| Indicator | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥2110.8B | ¥2012.2B | +4.9% |
| Operating Income / Operating Profit | ¥113.0B | ¥97.6B | +15.7% |
| Ordinary Income | ¥137.3B | ¥97.0B | +41.5% |
| Net Income / Net Profit | ¥51.6B | ¥161.0B | -68.0% |
| ROE | 3.4% | 12.1% | - |
FY2026 (ended March 2026) Q2 cumulative results showed Revenue ¥2,110.8B (YoY +¥98.6B +4.9%), Operating Income ¥113.0B (YoY +¥15.4B +15.7%), Ordinary Income ¥137.3B (YoY +¥40.3B +41.5%), and Net Income attributable to owners of the parent ¥51.6B (YoY -¥109.4B -68.0%). Revenue growth for the fourth consecutive quarter was driven by the Metals segment (+11.6%), Real Estate (+7.6%), and Electronic Materials (+6.2%). At the operating level, gross margin improved to 15.3% (YoY +0.6pt) and operating margin expanded to 5.4% (YoY +0.5pt). Ordinary Income rose substantially due to equity-method investment gains of ¥31.1B (YoY +¥25.0B), but Net Income fell 68.0% due to the reversal from the prior year's gain on sale of investment securities of ¥170.8B (current period ¥72.2B).
[Revenue] Revenue ¥2,110.8B (YoY +4.9%) by segment: Metals ¥1,033.3B (+11.6%, composition 49.0%) was the largest contributor, supported by firm copper prices and higher sales volumes. Machinery-related sales: Rock Drill ¥364.4B (+4.1%, composition 17.3%) and Unic ¥299.7B (+2.0%, composition 14.2%) maintained revenue growth. Chemical Products ¥104.2B (+5.4%) and Electronic Materials ¥69.5B (+6.2%) also performed steadily. Conversely, Industrial Machinery ¥217.4B (-15.2%) declined due to a lull in large projects. Real Estate ¥22.4B (+7.6%) grew on stable rental income. Overall, exposure to Metals increased while revenue diversification across Machinery and Chemical Products progressed.
[Profitability] Cost of sales ¥1,788.8B (cost ratio 84.7%) produced Gross Profit ¥322.0B (Gross Margin 15.3%, YoY +0.6pt). SG&A ¥209.1B (SG&A ratio 9.9%, YoY +5.6%) rose faster than sales growth +4.9%, but Operating Income ¥113.0B (Operating Margin 5.4%, YoY +15.7%) still posted an increase. Non-operating results included equity-method investment gains ¥31.1B (YoY +¥25.0B) boosting Ordinary Income, with dividend income ¥6.3B and foreign exchange gains ¥5.7B also contributing, resulting in Ordinary Income ¥137.3B (YoY +41.5%). Extraordinary income included gain on sale of investment securities ¥72.2B (prior year ¥170.8B), while extraordinary losses included ¥23.9B (including environmental remediation costs ¥21.9B), resulting in a net uplift of ¥48.7B. Pre-tax income ¥186.0B less tax expense ¥56.7B (effective tax rate 30.5%) produced Net Income attributable to owners of the parent ¥51.6B (YoY -68.0%). Net Income declined due to the prior year's large extraordinary gain, although revenue and profit increased through the Ordinary Income stage.
Operating Income contribution was largest from Metals ¥37.9B (margin 3.7%, YoY +56.7%), driven by firm copper prices and volume growth. Rock Drill ¥28.5B (margin 7.8%, YoY +2.0%) functions as a stable earnings source. Unic ¥12.7B (margin 4.2%, YoY +30.3%) showed notable margin improvement reflecting cost management. Industrial Machinery ¥16.5B (margin 7.6%, YoY -25.4%) declined due to lower sales. Chemical Products ¥8.4B (margin 8.0%, YoY +33.9%) and Electronic Materials ¥3.6B (margin 5.2%, YoY +192.0%) exhibited high profit growth. Real Estate ¥6.9B (margin 31.0%, YoY +1.0%) provided high-margin support to companywide profitability. Significant margin dispersion exists across segments: Metals is large-scale but low-margin, while Machinery, Chemical Products, and Real Estate drive overall margins.
[Profitability] Operating Margin 5.4% (YoY +0.5pt), Ordinary Income Margin 6.5% (YoY +1.8pt), Net Margin 2.4% (YoY -5.6pt). ROE 3.4% (prior year 14.3%) fell sharply due to the reversal of extraordinary gains. EBIT margin 5.4% improved year-on-year due to SG&A control. ROA (on Ordinary Income basis) 5.2% (prior year 3.8%) reflects improved earnings power up to the Ordinary Income stage. [Cash Quality] Operating Cash Flow (OCF) ¥34.1B is weak at 0.66x relative to Net Income ¥51.6B; deterioration in working capital (accounts payable -¥36.5B, other payables -¥105.3B) impeded cash conversion. From OCF subtotal ¥89.5B, corporate tax payments ¥60.8B were deducted; accounts receivable collection ¥89.9B was a positive contributor, while inventory increase -¥14.4B constrained cash. [Investment Efficiency] Total Asset Turnover 0.78x (annualized), roughly flat. Days Inventory Outstanding (DIO) 107 days remains elevated, indicating scope to improve inventory efficiency. Investment securities ¥410.5B (15.1% of total assets) include valuation differences ¥118.3B, which have boosted net assets via AOCI. [Financial Health] Equity Ratio 55.1% (prior year 50.9%), Current Ratio 245%, Quick Ratio 195% indicate strong liquidity. Debt/EBITDA 3.18x is somewhat high, but EBITDA interest coverage 29.4x shows adequate interest resilience. Short-term borrowings increased to ¥110.1B (prior year ¥43.1B), but cash and deposits ¥210.5B (Cash/short-term liabilities 1.91x) limit maturity mismatch risk.
OCF ¥34.1B: OCF subtotal ¥89.5B less corporate tax payments ¥60.8B, with working capital changes reducing cash. Accounts receivable collection ¥89.9B was positive; decreases in accounts payable ¥36.5B, other payables ¥105.3B, and inventory increase ¥14.4B were cash outflows. OCF/Net Income ratio 0.66x highlights cash quality issues and urgent need to normalize working capital. Investing Cash Flow was positive ¥21.2B, with proceeds from sale of investment securities ¥98.7B funding capital expenditures ¥48.7B. Free Cash Flow was ¥55.3B (= OCF ¥34.1B + Investing CF ¥21.2B). Financing Cash Flow was -¥96.6B, executing share repurchases ¥80.7B and dividends ¥24.0B as shareholder returns, adjusting capital structure with increased short-term borrowings ¥165.0B and long-term debt repayments ¥37.5B. Cash and cash equivalents at period end were ¥203.5B (opening ¥243.9B), a decrease of ¥40.4B, but liquidity remains sufficient.
Core recurring earnings center on Operating Income ¥113.0B, with net non-operating items +¥24.3B (equity-method income ¥31.1B and dividend income ¥6.3B principally) lifting Ordinary Income. One-off items comprised Extraordinary Income ¥72.6B (of which gain on sale of investment securities ¥72.2B) and Extraordinary Losses ¥23.9B (of which environmental remediation costs ¥21.9B), producing net +¥48.7B added to pre-tax income. Non-operating income ¥49.8B equals 2.4% of Revenue, below the 5% threshold, indicating preserved soundness in revenue structure. Comprehensive Income ¥268.3B well exceeded Net Income ¥51.6B, driven by valuation gains on investment securities ¥118.3B and actuarial losses/gains adjustments ¥19.9B in Other Comprehensive Income. The fact OCF is below Net Income is primarily due to working capital deterioration; realization of accounting profits into cash requires inventory reduction and improved payables management.
Full Year guidance: Revenue ¥2,357.0B (YoY +11.7%), Operating Income ¥90.0B (YoY -20.3%), Ordinary Income ¥87.0B (YoY -36.7%), Net Income attributable to owners of the parent ¥51.0B (EPS forecast ¥157.25). Progress vs Q2 cumulative results: Revenue 89.6%, Operating Income 125.5%, Ordinary Income 157.8%, Net Income 101.2% — profits are progressing ahead of plan. The conservative full-year outlook for Operating and Ordinary Income likely incorporates uncertainty in metal prices and FX, continued environmental remediation costs, and the one-off nature of prior extraordinary gains. Given profit progress to Q2 substantially exceeds full-year forecasts, management appears to anticipate downward profit pressures in H2 (seasonality, cost increases, price adjustments).
This fiscal period dividend: annual total ¥80 (interim ¥30, year-end ¥50, including commemorative dividend ¥10), payout ratio about 20.8% (annual dividend ¥80 / EPS ¥384.65). On the basis of full-year guidance, dividend forecast ¥40 and EPS forecast ¥157.25 imply payout ratio about 25.4%, a conservative level. Share buybacks of ¥80.7B were executed; total shareholder returns amounted to ¥104.7B (dividends ¥24.0B + buybacks ¥80.7B). Total return ratio against Free Cash Flow ¥55.3B is approximately 189%, indicating an aggressive return stance funded by proceeds from sale of investment securities and on-hand liquidity. Dividends alone cover FCF by 2.3x, but including share buybacks requires external funding. If OCF improves and inventory is reduced, the company will be better positioned to sustain stable dividends and opportunistic buybacks.
Working Capital Management Risk: DIO 107 days remains elevated and OCF was only 66% of Net Income due to declines in accounts payable and other payables. Inventory build-up risks discount pressure, higher storage costs, and weakened working capital efficiency which compresses ROIC 4.3%. Delays in inventory normalization could affect both liquidity and capital efficiency.
Commodity Price & FX Risk: Metals segment accounts for 49.0% of revenue and contributed Operating Income ¥37.9B, but carries a low margin of 3.7%, so copper price and FX fluctuations directly affect earnings. Non-operating FX gains ¥5.7B and losses ¥6.2B are roughly balanced; effectiveness of FX hedging and conservatism of commodity price assumptions are key to earnings volatility.
Ongoing Environmental Remediation Costs: Extraordinary losses included environmental remediation costs ¥21.9B (1.0% of Revenue, 19.4% of Operating Income), related to mine and coal mine site liabilities, which pressure profits. Costs that are difficult to allocate companywide may persist or increase, diluting operating profitability and warrant close attention.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 5.4% | 7.8% (4.6%–12.3%) | -2.4pt |
| Net Margin | 2.4% | 5.2% (2.3%–8.2%) | -2.7pt |
Profitability lags the industry median, with Metals’ low-margin structure and environmental cost burden suppressing Operating Margin.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 4.9% | 3.7% (-0.4%–9.3%) | +1.2pt |
Revenue growth outperformed the industry median, driven by increases in Metals, Chemical Products, and Machinery segments.
※ Source: Company compilation
Improvement potential in OCF and cash conversion: OCF ¥34.1B is only 66% of Net Income ¥51.6B, with DIO 107 days constraining cash. Receivables collection progressed (+¥89.9B), but reductions in payables and other liabilities and inventory build-up blocked cash conversion. Progress in inventory reduction and working capital normalization would likely improve OCF/EBITDA and expand Free Cash Flow, enabling a balance between growth investment and shareholder returns.
Segment profit structure improvement and margin uplift potential: Metals is largest by revenue share 49% and contributed Operating Income ¥37.9B but has a low margin of 3.7%, diluting the companywide margin of 5.4%. Conversely, Rock Drill (margin 7.8%), Chemical Products (8.0%), and Real Estate (31.0%) are high-margin segments. Continued revenue growth in Machinery and Chemical Products and margin improvement in Metals (price pass-through, cost cuts) could raise company Operating Margin and stabilize earnings.
This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your responsibility; consult a professional advisor as appropriate.