| Indicator | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥17415.9B | ¥15933.5B | +9.3% |
| Operating Income / Operating Profit | ¥1336.2B | ¥776.8B | +72.0% |
| Profit Before Tax | ¥2556.8B | ¥313.8B | +714.7% |
| Net Income | ¥1887.4B | ¥117.8B | -80.6% |
| ROE | 8.2% | 0.6% | - |
FY2026 full-year results achieved substantial profit growth with Revenue ¥17415.9B (YoY +¥1482.4B +9.3%), Operating Income ¥1336.2B (YoY +¥559.4B +72.0%), Ordinary Income ¥2998.0B (YoY +¥1804.5B +151.2%), and Net income attributable to owners of parent ¥1762.9B (YoY +¥1598.0B +969.3%). The removal of the prior-year large impairment loss of ¥1126.7B and recovery in commodity prices and refining spreads improved gross margin to 15.8% (prior year 3.7%), a 1210bp improvement. Operating margin expanded by 280bp to 7.7% (prior year 4.9%), aiding fixed-cost absorption. Equity-method investment income of ¥405.7B (prior year ¥87.1B) and financial income of ¥556.7B boosted Profit Before Tax to ¥2556.8B, with non-operating items driving the sharp rise in Ordinary Income. By segment: Resources had Revenue ¥1924.5B (+36.4%) and Profit Before Tax ¥1678.3B; Smelting & Refining had Revenue ¥12962.8B (+9.8%) and Profit Before Tax ¥915.9B; Materials had Revenue ¥2495.8B (-6.9%) and Profit Before Tax ¥152.9B. The Resources segment contributed over half of profits, indicating a revenue structure highly dependent on market conditions.
[Revenue] Revenue ¥17415.9B (YoY +9.3%) was driven by recovery in Resources and Smelting & Refining. By segment, Resources ¥1924.5B (+36.4%) rose sharply from increased production and higher prices for copper, nickel, etc. Smelting & Refining ¥12962.8B (+9.8%, 74.4% share) increased on improved refining spreads and higher utilization. Materials ¥2495.8B (-6.9%, 14.3% share) declined due to a pause in demand for battery materials and functional materials. Including Other ¥32.8B (-16.5%), the company-wide top line expanded. External factors such as commodity price recovery and FX (yen depreciation) contributed, and after inter-segment sales adjustment of ¥2065.3B, top-line expansion was realized.
[Profitability] Cost of sales was ¥14670.8B (cost ratio 84.2%), yielding Gross Profit ¥2745.0B and Gross Margin 15.8% (prior year 3.7%), a large improvement. The prior-year large impairment of ¥1126.7B (impairments across Resources & Smelting) was removed, normalizing the cost structure. SG&A was ¥833.0B (SG&A ratio 4.8%), up from ¥744.0B prior year (+12.0%), outpacing revenue growth. Operating Income ¥1336.2B (Operating margin 7.7%) recovered sharply from ¥776.8B prior year (+72.0%). Non-operating items included Financial Income ¥556.7B (prior year ¥560.9B) from stable dividend/interest receipts, offsetting Financial Expenses ¥183.2B (prior year ¥180.5B). Equity-method investment income ¥405.7B (prior year ¥87.1B) surged due to improved earnings at resource-related equity-method affiliates. Other income/expenses netted ▲¥134.5B (prior year +¥5.3B), pressured by the loss of prior-year disposal gain of ¥67B and current-period equity acquisition expenditure of ¥333.9B. Ordinary Income was ¥2998.0B (+151.2%), Profit Before Tax ¥2556.8B (prior year ¥313.8B). After corporate tax ¥669.4B (effective tax rate 26.2%), Net Income ¥1887.4B (prior year ¥117.8B) and Net income attributable to owners of parent ¥1762.9B recorded large increases. Special items: impairment loss narrowed to ¥79.4B (prior year ¥1126.7B), greatly reducing one-off burdens. In conclusion, revenue growth and substantial profit increase were primarily driven by commodity price recovery and removal of prior-year impairments.
Resources segment: Revenue ¥1924.5B (+36.4%), Profit Before Tax ¥1678.3B (prior year ¥1018.4B, +64.8%). Increased production of copper and nickel and market strength, plus a sharp rise in equity-method investment income of ¥283.2B (prior year ¥25.5B) contributed. Assets ¥15403.4B, with equity-method investments ¥3002.3B included, reflecting a capital-intensive structure. Capital expenditures ¥628.3B continued exploration and development investment.
Smelting & Refining segment: Revenue ¥12962.8B (+9.8%), Profit Before Tax ¥915.9B (prior year ▲¥71.5B) turning to profit. Removal of prior-year impairment of ¥553.9B (refining assets), improved refining spreads, and higher utilization contributed. Assets ¥12858.1B. Capital expenditures ¥382.0B implemented for equipment renewal and efficiency investments.
Materials segment: Revenue ¥2495.8B (-6.9%), Profit Before Tax ¥152.9B (prior year ▲¥542.3B) returned to profit. Removal of prior-year impairment of ¥572.9B (battery materials, etc.) was the main factor, but revenue declined due to weaker demand for battery materials and powder materials. Assets ¥3432.9B. Capital expenditures ¥270.1B continued for technology investments.
[Profitability] Operating margin 7.7% (prior year 4.9%), Net margin 10.8% (prior year 0.7%)—major improvement. ROE 9.0% (prior year 0.9%) recovered as prior-year impairments and special losses subsided. DuPont five-factor analysis: Profit margin (Profit Before Tax ¥2556.8B / Revenue ¥17415.9B = 14.7%) × Tax burden ratio (Net Income ¥1887.4B / Profit Before Tax ¥2556.8B = 73.8%) × Interest burden factor (Profit Before Tax ¥2556.8B / EBIT ¥1336.2B = 1.914) × Total asset turnover 0.489× × Financial leverage 1.55× gives ROE approximately 9.0%. Excess financial income (interest burden factor ~1.9×) and equity-method income boosted Net Income, showing significant step-up from Operating Income. EBITDA ¥1934.6B (Operating Income ¥1336.2B + Depreciation & Amortization ¥598.4B) yields EBITDA margin 11.1%. Prior-year EBITDA was ¥844.9B (including D&A ¥670.7B), a +129.0% improvement. ROIC (NOPAT / Invested Capital) simple estimate is about 4.3% (NOPAT ~¥1000B / Invested capital ~¥2.3T), suggesting progress toward but not yet reaching cost of capital.
[Cash Quality] Operating Cash Flow (OCF) ¥1018.1B versus Net Income ¥1887.4B gives OCF/Net Income 0.54×, indicating weak cash backing of profits. Main drivers were increases in working capital: Inventories ▲¥1704.2B, Accounts receivable ▲¥531.3B. OCF/EBITDA 0.53× is also low, showing delayed cash conversion. Estimated working capital days (CCC) ~160 days (DIO 184 days, DSO 53 days, DPO 77 days), indicating prolonged inventory holding. Free Cash Flow (FCF) was ▲¥834.4B (OCF ¥1018.1B − CapEx ¥827.6B − Intangibles ¥28.4B etc.), negative.
[Investment Efficiency] CapEx ¥827.6B / Depreciation ¥598.4B = 1.38×, reflecting a growth investment phase. ROIC ~4.3% is below ROA ~5.3%, weighing on returns due to capital intensity. Total asset turnover 0.489× (prior year 0.519×) slowed from inventories building to ¥7404.7B (prior year ¥5678.0B, +30.4%). Inventory turnover (COGS / Inventories) about 1.98× and DIO 184 days indicate excess inventory risk.
[Financial Soundness] Equity Ratio 58.3% (prior year 60.1%), D/E 0.55×, indicating a solid capital base. Interest-bearing debt total ¥6638.2B (short-term ¥3486.2B, long-term ¥3152.0B) versus cash ¥1167.7B gives net D/E about 0.44×. Debt/EBITDA ~3.4× (neutral to somewhat high). Interest coverage (EBIT ¥1336.2B / Financial Expenses ¥183.2B) about 7.3×, healthy. Current ratio about 158% (Current assets ¥11806.1B / Current liabilities ¥7473.8B), no short-term liquidity concerns. Deferred tax liabilities ¥1405.1B (prior year ¥900.0B) rose in line with valuation gains.
OCF was ¥1018.1B, down ¥479.6B (−32.0%) YoY. Despite a large increase in Profit Before Tax to ¥2556.8B (prior year ¥313.8B), expanded working capital compressed cash flow. Subtotal was ¥665.0B (prior year ¥1049.3B), and changes in working capital were Inventory ▲¥1704.2B (prior year ▲¥520.0B), Accounts receivable ▲¥531.3B (prior year ▲¥87.7B), Accounts payable +¥509.8B (prior year ▲¥27.5B), producing net working capital outflow ▲¥1725.7B. Dividend receipts ¥555.8B and interest receipts ¥425.5B partly offset, but corporate tax payments ¥468.8B led to ending OCF ¥1018.1B. OCF/Net Income 0.54× and OCF/EBITDA 0.53× indicate low quality. Investing CF was ▲¥1852.5B (prior year ▲¥1388.8B), driven by CapEx ¥827.6B, equity acquisitions ¥333.9B, and loans ¥521.9B. FCF was ▲¥834.4B, negative. Financing CF was +¥367.4B (prior year ▲¥61.8B), where bond issuance ¥3490.8B and short-term borrowings +¥607.7B funding exceeded borrowings repayments ▲¥620.1B, bond redemptions ▲¥2794.8B, dividends ▲¥327.1B, and treasury stock purchases ▲¥150.2B, resulting in net financing. Cash decreased ¥429.4B from beginning-of-period ¥1597.1B to end-of-period ¥1167.7B. Total shareholder returns (dividends ¥327.1B + buybacks ¥150.2B = ¥477.4B) could not be covered by internal FCF and were supplemented by financing activity.
Ordinary Income ¥2998.0B versus Operating Income ¥1336.2B leaves a difference of ¥1661.8B from non-operating items: Financial Income ¥556.7B, Financial Expenses ▲¥183.2B, Equity-method investment income ¥405.7B, Other income/expenses ▲¥134.5B. The surge in equity-method income to ¥405.7B (prior year ¥87.1B, +365.9%) reflects improved earnings at resource-related equity-method affiliates, embedding high sensitivity to commodity prices and volatility. Financial income comprised mainly of dividends ¥555.8B and interest income ¥425.5B; while recurring, it is exposed to market fluctuations. The loss of prior-year disposal gain ¥67B and a reduced impairment charge of ¥79.4B (prior year ¥1126.7B) significantly lowered one-off burdens. The conversion of Operating Income to OCF (OCF ¥1018.1B / Operating Income ¥1336.2B) ~76% after adding back depreciation ¥598.4B shows working capital outflows offsetting profitability. Comprehensive income ¥2892.8B versus Net Income ¥1887.4B produced OCI of ¥1005.4B, comprising valuation gains ¥743.4B, defined benefit plan remeasurements ¥286.9B, and foreign currency translation adjustments ▲¥78.2B, with valuation gains boosting comprehensive income. Accruals (Net Income − OCF) approximately ¥869.3B indicate contributions from working capital build-up and non-cash earnings (equity-method income, valuation gains). The quality of earnings is supported by improved operating base plus equity-method and financial income, normalized by the removal of prior large impairments; however, inventory accumulation and delayed cash conversion pose continuity risks.
Full-year forecast: Revenue ¥18830.0B (+8.1%), Net Income ¥1560.0B (−21.2%), Net income attributable to owners of parent ¥1390.0B. Achieved results vs. forecast: Revenue ¥17415.9B (92.5% of forecast), Net Income ¥1887.4B (121.0% of forecast), Net income attributable to owners of parent ¥1762.9B (126.8% of forecast), with earnings outperforming. Main drivers of upside were higher-than-expected equity-method investment income ¥405.7B and financial income ¥556.7B, accelerated market recovery in Resources, and lower-than-expected impairment expenses. Revenue missed forecast by ¥1414.1B, but margin improvement absorbed the shortfall. Dividend forecast ¥103.00 was exceeded with actual total dividend ¥228 (interim ¥65, year-end ¥163), a large increase. Payout Ratio rose from forecast EPS-based 19.9% to actual about 35.1% (parent EPS ¥649.55), allocating the excess profit to shareholder returns. Reproducibility of the upside depends on assumptions for commodity prices and FX; the outperformance is dependent on equity-method income and market factors, so commodity price trends will be key.
Annual dividend ¥228 (interim ¥65, year-end ¥163), at the same level as the prior year. Payout Ratio about 35.1% (based on parent EPS ¥649.55), maintaining dividends despite roughly 3.8x increase in profit year-over-year. Total dividends ¥327.1B plus buybacks ¥150.2B equals total return ¥477.4B, giving a Total Return Ratio of about 27.1% (Total returns / Net income attributable to owners of parent ¥1762.9B). With FCF ▲¥834.4B, dividends + buybacks ¥477.4B could not be covered by internal funds and were supplemented by debt. Cash on hand ¥1167.7B and balance sheet capacity (Equity Ratio 58.3%) secure short-term sustainability, but medium-term continuity of returns depends on inventory reduction and CCC normalization to improve OCF. The company maintains an active shareholder return stance with continuity of dividends and buyback flexibility, but the balance between returns and growth investment (CapEx / Depreciation 1.38×) is a monitoring point.
Working capital expansion risk: Inventories ¥7404.7B (+30.4%), DIO 184 days and CCC 160 days have lengthened, pressuring cash generation. Potential risks include inventory valuation losses, obsolescence, and higher storage costs. In market downturns, convertibility and liquidity deterioration are concerns.
Commodity price & FX volatility risk: The Resources segment contributes over half of Profit Before Tax and is highly sensitive to copper, nickel, and precious metal price fluctuations. Equity-method investment income ¥405.7B is also highly variable from resource exposure. Yen depreciation was a tailwind; reversal could compress earnings and reverse foreign operations translation gains. Deferred tax liabilities ¥1405.1B are linked to valuation gains, and market deterioration could increase tax burden.
Cash quality and capital efficiency risk: OCF/Net Income 0.54× and OCF/EBITDA 0.53× are low, indicating weak cash backing of profits. ROIC ~4.3% may remain below cost of capital. Rising Debt/EBITDA ~3.4× increases leverage sensitivity to external shocks, potentially materializing refinancing cost and funding constraint risks.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| ROE | 9.0% | 6.3% (3.2%–9.9%) | +2.7pt |
| Operating Margin | 7.7% | 7.8% (4.6%–12.3%) | -0.1pt |
| Net Margin | 10.8% | 5.2% (2.3%–8.2%) | +5.6pt |
ROE exceeds the median by 2.7pt, recovering to an industry upper range after last period’s impairment removal. Operating margin is around the median, while Net margin is substantially higher due to equity-method and financial income contributions.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 9.3% | 3.7% (-0.4%–9.3%) | +5.6pt |
Revenue growth exceeds the median by 5.6pt, driven by commodity price recovery and higher utilization relative to industry average.
※ Source: Company compilation
Profit levels improved significantly year-over-year due to commodity price linkage and uplift from equity-method income. Operating margin 7.7% and EBITDA margin 11.1% indicate recovery, but the Resources segment contributes over half of profits, creating a revenue structure highly dependent on market conditions. Sustainability of commodity prices and the performance of equity-method affiliates are major variables that will determine future profit trends.
Inventory accumulation (DIO 184 days) and CCC 160 days have prolonged cash conversion, resulting in OCF/Net Income 0.54× and delayed cash conversion. With FCF ▲¥834.4B, dividends and buybacks (total ¥477.4B) could not be covered by internal funds and relied on financing. Inventory normalization and CCC compression are top priorities for the next period; progress in these areas will be decisive for cash generation and sustainability of shareholder returns.
Removal of the prior-year large impairment of ¥1126.7B has normalized the earnings base. However, ROIC ~4.3% remains below cost of capital; the profitability contribution and cash returns from growth investments (CapEx / Depreciation 1.38×) are key to value creation. Considering potential improvement in total asset turnover 0.489× and leverage level Debt/EBITDA ~3.4×, simultaneous improvement in capital efficiency and cash quality is a structural condition for medium-term enterprise value enhancement.
This report is an earnings analysis document automatically generated by AI from 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; please consult a professional advisor as needed.