absorbed by Operating Income. After adding extraordinary income of ¥1.54B (gains on the sale of investment securities of ¥1.54B, a temporary factor), Profit Before Tax was ¥3.35B, and Net Income attributable to owners of the parent was ¥2.28B (+46.5%). In conclusion, the company achieved higher revenue and profit accompanied by improvements in its business structure.

Segment Analysis

Lifeline generated revenue of ¥14.80B (50.8% composition ratio) and Operating Income of ¥1.31B (margin 8.8%), accounting for more than half of company-wide Operating Income (segment total of ¥2.03B, before deduction of adjustments) and serving as the main driver of higher revenue and profit. IndustrialMaterials continued its trend of higher revenue and profit, with revenue of ¥8.27B (28.4%) and Operating Income of ¥0.60B (margin 7.3%). MachinerySystem recorded lower revenue and profit, with revenue of ¥6.05B (20.8%, YoY -11.7%) and Operating Income of ¥0.12B (margin 2.0%, YoY -70.9%). The disparity in segment margins (Lifeline 8.8% versus MachinerySystem 2.0%) acted to push down the company-wide operating margin of 6.3%. Segment profit adjustments were negative ¥0.19B, narrowing from negative ¥0.32B in the previous year, indicating that the impact of inventory adjustments was smaller than in the previous year.

Key Financial Indicators

【Profitability】The operating margin improved to 6.3% from 4.0% in the previous year, an improvement of +2.3pt, while the net profit margin (based on income attributable to owners of the parent) improved to 7.9% from 5.7%, up +2.2pt. ROE was 2.4%. Based on a decomposition into a net profit margin of 7.9%, total asset turnover of 0.19x, and financial leverage of 1.58x, the improvement in profitability was the primary driver, while the contributions from asset turnover and leverage were limited. 【Quality of Cash Flow】Comprehensive income was ¥1.96B, below Net Income attributable to owners of the parent of ¥2.28B. The primary factors weighing on comprehensive income were unrealized gains/losses on other securities of negative ¥0.21B and adjustments related to retirement benefits of negative ¥0.13B. 【Investment Efficiency】Total asset turnover was 0.19x (Revenue of ¥29.07B ÷ total assets of ¥151.01B). While total assets contracted by -2.9% YoY, property, plant and equipment increased to ¥40.24B from ¥38.56B in the previous year, indicating that improvements in asset efficiency have not yet emerged in terms of capital turnover. 【Financial Soundness】The Equity Ratio was 63.3%, while the current ratio and quick ratio were 212% and 183%, respectively, ensuring ample liquidity. Interest-bearing debt (total short-term and long-term borrowings) was ¥16.23B, versus cash and deposits of ¥17.22B, resulting in net cash of approximately ¥0.99B. Short-term borrowings declined to ¥5.43B (-60.9% YoY), while long-term borrowings increased to ¥10.80B (+52.1%), indicating an extension of debt maturities.

Cash Flow Analysis

Because the statement of cash flows has not been disclosed, funding trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥17.22B, down ¥1.32B from ¥18.54B in the previous year. Meanwhile, short-term borrowings were reduced by ¥8.44B, from ¥13.87B to ¥5.43B, while long-term borrowings increased by ¥3.70B, from ¥7.10B to ¥10.80B, suggesting that the funding structure was rearranged from short-term to long-term financing. Accounts receivable and notes receivable were ¥26.08B, down ¥4.09B from ¥30.17B in the previous year, while inventories increased by ¥1.12B to ¥11.74B from ¥10.62B, placing pressure on working capital through inventory accumulation. Investment securities were ¥21.78B, down ¥0.57B from ¥22.35B in the previous year, consistent with the recognition of gains on the sale of investment securities of ¥1.54B during the period. Total assets were ¥151.01B, down ¥4.58B from ¥155.59B in the previous year, indicating that the company maintained financial soundness while also reducing its asset base during the year.

Quality of Earnings

The core of recurring earnings power was Operating Income of ¥1.84B. Non-operating income of ¥0.15B, including dividend income of ¥0.07B, and non-operating expenses of ¥0.18B, including interest expenses of ¥0.09B, were largely offset, resulting in a limited impact on Ordinary Income. Meanwhile, extraordinary income of ¥1.54B (gains on the sale of investment securities of ¥1.54B) was a non-recurring, temporary factor, equivalent to approximately 68% of Net Income attributable to owners of the parent of ¥2.28B. The increase from Ordinary Income of ¥1.81B to Net Income of ¥2.28B was primarily attributable to this extraordinary income. Net income growth of +46.5% was somewhat slower than growth at the operating and ordinary income levels (YoY +67.1% and +75.2%, respectively) because income taxes and other taxes of ¥1.05B, representing an effective tax rate of approximately 31.3%, were also imposed on the extraordinary income. Comprehensive income of ¥1.96B was slightly below net income of ¥2.28B, with negative changes in valuation differences on securities and retirement benefit adjustments serving as the primary sources of accrual-based divergence.

Earnings Forecast and Guidance

As of Q1, the progress rates toward the Full-Year plan were 22.2% for Revenue (¥29.07B/¥131.00B), 21.6% for Operating Income (¥1.84B/¥8.50B), and 21.0% for Ordinary Income (¥1.81B/¥8.60B), all slightly below the simple progress benchmark of 25%. Meanwhile, net income attributable to owners of the parent was progressing at 30.5% (¥2.28B/¥7.50B), but this was significantly influenced by the temporary gain on the sale of investment securities of ¥1.54B and differs in nature from progress at the operating level. The Full-Year plan calls for revenue growth of +2.2%, Operating Income growth of +5.5%, and Ordinary Income growth of +3.4%. Operating Income growth of YoY +67.1% in Q1 is therefore progressing at a pace significantly above the plan. While the earnings forecast was revised during the quarter, there was no revision to the dividend forecast.

Shareholder Returns

The Full-Year dividend forecast is ¥60 per share (year-end dividend, on a post-stock-split basis), resulting in a Payout Ratio of 48.5% against forecast EPS of ¥123.6. The company conducted a 5-for-1 stock split of its common shares, effective October 1, 2025. Because the Q2-end dividend is stated on a pre-split basis while the year-end dividend is stated on a post-split basis, the total annual dividend cannot be simply aggregated and is disclosed as “-”. Without taking the stock split into account, the year-end dividend would be ¥144 and the total annual dividend would be ¥288. No disclosure has been made regarding share repurchases, and the shareholder return policy appears to be centered on the Payout Ratio.

Risk Factors

1. Segment concentration risk: Lifeline accounts for 50.8% of revenue and more than half of segment profit before adjustments. Demand trends and project timing in this business therefore have a significant impact on company-wide performance.

2. Deterioration in MachinerySystem profitability: Revenue declined to ¥6.05B (YoY -11.7%), Operating Income declined to ¥0.12B (YoY -70.9%), and the margin fell to 2.0%. The disparity with the margins of other segments (Lifeline 8.8%, IndustrialMaterials 7.3%) is a factor weighing on the company-wide margin.

3. Risk of working capital accumulation: Inventories increased to ¥11.74B (up +¥1.12B from ¥10.62B in the previous year), while accounts receivable and notes receivable declined to ¥26.08B (down -¥4.09B from ¥30.17B in the previous year). The impact of movements in inventories and receivables on asset efficiency and cash conversion requires monitoring.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The operating margin is below the industry median, while the net profit margin is above the industry median, partly due to the contribution from extraordinary income.

Growth and Capital Efficiency

The revenue growth rate is broadly in line with the industry median.

※Source: Compiled by the company

Key Points in the Financial Results

1. Gains on the sale of investment securities of ¥1.54B, a temporary factor, accounted for approximately 68% of Net Income of ¥2.28B. When comparing the growth rates of Operating Income and Ordinary Income (YoY +67.1% and +75.2%, respectively) with net income growth (+46.5%), it is useful to distinguish the contribution of temporary factors.

2. By segment, the improvement in margins at Lifeline and IndustrialMaterials (8.8% and 7.3%, respectively) contrasts with the deterioration in MachinerySystem’s margin (2.0%). The company-wide margin of 6.3% reflects this segment mix.

3. Revenue, Operating Income, and Ordinary Income were each progressing at approximately 22%, slightly below the simple progress benchmark of 25%, while net income reached 30.5% due to the recognition of extraordinary income. The different components of progress should therefore be taken into account when interpreting the progress rates.

Theoretical Share Price (For Reference)

This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson type with an explicit five-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥1,501–¥1,587 at ±1% for the cost of equity, and ¥1,542–¥1,544 at ±0.1 for ω.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the end of the quarter are used; there is a timing difference relative to the Full-Year forecast.
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-07 / This value does not predict or guarantee future share prices)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings flash report data. It does not recommend investment in any specific issue. The industry benchmarks are reference information compiled by the company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, and you should consult a professional as necessary.

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