| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥2748.5B | ¥2485.6B | +10.6% |
| Operating Income / Operating Profit | ¥253.1B | ¥228.2B | +10.9% |
| Ordinary Income | ¥260.5B | ¥234.9B | +10.9% |
| Net Income / Net Profit | ¥155.5B | ¥110.2B | +41.1% |
| ROE | 7.3% | 5.6% | - |
For the fiscal year ended March 2026, the company reported Revenue ¥2748.5B (YoY +¥263.0B +10.6%), Operating Income ¥253.1B (YoY +¥24.8B +10.9%), Ordinary Income ¥260.5B (YoY +¥25.6B +10.9%), and Net Income attributable to owners of the parent ¥192.4B (YoY +¥17.3B +7.1%). Revenue was driven by rapid increases in defense-related equipment from ¥32.2B to ¥46.9B (+45.6%) and other industrial machinery from ¥27.6B to ¥41.6B (+50.7%), with External Sales in the Industrial Machinery segment totaling ¥226.2B (+14.0%) leading overall performance. The operating margin remained flat at 9.2% (prior year 9.2%), while gross margin fell to 23.4% (prior year 24.5% -1.2pt). SG&A ratio improved to 14.2% (prior year 15.4% -1.2pt), enabling operating-level profit growth. In extraordinary items, gain on sale of investment securities ¥31.2B contributed, expanding Profit Before Tax to ¥278.3B (prior year ¥233.1B +19.4%). Operating Cash Flow was a large negative ¥-168.9B (prior year ¥-45.7B), driven mainly by working capital expansion centered on Work-in-Progress of ¥1233.2B (prior year ¥1136.5B +8.5%), and Free Cash Flow deteriorated to ¥-340.0B. Long-term borrowings surged to ¥741.4B (prior year ¥194.4B +¥547.0B) as financing was executed to meet growth investments and working capital needs.
[Revenue] The Industrial Machinery business led with External Sales ¥226.2B (prior year ¥199.0B +13.7%), including Defense-related equipment ¥46.9B (+45.6%) and Other Industrial Machinery ¥41.6B (+50.7%). Resin production/processing machinery was ¥72.9B (+0.8%), and molding machines were ¥64.8B (-3.1%), largely flat to slightly down. The Castings & Engineering business posted External Sales ¥45.8B (prior year ¥47.1B -2.8%), with castings products ¥39.7B (+3.4%) up while Engineering and others ¥6.1B (-30.1%) declined. Other businesses increased to ¥2.8B (+17.4%). Segment composition: Industrial Machinery 82.3% of sales, Castings & Engineering 16.7%, Other 1.0%; accumulation of defense and industrial-machine projects was the main driver of consolidated sales growth.
[Profitability] Operating margin held at 9.2% year-on-year, but gross margin declined to 23.4% (prior year 24.5% -1.2pt) due to higher raw material and outsourcing costs and product mix changes. SG&A was ¥389.5B (prior year ¥381.7B +2.0%), increasing far less than sales growth of +10.6%, improving SG&A ratio to 14.2% (prior year 15.4% -1.2pt). R&D expenses increased to ¥47.3B (1.7% of sales). Segment operating profits: Industrial Machinery ¥200.4B (prior year ¥175.8B +14.0%, margin 8.8%) performed well; Castings & Engineering ¥88.7B (prior year ¥87.0B +2.0%, margin 19.4%) slightly increased; Other ¥0.9B (prior year ¥1.1B -21.4%, margin 1.8%) decreased. Non-operating income included dividend income ¥8.0B, interest income ¥1.8B, and foreign exchange gains ¥3.6B, totaling Non-operating Income ¥23.2B, while interest expense rose to ¥7.3B (prior year ¥2.7B +¥4.6B). Total Non-operating expenses were ¥15.7B (prior year ¥9.5B +65.9%), resulting in Ordinary Income ¥260.5B (+10.9%). Extraordinary items recorded Extraordinary Income ¥31.4B mainly from gain on sale of investment securities ¥31.2B, less Extraordinary Losses ¥13.6B including loss on retirement of fixed assets ¥8.1B, expanding Profit Before Tax to ¥278.3B (prior year ¥233.1B +19.4%). After income taxes of ¥84.5B (effective tax rate 30.4%), Net Income attributable to owners of the parent was ¥192.4B (+7.1%). Although the decline in gross margin is a concern, SG&A efficiency and non-operating/extraordinary gains compensated, keeping bottom-line profit firm.
The Industrial Machinery segment recorded Sales ¥228.5B (including intersegment transactions, prior year ¥200.5B +14.0%) and Operating Income ¥200.4B (prior year ¥175.8B +14.0%, margin 8.8%). High growth in Defense-related equipment (+45.6%) and Other Industrial Machinery (+50.7%) drove performance; resin production/processing machinery slightly increased, molding machines slightly decreased. Operating margin 8.8% was in line with the prior year, supported by maintained project profitability and SG&A efficiency. Castings & Engineering reported Sales ¥54.6B (prior year ¥54.5B +0.2%) and Operating Income ¥88.7B (prior year ¥87.0B +2.0%, margin 16.3%), maintaining high profitability. Growth in castings products offset declines in Engineering and others, leaving segment profit slightly up. Other businesses reported Sales ¥4.9B (prior year ¥4.4B +12.3%) and Operating Income ¥0.9B (prior year ¥1.1B -21.4%, margin 1.8%), small scale but with lower profit. Consolidated Operating Income after corporate adjustments was ¥253.1B, with Industrial Machinery contributing 79.2% of operating profit, Castings contributing 35.0%, and Other 0.4%. Expansion of defense and industrial projects was the main cause of consolidated profit growth, and Castings’ high margin provides a stable earnings base.
[Profitability] Operating margin 9.2% (prior year 9.2% unchanged). Gross margin declined to 23.4% (prior year 24.5% -1.2pt), while SG&A ratio improved to 14.2% (prior year 15.4% -1.2pt) supporting the operating level. ROE was 9.5% (XBRL metric, NetIncomeAttributableToOwners basis) slightly down from 9.7% prior, ROA was 6.3% (Ordinary Income basis) up from 6.1% (+0.2pt). Operating margin exceeded the peer median of 7.8% by +1.5pt, and net margin 5.7% exceeded median 5.2% by +0.5pt, indicating relatively favorable profitability. [Cash Quality] Operating Cash Flow ¥-168.9B, Operating CF / Net Income -0.88x, Cash conversion (Operating CF / EBITDA) -0.49x indicate challenges in converting earnings to cash. Free Cash Flow ¥-340.0B, with capital expenditures ¥236.9B (estimated from increase in tangible and intangible fixed assets ¥242.8B) and working capital expansion both contributing. CCC 283 days (DSO 84 days, DIO 242 days, DPO 43 days) is prolonged, with Work-in-Progress ¥1233.2B (88.5% of total inventories ¥1393.5B) pressuring inventory. [Investment Efficiency] Total Asset Turnover 0.639x, Order Backlog ¥567.5B (contract liabilities) equals 20.6% of revenue, indicating substantial project-based revenue recognition yet to be realized. Capex / Depreciation 2.62x (¥242.8B / ¥90.6B) reflects aggressive investment mode for growth. [Financial Soundness] Equity Ratio 49.4% (XBRL 49.7%), Current Ratio 241.5%, Quick Ratio 237.9% showing ample liquidity, Cash and deposits ¥777.6B is 6.66x short-term borrowings ¥116.8B. Interest-bearing debt ¥858.2B (short-term borrowings ¥116.8B + long-term borrowings ¥741.4B), Debt/EBITDA 2.50x, Debt/Equity 40.3%, Interest Burden Ratio 1.100, EBITDA Interest Coverage 47.2x — leverage remains within investment-grade range but the YoY surge in long-term borrowings +¥547.0B is notable. Interest coverage is robust and interest payment capacity is high.
Operating CF was a significant negative ¥-168.9B. In addition to subtotal ¥-91.6B, increases in inventories ¥-87.7B (mainly Work-in-Progress), corporate tax payments ¥-82.5B, and consumption tax payments ¥-30.0B contributed. Operating CF worsened by ¥-123.2B from prior year ¥-45.7B, reflecting delays in converting earnings to cash. Main causes were Work-in-Progress ¥1233.2B (prior year ¥1136.5B +¥96.7B) and accumulation of percentage-of-completion projects, and increase in Accounts Receivable and Notes Receivable ¥635.8B (prior year ¥599.9B +¥35.9B) pressuring working capital. Net interest and dividend receipts of ¥9.8B less interest payments ¥-4.7B produced a small positive ¥5.1B, but could not offset core business cash absorption. Investing CF was ¥-171.0B, mainly due to acquisition of tangible and intangible fixed assets ¥-236.9B (capex), partially offset by proceeds from sale of investment securities ¥66.8B. Free CF was ¥-340.0B (prior year ¥-122.7B, deterioration ¥-217.3B), with growth investments and working capital expansion progressing simultaneously. Financing CF was ¥+360.9B, primarily long-term borrowings ¥550.0B, offset by short-term borrowings ¥-7.9B, dividends paid ¥-67.7B, and lease liability repayments ¥-4.4B. Cash and deposits increased from ¥758.0B at beginning of period to ¥777.6B at end of period (+¥19.6B), maintaining liquidity through borrowing. Improving working capital management (reducing WIP, strengthening collections) is the top priority for the next period.
Operating Income ¥253.1B vs Ordinary Income ¥260.5B (+¥7.4B) shows Non-operating Income ¥23.2B (dividend income ¥8.0B, interest income ¥1.8B, FX gains ¥3.6B, etc.) exceeded Non-operating Expenses ¥15.7B (interest expense ¥7.3B, fees ¥3.7B, etc.), adding to profits at the non-operating level. Extraordinary items were net +¥17.8B (Extraordinary Income ¥31.4B - Extraordinary Losses ¥13.6B), with gain on sale of investment securities ¥31.2B temporarily boosting Profit Before Tax. The uplift from Ordinary Income ¥260.5B to Profit Before Tax ¥278.3B (+¥17.8B) indicates that sustainable earning power is closer to Operating Income ¥253.1B. Comprehensive Income ¥260.5B (attributable to owners of the parent ¥259.5B) substantially exceeds Net Income ¥155.5B, with Other Comprehensive Income ¥66.8B (valuation difference on securities ¥37.1B, actuarial differences related to retirement benefits ¥26.6B, etc.) making a large contribution. On an accrual basis, the divergence between Operating CF ¥-168.9B and Net Income ¥155.5B is notable, as working capital increases have delayed conversion of earnings into cash. Depreciation ¥90.6B partially offsets the negative operating CF, but inventory increase ¥-87.7B and corporate tax payments ¥-82.5B negate that effect; therefore earnings quality requires careful assessment. Extraordinary gains are one-off, so sustainable profit generation should be evaluated at operating and ordinary income levels; next fiscal year will focus on growth in core operating and ordinary income excluding non-operating and extraordinary items.
Full-year guidance: Revenue ¥3100.0B (YoY +12.8%), Operating Income ¥270.0B (+6.7%), Ordinary Income ¥260.0B (-0.2%), Net Income attributable to owners of the parent ¥190.0B (EPS forecast ¥258.11), Dividend forecast ¥46.0 per share. Progress toward full-year guidance based on current results: Revenue 88.7% (¥2748.5B / ¥3100.0B), Operating Income 93.7% (¥253.1B / ¥270.0B), Ordinary Income 100.2% (¥260.5B / ¥260.0B), Net Income 101.3% (¥192.4B / ¥190.0B). Operating-level results are slightly short, but Ordinary and Net Income exceeded expectations. Ordinary Income outperformance was driven by non-operating dividend and FX gains, and Net Income outperformance was mainly due to Extraordinary Income (gain on sale of investment securities ¥31.2B). Compared with full-year guidance, revenue shortfall suggests delayed project progress; operating income shortfall suggests gross margin deterioration not fully offset by SG&A efficiency. The upticks in Ordinary and Net Income are supported by special factors; next year requires steady progress in core business (operating and ordinary income). The announced dividend forecast ¥46.0 per share vs actual current-year ¥92.0 is double, but consistent on an annual aggregated basis. Cost improvements, restoring project profitability, and compressing working capital will be key to achieving next year’s targets.
Annual dividend was ¥92.0 (Q2-end ¥44.0, Year-end ¥48.0), up ¥54.0 from prior year ¥38.0. Payout Ratio 35.2% (XBRL) is at an appropriate level. Total dividends ¥67.7B (XBRL DividendsPaid -¥67.7B) correspond to 35.2% of Net Income attributable to owners of the parent ¥192.4B, indicating a stable dividend policy. However, Free Cash Flow ¥-340.0B vs dividends paid ¥67.7B yields FCF coverage -4.97x (negative), and dividends this period were funded by on-hand liquidity and long-term borrowing (+¥550.0B). Share buybacks during the period were minimal at ¥0.2M, so Total Return Ratio is roughly in line with the payout ratio. Shareholders’ equity ¥2124.3B and dividends ¥67.7B imply DOE (Dividend on Equity) approximately 3.2%, indicating shareholder returns are dividend-centric and restrained. Next period’s dividend forecast ¥46.0 (full-year basis) aligns with current period ¥92.0 on an annualized basis, implying maintenance of payout policy. Sustainability of dividends is supported short-term by cash and deposits ¥777.6B and ample liquidity, but structurally OCF turning positive and working capital improvement are necessary to sustainably balance dividends and investments.
Working capital expansion and deterioration of cash generation: Operating CF ¥-168.9B, CCC 283 days, Work-in-Progress ¥1233.2B (88.5% of inventories) show accumulation of percentage-of-completion projects delaying conversion of revenue to cash. DSO 84 days and DIO 242 days indicate prolonged receivables and inventory turnover, expanding working capital demand and dependence on external financing with FCF ¥-340.0B. Shortening schedules, milestone-based billing design, and strengthening collection processes are urgent; without improvement, simultaneous management of dividends, investment, and leverage will be difficult.
Product mix volatility and pressure on gross margin: Gross margin declined to 23.4% (prior year 24.5% -1.2pt) due to rising raw material and outsourcing costs and changes in project mix such as defense-related equipment. While SG&A efficiency preserved an operating margin of 9.2%, absent structural cost improvements the gross margin pressure may persist. Yield improvements, supply-chain stabilization, and rigorous project profitability assessment are needed.
Rising leverage and increasing interest burden: Long-term borrowings surged to ¥741.4B (prior year ¥194.4B +¥547.0B), bringing Debt/EBITDA to 2.50x approaching the upper bound of investment-grade. Interest payments rose to ¥7.3B (prior year ¥2.7B +¥4.6B). Although Interest Coverage 47.2x provides cushion, continued negative operating CF would further increase funding needs and risks from higher financing costs or rating downgrades could materialize. Achieving OCF positivity and returning Debt/EBITDA <2.0x in subsequent periods is critical to maintain financial soundness.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 9.2% | 7.8% (4.6%–12.3%) | +1.5pt |
| Net Margin | 5.7% | 5.2% (2.3%–8.2%) | +0.5pt |
Operating margin 9.2% exceeds industry median 7.8% by +1.5pt; SG&A efficiency and stable project profitability contribute, placing the company among the higher-ranked manufacturers in profitability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 10.6% | 3.7% (-0.4%–9.3%) | +6.9pt |
Revenue growth 10.6% outpaces industry median 3.7% by +6.9pt, led by expansion of defense-related equipment and industrial-machine projects, marking notable growth within manufacturing.
※ Source: Company compilation
Solid core growth and sustainability of defense & industrial demand: Achieved double-digit revenue growth +10.6% and operating profit growth +10.9%, driven by Defense-related equipment +45.6% and Other Industrial Machinery +50.7%. Operating margin 9.2% exceeded industry median by +1.5pt, reflecting SG&A efficiency and project profitability management. Contract liabilities ¥567.5B (20.6% of revenue) indicate a thick backlog, supporting medium-term revenue. Capex / depreciation 2.62x signals an aggressive investment stance to expand capacity and capitalize on defense-related growth scenarios.
Early improvement of working capital expansion and cash conversion is the top priority: Operating CF ¥-168.9B, CCC 283 days, WIP ratio 88.5% show substantial delays in converting earnings to cash, and FCF ¥-340.0B indicates dependence on external financing. OCF turning positive through process shortening, milestone billing design, and stronger collections is essential to balance dividends, investments, and leverage. Decline in gross margin -1.2pt is also a concern; cost structure improvements and restoring project profitability will be key to raising earnings quality next period.
This report is an AI-generated analysis based on 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 responsibility; please consult a professional advisor as appropriate.