| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1545.6B | ¥1595.8B | -3.1% |
| Operating Income | ¥47.9B | ¥65.6B | -27.0% |
| Ordinary Income | ¥40.2B | ¥48.5B | -17.2% |
| Net Income | ¥16.6B | ¥-0.8B | +2101.2% |
| ROE | 2.9% | -0.2% | - |
For the fiscal year ended March 2026, Revenue was ¥1,545.6B (YoY -¥50.2B -3.1%), Operating Income was ¥47.9B (YoY -¥17.7B -27.0%), Ordinary Income was ¥40.2B (YoY -¥8.4B -17.2%), and Net income attributable to owners of parent was ¥30.6B (YoY +¥6.9B +29.3%). The principal cause of the company-wide profit decline was the swing to loss in the Special Steel and Steel Materials business (Operating loss ¥10.2B), while the Springs Business drove earnings with substantial increases: Revenue ¥762.0B (+15.3%) and Operating Income ¥39.8B (+98.6%). Operating margin declined to 3.1% (down 1.0pp from 4.1% a year earlier) and gross margin fell to 13.5% (down 1.4pp from 14.9%), deteriorating profitability; however, a large decline in the effective tax rate to 8.2% (from 34.0%) supported higher Net Income. Operating Cash Flow (OCF) improved to ¥100.8B (YoY +67.8%), and Free Cash Flow (FCF) was ¥93.6B, which funded dividends and long-term debt repayments totaling ¥132.3B.
[Revenue] Revenue was ¥1,545.6B (YoY -3.1%), a decline. By segment, the Springs Business achieved significant growth with Revenue ¥762.0B (+15.3%) supported by steady demand from automotive and construction equipment customers, while the Special Steel and Steel Materials business declined sharply to ¥649.1B (-20.4%), dragging on consolidated results. The Machinery & Equipment business was ¥117.7B (+12.6%) and the Cast & Powder Metallurgy business was ¥98.3B (+6.6%), both steady. Revenue composition: Springs Business 49.3% (largest), Special Steel and Steel Materials 42.0%. The Springs Business expansion was driven by growth in overseas customers and penetration of price revisions; the Special Steel and Steel Materials business was affected by market softening and delayed price pass-through, reducing both volumes and unit prices.
[Profitability] Gross profit was ¥208.3B (gross margin 13.5%), down ¥28.8B YoY and gross margin down 1.4pp. Selling, General & Administrative expenses were ¥160.4B (SG&A ratio 10.4%), restrained by ¥11.1B YoY, improving SG&A ratio by 0.4pp. Operating Income was ¥47.9B (operating margin 3.1%), down ¥17.7B YoY (-27.0%). By segment, the Springs Business posted Operating Income ¥39.8B (margin 5.2%, YoY +98.6%), doubling profits, while the Special Steel and Steel Materials business swung to a loss of -¥10.2B (versus ¥33.2B profit prior year), lowering consolidated Operating Income by ¥27.6B. Machinery & Equipment posted ¥8.9B (+25.5%), Cast & Powder Metallurgy ¥8.1B (+98.1%), with Cast & Powder Metallurgy maintaining the highest margin at 8.3%. Non-operating income was ¥9.4B, including ¥2.4B foreign exchange gains; non-operating expenses were ¥17.1B, including interest expense ¥12.6B and foreign exchange losses ¥4.6B, with net FX impact -¥2.2B, equivalent to a 4.6% drag on Operating Income. Ordinary Income was ¥40.2B (YoY -17.2%). Extraordinary gains were ¥12.1B (including ¥0.6B gain on sale of investment securities) and extraordinary losses were ¥12.7B (including impairment losses ¥3.7B), net impact -¥0.6B. Income taxes were ¥3.2B with an effective tax rate of 8.2% (prior year 34.0%), materially lower due in part to reassessments of deferred tax asset realizability. Net income attributable to owners of parent was ¥30.6B (YoY +29.3%), resulting in a declining-revenue yet profit-increasing outcome rather than the opposite.
Springs Business: Revenue ¥762.0B (+15.3%), Operating Income ¥39.8B (margin 5.2%, YoY +98.6%). The core business, accounting for approximately 83% of consolidated Operating Income, benefited from expanded sales of coiled springs and stabilizers for automotive and construction equipment and margin improvements, doubling profits. Margin improved from 2.0% to 5.2% (+3.2pp), aided by price revisions taking hold and fixed-cost efficiency. Special Steel and Steel Materials Business: Revenue ¥649.1B (-20.4%), Operating Income -¥10.2B (margin -1.6%, YoY -130.9%). The business swung from a ¥33.2B profit to a loss, significantly pressuring consolidated earnings. Causes included market deterioration, delayed pass-through of raw material costs, and lower utilization due to demand decline. Cast & Powder Metallurgy Business: Revenue ¥98.3B (+6.6%), Operating Income ¥8.1B (margin 8.3%, YoY +98.1%). Increased sales of high value-added precision castings and special alloy powders and yield improvements contributed to doubled profits, yielding the highest margin among segments. Machinery & Equipment Business: Revenue ¥117.7B (+12.6%), Operating Income ¥8.9B (margin 7.6%, YoY +25.5%). Strong orders for forging/press machines and environmental recycling equipment and margin improvement drove higher profits; margin improved from 6.8% to 7.6% (+0.8pp). Others: Revenue ¥37.1B (+1.0%), Operating Income ¥1.4B (margin 3.7%, YoY -4.1%). Includes distribution and services businesses, remaining largely flat.
[Profitability] Operating margin was 3.1% (down 1.0pp from 4.1%), Net margin was 2.0% (up 0.5pp from 1.5%). Gross margin was 13.5% (down 1.4pp from 14.9%) with the Special Steel and Steel Materials business loss and delayed price pass-through weighing on profitability. SG&A ratio was 10.4% (improved 0.3pp from 10.7%), indicating cost control despite revenue decline. ROE was 5.4% (up 0.1pp from 5.3%), supported by improved Net margin, though capital efficiency remains low due to Operating margin decline. ROA was 2.9% (down 0.5pp from 3.4%), with total asset turnover 1.09x broadly stable but impacted by lower Operating margin. [Cash Quality] OCF/Net Income was 3.30x, indicating strong cash generation; accrual ratio was -5.0%, suggesting high quality of earnings. OCF/EBITDA was 1.19x, maintaining healthy cash conversion relative to operating profit. Depreciation was ¥36.6B versus capital expenditure ¥34.6B, investment/depreciation ratio 0.94x, slightly below maintenance level, contributing to short-term cash generation but warranting attention for medium-to-long-term asset renewal. [Investment Efficiency] Total asset turnover was 1.09x (prior 1.15x), slightly down; inventory days improved to 260 days (prior 278 days). Receivables days were 68 days (prior 69 days) stable; payables days extended to 41 days (prior 31 days), shortening CCC to 287 days (prior 316 days). Working capital improvement—accounts receivable decrease (OCF contribution +¥34.0B), inventory decrease (+¥7.5B), accounts payable increase (+¥22.2B)—combined to lift OCF by approximately ¥63.7B, though there is a risk of reversal next period. [Financial Soundness] Equity Ratio was 39.9% (up 8.1pp from 31.8%) supported by recognition of Comprehensive Income ¥78.2B and increased net assets. Interest-bearing debt was ¥434.0B (down -14.9% from ¥510.1B) as long-term borrowings were repaid. Debt/Equity ratio was 0.88x (improved from 1.15x), Debt/EBITDA was 5.13x indicating high leverage but improving with steady debt reductions. Current ratio was 173.0% (prior 183.3%), quick ratio 151.6% (prior 156.5%), showing adequate short-term liquidity, but short-term borrowings of ¥213.7B represent 49% of total borrowings and cash/short-term debt ratio is 0.80x, making the certainty of refinancing plans important. Interest coverage (Operating Income / Interest Paid) was 3.79x (prior 4.41x), slightly lower but above a 3x threshold, indicating interest burden within tolerable range.
OCF was ¥100.8B (YoY +67.8%), a strong cash generation at 3.30x Net Income of ¥30.6B. OCF subtotal was ¥127.9B with significant contribution from working capital improvements. Cash inflow from decreased receivables was ¥34.0B, decreased inventories ¥7.5B, and increased payables ¥22.2B, totaling approximately ¥63.7B from working capital. Income taxes paid ¥15.1B and interest paid ¥13.2B were outflows, yet net OCF was ¥100.8B. Investing Cash Flow was -¥7.3B: capital expenditure -¥34.6B and intangible asset acquisitions -¥1.3B were partially offset by proceeds from sale of fixed assets ¥16.8B and long-term loan recoveries ¥0.3B. Capex/depreciation ratio was 0.94x, slightly below maintenance level, contributing to short-term FCF. FCF (OCF + Investing CF) was ¥93.6B, a substantial improvement from ¥8.4B in the prior year. Financing Cash Flow was -¥87.0B, with repayment of long-term borrowings -¥132.3B the largest outflow, dividends paid -¥11.4B, and net increase in short-term borrowings ¥47.9B partially offsetting. Net cash increased ¥9.8B, ending cash balance ¥171.5B. FX translation adjustments increased cash by ¥3.2B, reflecting yen depreciation impact at overseas subsidiaries. Cash quality metrics—OCF/EBITDA 1.19x and accrual ratio -5.0%—indicate healthy quality, but the working capital timing benefit has limited persistence and could reverse next period.
Overall quality of earnings is generally good. Operating Income ¥47.9B versus OCF ¥100.8B yields OCF/Operating Income ratio 2.10x, indicating strong cash generation from core operations. Non-operating income ¥9.4B is small at 0.6% of Revenue, comprising interest income ¥0.8B, dividend income ¥0.5B, FX gains ¥2.4B, subsidies ¥3.8B, etc., with limited transiency. Non-operating expenses ¥17.1B are primarily interest expense ¥12.6B and include FX losses ¥4.6B. Net FX impact was -¥2.2B (FX gains ¥2.4B - FX losses ¥4.6B), a drag roughly equal to 4.6% of Operating Income but within recurring range. Net extraordinary impact was -¥0.6B (extraordinary gains ¥12.1B - extraordinary losses ¥12.7B), minor and <2% impact on Net Income. Comprehensive Income ¥78.2B versus Net Income ¥30.6B: the majority of Other Comprehensive Income ¥47.6B comprised retirement benefit remeasurement adjustments ¥34.3B and valuation differences on securities ¥5.8B, boosting equity on the balance sheet. Accrual quality is high with OCF > Net Income and accrual ratio -5.0% (driven by reductions in receivables and inventories). Pre-tax profit ¥39.5B versus Ordinary Income ¥40.2B shows small divergence between ordinary and pre-tax stages, suggesting limited influence from one-off factors. Effective tax rate 8.2% (prior 34.0%) was influenced by deferred tax asset realizability reassessments and requires cautious assessment for sustainability, but core earnings are primarily ordinary in nature.
Company guidance for FY March 2027: Revenue ¥1,660.0B (YoY +7.4%), Operating Income ¥64.0B (YoY +33.6%), Ordinary Income ¥51.0B (YoY +26.9%), Net income attributable to owners of parent ¥31.0B (YoY +1.3%). Planned operating margin is 3.9% (improving 0.8pp from 3.1% actual), still below the 4.1% two-year prior level. Growth assumptions rest on market recovery and price pass-through stabilization in the Special Steel and Steel Materials business and continued firm demand in the Springs Business. Achieving +33.6% Operating Income growth requires elimination of the Special Steel and Steel Materials business loss (turnaround from -¥10.2B to profit, implying improvement of approx. ¥15B or more), depending on price revision penetration, yield improvements, and fixed-cost efficiency. The Springs Business is expected to maintain high margins, and Cast & Powder Metallurgy and Machinery & Equipment are assumed to continue positive profit trends. EPS projected ¥205.01 (from ¥202.04 current +1.5%), dividend planned at ¥52 per year (from ¥81 this year -35.8%), reducing payout ratio to 25.4%. Dividend cut is viewed as an adjustment of transitory factors (reaction to increased net assets this year from retirement benefit remeasurement gains). Progress vs. full-year plan based on this fiscal year actuals: Revenue 93.1%, Operating Income 74.8%, Ordinary Income 78.8% — indicating operating and ordinary income lags, consistent with plans skewed to the second half. Achievement depends heavily on speed of Special Steel and Steel Materials business rebuild, sustainability of Springs Business demand, and FX/raw material price trends.
Annual dividend was ¥81 (interim ¥40, year-end ¥41) with payout ratio 41.7% (dividend total approx. ¥11.4B against Net Income attributable to owners of parent ¥30.6B). Prior year dividend was ¥30, making this fiscal year a significant increase of ¥51. Dividends are well covered by FCF: FCF ¥93.6B vs dividend total approx. ¥11.4B yields FCF coverage 7.35x, indicating high sustainability of dividends. With cash and deposits ¥171.5B and OCF ¥100.8B, dividend payment capacity is sufficient. Next fiscal year dividend plan is ¥52 (down ¥29 from ¥81), with payout ratio 25.4% based on projected Net Income ¥31.0B, maintaining a healthy level. The high dividend this year likely reflected transitory factors (increase in net assets due to Comprehensive Income ¥78.2B), and next year’s reduction appears aimed at normalizing payout. No share buyback disclosure; shareholder returns are concentrated on dividends. Despite interest-bearing debt ¥434.0B, the strong FCF generation has allowed dividends and debt repayments to coexist, maintaining balance between financial discipline and shareholder returns.
Profitability deterioration risk in Special Steel and Steel Materials business: Swing to operating loss ¥10.2B (YoY deterioration ¥43.4B from prior +¥33.2B) significantly pressures consolidated profits. Continued market softness and delayed cost pass-through would materially impair consolidated earnings. Volatility in raw material prices (alloying elements, scrap) and demand uncertainty (automotive/construction equipment) are key risks; if price revision adoption and utilization recovery are delayed, next fiscal year’s profit growth plan will be difficult to achieve. Gross margin decline to 13.5% (from 14.9% -1.4pp) underscores the urgency of product mix improvement and yield enhancement.
Financial leverage and short-term debt concentration risk: Of interest-bearing debt ¥434.0B, short-term borrowings ¥213.7B (49% of total) create concentration in short-term liabilities, cash/short-term debt ratio 0.80x making refinancing plan certainty critical. Debt/EBITDA 5.13x reflects high leverage and rising interest rates could pressure interest payments (Interest coverage 3.79x below a preferable 5x threshold). Long-term borrowings have been reduced to ¥220.4B (from ¥282.2B, -21.9%), but failure to roll over short-term debt could crystallize liquidity risk. Accounts payable ¥152.0B (prior ¥117.1B +29.8%) was lengthened to generate cash, but normalization would risk reversing working capital benefits and deteriorating OCF.
Concentration risk in the core business and demand cycle risk: The Springs Business accounts for approximately 83% of Operating Income (¥39.8B of ¥47.9B), indicating high dependence on a single business. Revenue and earnings are sensitive to cyclical demand in automotive and construction equipment; downturns or major customer production cuts could reverse the profit trend. FX volatility (net impact -¥2.2B, ~4.6% of Operating Income) also affects margins, with yen appreciation harming export profitability. Capex/depreciation ratio 0.94x below maintenance level raises medium-to-long-term risks of asset aging and competitiveness erosion.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 3.1% | 7.8% (4.6%–12.3%) | -4.7pt |
| Net Margin | 1.1% | 5.2% (2.3%–8.2%) | -4.1pt |
Both Operating Margin and Net Margin are well below industry medians, placing the company in the lower tier for profitability. The swing to loss in the Special Steel and Steel Materials business is the main cause and urgent margin improvement is required.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -3.1% | 3.7% (-0.4%–9.3%) | -6.8pt |
Revenue growth lags the industry median by 6.8pp, reflecting the company’s revenue decline driven by a steep fall in the Special Steel and Steel Materials business (-20.4%).
※Source: Company compilation
The Springs Business’ high growth and high profitability are driving consolidated profits: Operating Income ¥39.8B (83% of consolidated), margin 5.2% (up 3.2pp from 2.0%), strengthening its position as the core business. Continued firm demand in automotive and construction equipment and entrenchment of price revisions are key to sustaining profit growth. However, high reliance on a single business increases vulnerability to demand cycles; rebuilding the Special Steel and Steel Materials business to diversify earnings is a prerequisite for enhancing shareholder value.
The Special Steel and Steel Materials business’ swing to loss (Operating loss ¥10.2B, YoY deterioration ¥43.4B) pressured consolidated gross margin (13.5%, -1.4pp) and ROE (5.4%), making rapid turnaround the top priority. Next year’s plan of Operating Income ¥64.0B (+33.6%) requires elimination of the Special Steel and Steel Materials business loss (approximately ¥15B+ improvement), so progress on price pass-through, yield improvement, and fixed-cost efficiency execution speed will be critical. Delays in market recovery or renewed raw material cost increases would heighten downside risk to the plan.
FCF generation is ample at ¥93.6B, and OCF ¥100.8B (YoY +67.8%) is 3.30x Net Income, indicating high cash generation quality. Dividend ¥81 (payout ratio 41.7%) is covered 7.35x by FCF and appears sustainable, though next year’s planned cut to ¥52 signals normalization. Interest-bearing debt is being reduced (¥434.0B, YoY -14.9%) but high leverage (Debt/EBITDA 5.13x) and 49% short-term borrowings present financial risks; progress in refinancing into long-term debt and improving Interest coverage (3.79x) will be important metrics of financial resilience. Working capital improvements (approx. ¥63.7B OCF contribution) carry reversal risk next period, warranting monitoring of inventory days and CCC trends.
This report was automatically generated by AI 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 company from public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed before making investment decisions.