| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥640.9B | ¥628.7B | +2.0% |
| Operating Income / Operating Profit | ¥48.5B | ¥35.9B | +35.3% |
| Ordinary Income | ¥51.4B | ¥38.8B | +32.5% |
| Net Income / Net Profit | ¥34.8B | ¥32.5B | +7.2% |
| ROE | 8.5% | 8.9% | - |
For the fiscal year ended March 2026, Revenue was ¥640.9B (YoY +¥12.3B +2.0%), Operating Income was ¥48.5B (YoY +¥12.6B +35.3%), Ordinary Income was ¥51.4B (YoY +¥12.6B +32.5%), and Net Income was ¥34.8B (YoY +¥2.3B +7.2%), representing both top-line and bottom-line growth. While revenue increased only slightly, Operating Margin improved to 7.6% (prior year 5.7%), a 1.9pt improvement, and Gross Margin expanded to 23.9% (prior year 22.0%), also up 1.9pt, which drove profit growth. SG&A ratio was 16.4%, almost flat YoY, so gross margin improvement flowed directly to operating profit. Ordinary Income was supported by equity-method investment income of ¥5.2B (prior year ¥4.6B), while interest expense rose to ¥3.9B (prior year ¥2.8B) increasing interest burden. Extraordinary items were a net loss of △¥10.8B (impairment loss ¥11.8B, environmental measures ¥4.5B, gain on sale of investment securities ¥4.2B, etc.), weighing on Net Income growth. Operating Cash Flow (OCF) was ¥53.9B (YoY +122.9%), Free Cash Flow (FCF) was ¥37.2B, indicating strong cash generation.
Revenue of ¥640.9B (+2.0%) was driven by Development Products related (+12.2%) and Industrial Machinery related (+19.4%). Development Products increased to ¥198.7B due to expanded infrastructure demand (road safety facilities, long-span bridge cables, bridge design, etc.). Industrial Machinery expanded to ¥45.8B due to recovery in capex demand for powder metallurgy products and automatic weighing/packaging machines. Conversely, Wire Rope & Steel Wire related declined slightly to ¥287.2B (△2.4%), impacted by a pause in demand for wire ropes and fiber ropes. Steel Cord related fell significantly to ¥49.8B (△13.0%) mainly due to weak market conditions for tire steel cord and hose wire and demand adjustments. Energy & Real Estate related decreased slightly to ¥73.1B (△3.0%). Segmental revenue composition: Wire Rope & Steel Wire 44.8%, Development Products 31.0%, Energy & Real Estate 11.4%, Steel Cord 7.8%, Industrial Machinery 7.1%.
Profit: Operating Income ¥48.5B (+35.3%) was driven by gross margin improvement. Cost of sales was ¥487.5B (76.1% of sales) showing an improvement of approximately △0.9pt YoY, and Gross Margin expanded to 23.9% (prior year 22.0%) up 1.9pt. SG&A was ¥104.9B (16.4% of sales), up +2.2% YoY, with SG&A ratio almost flat, so gross margin expansion contributed directly to Operating Income. By segment, Development Products surged to Operating Income ¥21.8B (+184.0%, margin 11.0%), and Wire Rope & Steel Wire remained solid at ¥25.3B (+13.1%, margin 8.8%). In contrast, Steel Cord recorded an operating loss of ¥6.1B (margin △12.2%), turning negative and weighing on company margins. Non-operating items were net +¥2.9B (prior year +¥2.9B), steady, with dividend income ¥3.2B and equity-method income ¥5.2B contributing, while interest expense rose to ¥3.9B (prior year ¥2.8B), +41%. Ordinary Income was ¥51.4B (+32.5%), improving Ordinary Income margin to 8.0% (prior year 6.2%). Extraordinary items were a net △¥10.8B, with impairment losses of ¥11.8B (prior year ¥1.7B) and environmental measures ¥4.5B increasing one-off costs that were not fully offset by gain on sale of investment securities ¥4.2B. Profit before tax was ¥40.6B (prior year ¥38.4B), income taxes ¥5.7B (effective tax rate 14.1%, prior year 15.4%), resulting in Net Income of ¥34.8B (+7.2%). Although both revenue and profit increased, one-off costs significantly suppressed Net Income growth.
Wire Rope & Steel Wire (Revenue ¥287.2B △2.4%, Operating Income ¥25.3B +13.1%, margin 8.8%) saw margin improvement through cost efficiency and price pass-through despite slight revenue decline. Development Products (Revenue ¥198.7B +12.2%, Operating Income ¥21.8B +184.0%, margin 11.0%) achieved large profit growth due to improved profitability of infrastructure projects and contributions from large projects, accounting for 45% of consolidated operating profit and acting as the primary driver. Industrial Machinery (Revenue ¥45.8B +19.4%, Operating Income ¥2.8B +31.6%, margin 6.0%) benefitted from a recovery in capex demand with higher revenue and profit. Energy & Real Estate (Revenue ¥73.1B △3.0%, Operating Income ¥4.7B +27.2%, margin 6.4%) increased profit despite revenue decline due to stable monetization of solar power projects. Steel Cord (Revenue ¥49.8B △13.0%, Operating Loss ¥6.1B, margin △12.2%) moved into the red due to weak market for tire steel cord and the booking of impairment losses, becoming the largest weakness dragging on company margins.
Profitability: Operating Margin 7.6% (prior year 5.7%, +1.9pt), Net Margin 5.4% (prior year 5.2%, +0.2pt) improved. ROE 8.5% (prior year 9.1%) slightly down due to increase in equity. Expansion of Gross Margin to 23.9% (prior year 22.0%, +1.9pt) was the main driver of profitability improvement.
Cash Quality: Operating Cash Flow / Net Income 1.55x, OCF/EBITDA 0.81x (EBITDA ¥66.6B = Operating Income ¥48.5B + Depreciation ¥18.1B), reflecting headwinds from working capital (Accounts receivable increase ¥10.5B, Accounts payable decrease ¥9.2B) that suppressed cash generation. FCF ¥37.2B equals 1.07x Net Income, which is healthy.
Investment Efficiency: CapEx/Revenue 3.6%, CapEx/Depreciation 1.26x indicating reinvestment. Total Asset Turnover 0.72x. Interest Coverage 12.4x (Operating Income ¥48.5B / Interest expense ¥3.9B) showing ample capacity to cover interest.
Financial Soundness: Equity Ratio 46.2% (prior year 42.0%, +4.2pt), Debt/Equity 0.55x, Interest-bearing debt ¥227.9B (prior year ¥236.7B), Cash ¥70.7B, Net Interest-bearing Debt ¥157.2B, Debt/EBITDA 3.42x. Current Ratio 140.5%, Quick Ratio 117.3%. Short-term debt ratio is high at 59.4%, and Cash/Short-term debt 0.52x indicates high refinancing sensitivity.
OCF ¥53.9B (prior year ¥24.2B, +122.9%) was generated from Operating Cash Flow subtotal ¥59.1B (including non-cash expenses such as Depreciation ¥18.1B and Impairment ¥11.8B, and deducting equity-method income ¥5.2B), partially offsetting working capital headwinds (Accounts receivable increase ¥10.5B, Accounts payable decrease ¥9.2B) with Inventories decrease ¥9.9B, and after income taxes paid ¥5.8B. OCF/Net Income 1.55x indicates solid cash backing, but OCF/EBITDA 0.81x reflects deterioration in working capital efficiency. Investing Cash Flow △¥16.6B was net outflow driven by CapEx ¥22.9B (mainly replacement investment in Wire Rope & Steel Wire and Industrial Machinery equipment) and proceeds from sale of investment securities ¥7.7B. FCF ¥37.2B was ample and fully covered shareholder returns of Dividends ¥13.9B and Share Buybacks ¥3.0B. Financing Cash Flow △¥26.9B involved drawing long-term borrowings ¥51.0B and net increase in short-term borrowings ¥38.4B while repaying long-term borrowings ¥98.2B to improve the maturity profile. CCC 152 days (DSO 77 days + DIO 125 days △ DPO 50 days) shows worsening working capital efficiency YoY, with relaxed receivables collection terms and prolonged inventory holding remaining issues.
Core recurring earnings are Operating Income ¥48.5B and equity-method income ¥5.2B, and sustained gross margin improvement at the operating level indicates enhanced recurring earning power. One-off items were Special Losses ¥16.2B (impairment loss ¥11.8B, environmental measures ¥4.5B, loss on retirement of fixed assets ¥0.2B, etc.) and Special Gains ¥5.5B (gain on sale of investment securities ¥4.2B), netting to △¥10.8B, representing a 31% burden relative to Net Income ¥34.8B—indicating high dependence on one-off items. Non-operating income ¥11.1B (1.7% of sales) comprises Dividend income ¥3.2B, equity-method income ¥5.2B, and other ¥2.4B and is stable. Accrual quality is favorable with OCF/Net Income 1.55x, but OCF/EBITDA 0.81x reflects working capital headwinds and room for improvement in monetizing earnings. Comprehensive income ¥61.9B substantially exceeded Net Income ¥34.8B, with Other Comprehensive Income ¥27.1B consisting of valuation difference on securities ¥17.5B, actuarial gains/losses adjustment ¥10.3B, and foreign currency translation adjustment △¥2.1B, indicating material market-related effects. The 32% gap between Ordinary Income ¥51.4B and Net Income ¥34.8B is due to extraordinary items, so normalization next year could provide room for Net Margin improvement.
Full Year forecast: Revenue ¥670.0B (+4.5%), Operating Income ¥43.0B (△11.3%), Ordinary Income ¥44.0B (△14.3%), Net Income ¥30.0B (△13.8% vs this period ¥34.8B), representing a conservative plan of revenue up but profit down. Operating Margin is expected to fall to 6.4%, presumably reflecting assumptions including restructuring costs for Steel Cord, rebound in raw material and energy prices, and higher interest burden. Progress rates are Revenue 95.7%, Operating Income 112.8%, Ordinary Income 116.8%, Net Income 116.0%, meaning actual results have already exceeded the full-year forecast, highlighting conservatism in the initial plan. Dividend forecast is annual ¥30 (in-period policy), but actual dividend is ¥70 (interim ¥25 + year-end ¥45), substantially above forecast, and the company revised the year-end dividend upward from ¥40 to ¥45 on May 14. Looking ahead, revenue growth trend is expected to continue, but the realization of profit forecasts will depend on the reversal of one-off costs and progress in Steel Cord restructuring.
Annual dividend ¥70 (interim ¥25 + year-end ¥45, same as prior year), Payout Ratio 31.1% (Dividend ¥14.0B / Net Income ¥44.9B basis, average shares outstanding 15,563K) at a sound level. The year-end dividend was revised up from the initially forecast ¥40 to ¥45 (announced May 14). Total shareholder returns including share buybacks of ¥3.0B equal Dividends ¥13.9B + Share Buybacks ¥3.0B = ¥16.9B, giving Total Return Ratio 48.6% (Total return ¥16.9B / Net Income ¥34.8B), which is conservative. Dividend coverage by FCF is 2.7x and total return coverage by FCF is 2.2x, indicating high sustainability. With cash balance ¥70.7B and OCF ¥53.9B, the same level of dividend is sustainable even assuming next year’s forecast Net Income of ¥30.0B. The company has a track record of dividend increases, indicating strengthened shareholder return orientation.
Steel Cord segment’s loss structure (Operating Loss ¥6.1B, margin △12.2%): If weak market conditions and demand adjustments in tire steel cord persist, pressure on consolidated margins may be prolonged and become a factor in next year’s forecasted profit decline. Most of the ¥11.8B impairment loss was concentrated in this segment, and delayed decisive restructuring or exit decisions could lead to additional losses.
Deterioration in working capital efficiency (CCC 152 days, DSO 77 days, DIO 125 days): Working capital headwinds (Accounts receivable increase ¥10.5B, Accounts payable decrease ¥9.2B) may continue. If relaxed collection terms and inventory elongation become chronic, OCF generation could decline, FCF margin could worsen, and additional borrowing may be required. Interest Coverage is 12.4x, providing headroom currently, but accumulative working capital burden can contribute to higher interest costs.
Short-term debt ratio 59.4% and refinancing risk: With short-term borrowings ¥135.3B and cash ¥70.7B, Cash/Short-term debt 0.52x is low. The company has increased long-term borrowings by +76.5% and reduced short-term borrowings by △26.6% to shift the maturity profile, but short-term dependence remains high. Rising interest rates could increase refinancing costs, and a deterioration in financial conditions could constrain funding access.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.6% | 7.8% (4.6%–12.3%) | -0.2pt |
| Net Margin | 5.4% | 5.2% (2.3%–8.2%) | +0.2pt |
Operating Margin is in line with the industry median, and Net Margin slightly exceeds the median, placing profitability within the industry standard range.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 2.0% | 3.7% (-0.4%–9.3%) | -1.7pt |
Revenue growth rate lags the industry median, indicating conservative top-line expansion relative to peers.
※Source: Company compilation
Improved core profitability and strengthened cash generation: Operating Margin improved to 7.6% (YoY +1.9pt) and Gross Margin to 23.9% (YoY +1.9pt), demonstrating realized benefits of price pass-through and product mix. Robust FCF ¥37.2B supports a Payout Ratio of 31.1% and Total Return Ratio 48.6% as sustainable. High-margin segments—Development Products margin 11.0% and Wire Rope & Steel Wire margin 8.8%—are driving earnings and confirm structural earnings improvement.
Steel Cord losses and working capital efficiency are key constraints next year: The Steel Cord segment’s operating loss of ¥6.1B (margin △12.2%) is a drag on consolidated margins and progress in its restructuring is key to achieving next year’s forecast (Operating Income ¥43.0B, △11.3%). Working capital headwinds (AR increase, AP decrease) have extended CCC to 152 days and pressured OCF/EBITDA to 0.81x. Next year, simultaneous progress on Steel Cord restructuring and working capital optimization is required for margin recovery and cash generation.
Short-term debt dependence and importance of refinancing management: With a short-term debt ratio of 59.4% and Cash/Short-term debt 0.52x, liquidity buffer is thin and sensitivity to higher refinancing costs is high. The company has lengthened maturities by increasing long-term borrowings by +76.5% and reducing short-term borrowings by △26.6%, but leveraging Interest Coverage of 12.4x to further diversify maturities and fix rates would strengthen financial stability.
This report is an earnings analysis document automatically generated by AI based on XBRL earnings disclosure 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 should be made at your own responsibility; consult a professional advisor as appropriate.