AMADA CO.,LTD. FY2026 FY Earnings Report

Quick View

Executive Summary

For the fiscal year ended March 2026, Revenue was ¥4373.7B (YoY +¥407.0B +10.3%), Operating Income was ¥448.0B (YoY -¥42.8B -8.7%), Ordinary Income (Ordinary Income / operating + non-operating) was ¥552.6B (YoY +¥119.8B +27.7%), and Net Income attributable to owners of parent was ¥305.5B (YoY -¥18.3B -5.7%). The structure shows higher revenue but lower operating profit and higher ordinary income; improvement in non-operating financial results secured gains at the ordinary income stage, but final profit slightly declined due to tax burdens and related items. By segment, the core Metal Processing Machines Business decelerated with Revenue ¥3264.9B (-1.1%) and Operating Income ¥373.3B (-7.6%), while the Metalworking Machine Business supported the overall results with Revenue ¥883.5B (+35.5%) and Operating Income ¥91.6B (+32.8%). Operating Cash Flow (OCF) was ¥580.7B (YoY +25.7%), approximately 1.9x Net Income, indicating solid cash generation. Total assets expanded by ¥1222.2B versus the prior fiscal year-end due to acquisitions of subsidiaries; short-term borrowings increased to ¥728.0B (prior year ¥109.5B), and goodwill accumulated to ¥311.0B (prior year ¥67.5B).

Factors Driving Performance

【Revenue】Revenue was ¥4373.7B (YoY +10.3%). By region: Japan +8.1%, North America +6.2%, Europe -1.5%, China +47.5%, Other Asia +40.0%, with high growth in China and other Asia driving results. By product: Sheet metal division ¥2968.5B (-0.5%) was flat, fine welding division ¥296.3B (-7.3%) slightly down, cutting/grinding machine division ¥454.0B (-0.7%) flat, while press division ¥429.4B (+120.5%) posted large revenue increases. Other divisions expanded sharply to ¥225.4B (about 18x YoY), largely reflecting consolidation scope expansion (13 newly consolidated companies including Bia Mechanics, etc.). By segment, core Metal Processing Machines Business Revenue ¥3264.9B (-1.1%) was slightly down, Metalworking Machine Business Revenue ¥883.5B (+35.5%) grew substantially, and Other ¥225.4B (prior year ¥12.6B) surged. Of the company-wide Revenue growth of +10.3%, internal organic growth was limited; M&A effects and growth in certain product groups drove the increase.

【Profitability】Gross profit was ¥1775.4B (gross margin 40.6%), up ¥30.5B (+1.8%) YoY, but gross margin declined 290bp from 43.5% a year earlier. SG&A was ¥1341.8B (SG&A ratio 30.7%), up ¥104.4B (+7.8%) YoY, but SG&A ratio improved 80bp from 31.5% in the prior year, showing some cost control effects. Operating Income was ¥448.0B (operating margin 10.2%), down ¥42.8B (-8.7%) YoY. Operating margin contracted 213bp from 12.4% last year, indicating profitability deterioration despite revenue growth. Financial income was ¥40.4B (prior year ¥14.6B) and financial expenses ¥33.4B (prior year ¥15.1B), giving a net financial result of +¥7.0B (prior year -¥0.5B), contributed by increased financial income. Equity-method investment gains were ¥2.1B (prior year ¥1.3B), other income ¥21.5B (prior year ¥26.0B), other expenses ¥7.2B (prior year ¥11.8B). Profit before tax was ¥457.1B (prior year ¥491.6B), down ¥34.5B (-7.0%). After deducting income taxes of ¥149.5B (effective tax rate 32.7%), Net Income attributable to owners of parent was ¥305.5B (prior year ¥323.9B), down ¥18.3B (-5.7%). In conclusion: higher revenue but lower profit. The decline in gross margin was the main cause of the operating profit decrease; improvements in non-operating items secured higher ordinary income, but tax burden pressured net income.

Segment Analysis

The Metal Processing Machines Business reported Revenue ¥3264.9B (-1.1%), Operating Income ¥373.3B (-7.6%), operating margin 11.4% (prior year 12.2%). Profitability declined 80bp year-on-year, indicating a deterioration in the core business. The Metalworking Machine Business posted Revenue ¥883.5B (+35.5%), Operating Income ¥91.6B (+32.8%), operating margin 10.4% (prior year 10.6%), showing large revenue and profit growth with margins roughly stable. Other segments surged to Revenue ¥225.4B (about 18x YoY) but posted an operating loss of -¥17.0B (operating margin -7.5%), in the red. Losses in Other reflect startup costs and integration expenses associated with consolidation scope expansion. Of the company's Operating Income ¥448.0B, Metal Processing Machines accounted for 83.3%, Metalworking Machines 20.4%, and Other -3.8%, which depressed consolidated profit.

Key Financial Metrics

【Profitability】Operating margin 10.2% (prior year 12.4%), Net Income margin attributable to owners of parent 7.0% (prior year 8.2%), both down YoY. ROE was 5.8% (prior year 6.2%), mainly driven by the decline in net margin. Gross margin 40.6% (prior year 43.5%) fell 290bp, reflecting product mix and cost environment changes. SG&A ratio 30.7% (prior year 31.5%) improved 80bp, showing some fixed-cost containment. 【Cash Quality】Operating Cash Flow (OCF) ¥580.7B is approximately 1.90x Net Income attributable to owners of parent ¥305.5B, indicating good cash backing of earnings. OCF/EBITDA ratio was 0.86x (EBITDA ¥676.4B = Operating Income ¥448.0B + Depreciation ¥228.4B), showing solid cash conversion. Accrual ratio ((Net Income - OCF)/Total Assets) is approximately -3.6%, negative, indicating cash increased more than accounting profit and that reported profit is conservative. 【Investment Efficiency】Total asset turnover was about 0.57x (Revenue ¥4373.7B / average total assets approx. ¥7110B), down from about 0.61x the prior year, primarily due to balance sheet expansion from subsidiary acquisitions and higher working capital. Inventory Days (DIO) about 222 days (Inventory ¥1577.5B / COGS ¥2598.3B × 365), Receivables Days (DSO) about 132 days (Receivables ¥1580.5B / Revenue ¥4373.7B × 365), Payables Days (DPO) about 73 days (Payables ¥518.1B / COGS ¥2598.3B × 365), Cash Conversion Cycle (CCC) about 281 days, indicating heavy working capital usage. 【Financial Soundness】Equity Ratio 69.4% (prior year 79.9%), D/E ratio 0.15x (interest-bearing debt ¥808.0B / shareholders' equity ¥5403.6B), showing a solid financial base, though short-term borrowings rose sharply from ¥109.5B to ¥728.0B. Debt/EBITDA (interest-bearing debt ¥808.0B / EBITDA ¥676.4B) is about 1.19x, low and indicating high financial resilience. Net cash (cash & deposits ¥1536.3B - interest-bearing debt ¥808.0B) is about ¥728B, ample. Current ratio about 253% (current assets ¥4980.3B / current liabilities ¥1971.3B), goodwill-to-equity ratio 5.8% (goodwill ¥311.0B / shareholders' equity ¥5403.6B), both at healthy levels.

Cash Flow Analysis

OCF was ¥580.7B (YoY +25.7%), approximately 1.90x Net Income attributable to owners of parent ¥305.5B. OCF subtotal (before working capital changes) was ¥746.2B, reflecting Depreciation ¥228.4B, Stock-based compensation expense ¥0.6B, additions from financial items and equity-method results ¥19.6B, and exceeding Profit Before Tax ¥457.1B substantially. Working capital changes included inventory change +¥3.7B, trade payables change -¥24.3B, other working capital changes +¥19.1B, so overall cash outflow was limited. Payments of income taxes -¥171.5B, interest and dividends received +¥12.0B, interest paid -¥6.7B, lease payments -¥32.8B resulted in final OCF of ¥580.7B. Investing Cash Flow was -¥251.7B, primarily due to acquisitions of subsidiaries -¥498.7B (expansion of consolidation scope of 13 companies). Net increases in time deposits +¥102.1B and proceeds from sale and redemption of securities +¥130.0B provided funds; capital expenditures -¥55.8B and intangible asset acquisitions -¥40.2B were restrained. Free Cash Flow was ¥329.0B (OCF + Investing CF), covering total shareholder returns of ¥397.6B (dividends -¥197.5B and share buybacks -¥200.1B) by about 0.83x. Financing Cash Flow was +¥137.4B, driven mainly by net increase in short-term borrowings +¥593.9B, offset by long-term debt repayments -¥106.8B, dividend payments -¥197.5B, and treasury stock acquisitions -¥200.1B. Cash and cash equivalents increased from ¥1048.4B at the beginning of the period to ¥1536.3B at the end of the period, up ¥487.9B; foreign exchange translation effects +¥21.5B also contributed. Overall cash generation remained solid; M&A funding was raised via short-term borrowings, and working capital expansion was kept relatively limited.

Quality of Earnings

Operating Income ¥448.0B forms the core of recurring earnings, representing 10.2% of Revenue ¥4373.7B at the operating stage. Net financial income (financial income ¥40.4B less financial expenses ¥33.4B = +¥7.0B) turned positive from -¥0.5B a year earlier, mainly due to an increase in financial income (¥14.6B → ¥40.4B). Net other income (other income ¥21.5B less other expenses ¥7.2B = +¥14.3B) is minor at 0.3% of Revenue, and total non-operating items of +¥21.3B equal approximately 4.8% of Operating Income. Equity-method gains ¥2.1B contribute minimally. Ordinary Income ¥552.6B comprises Operating Income plus total non-operating results, and no large one-off special items were recognized. The difference between Profit Before Tax ¥457.1B and Net Income attributable to owners of parent ¥305.5B is ¥151.6B, with an effective tax rate of about 32.7%, a standard level. OCF ¥580.7B / Net Income ¥305.5B = about 1.90x, indicating strong cash backing of earnings; accrual ratio -3.6% ((Net Income - OCF) / Total Assets) also shows good cash realization. Of Comprehensive Income ¥564.1B, Other Comprehensive Income ¥256.5B mainly comprises foreign currency translation adjustments of ¥219.6B from overseas operating entities, driven by valuation gains from FX movements. Remeasurements of defined benefit plans -¥1.1B and FVTOCI fair value changes ¥37.9B were recorded as changes in equity components, with minor impact on net profit. Overall, Operating Income is the core of recurring earnings; improvements in non-operating results contributed to higher ordinary income, and there were no large non-recurring items, indicating stable earnings quality.

Forecasts & Guidance

Full Year guidance is Revenue ¥4600.0B (vs. current year +5.2%), Operating Income ¥480.0B (+7.1%), Net Income attributable to owners of parent ¥340.0B (+11.3%), EPS ¥109.49 (¥, +13.3%), DPS ¥32.00 (¥, +3.2%), projecting revenue and profit growth. Progress vs. the current year is 95.1% for Revenue, 93.3% for Operating Income, and 89.9% for Net Income, assuming accelerated growth in H2. Full year Operating margin is projected at 10.4% (current year 10.2%), assuming continued growth in Metalworking Machines, recovery in Metal Processing Machines profitability, and realization of M&A integration synergies. Forecast DPS ¥32.00 implies a forecast payout ratio of about 58.4%, slightly down from the current year payout ratio of 62.8%. Assuming OCF remains at the current-year level (about 1.9x Net Income, i.e., roughly ¥646B), balancing dividends and share buybacks is feasible, though FCF capacity will vary with the scale of investing CF. Key assumptions include recovery in domestic and global machine tool demand, easing of US-China tensions, and FX assumptions (specific rates not disclosed; note the risk of yen appreciation). Downside risks include further gross margin deterioration, prolonged working capital stagnation, and delays in integration benefits.

Shareholder Returns

Annual dividend is ¥62.00 (interim ¥31.00, year-end ¥31.00). Based on Net Income attributable to owners of parent ¥305.5B and total dividends ¥197.5B (on an issued-share basis after treasury stock deduction), the payout ratio is approximately 62.8%. This maintains the prior-year payout ratio of 62.8%, supporting a stable dividend policy. Share buybacks totaled ¥200.1B (financing CF), and combined dividends and buybacks amounted to ¥397.6B. The total shareholder return ratio to FCF is about 121% (FCF ¥329.0B), exceeding FCF, but ample cash and deposits ¥1536.3B reduce sustainability concerns. Treasury stock cancellation amounted to ¥188.97B (statement of changes in shareholders’ equity), reducing issued shares outstanding. Forecast DPS ¥32.00 implies a payout ratio of about 58.4% on forecast Net Income ¥340.0B, suggesting dividend policy is maintainable at the forecast level. Total dividends plus share buybacks are about 68% of Operating Cash Flow; dividend sustainability depends on OCF levels, but given cash buffers and projected OCF, sustainability appears within a reasonable range. Dividend yield (market data not provided) and dividend trends (multi-year data not provided) were not evaluated, but stability around a ~60% payout ratio is suggested.

Risk Factors

1. Gross Margin Decline Risk: Gross margin fell 290bp from 43.5% to 40.6% year-on-year, and operating margin contracted 213bp. Causes may include product mix shifts from large Metalworking Machine sales, rising costs, and intensified price competition. Metal Processing Machines operating margin also declined to 11.4% (prior year 12.2%), showing notable deterioration in the core business. The full-year forecast assumes slight operating margin improvement to 10.4%, contingent on gross margin recovery in H2; failure to realize this could result in missed operating profit targets and pressure on dividend policy. Inventory increased by ¥263.1B to ¥1577.5B (prior year ¥1314.3B), embedding inventory valuation loss and obsolescence risks.

2. Dependence on Short-term Debt and Refinancing Risk: Short-term borrowings surged about 6.6x from ¥109.5B to ¥728.0B, and the current liabilities ratio is high at 90.1% (current liabilities ¥1971.3B / total liabilities ¥2317.5B). Most short-term borrowings are presumed to have been raised for M&A funding, creating maturity mismatch and increased sensitivity to refinancing cost hikes and market condition shifts. Interest coverage is about 13.4x (Operating Income ¥448.0B / financial expenses ¥33.4B), indicating headroom, but if conversion to long-term debt is delayed, funding cost increases and liquidity pressure could occur. Net cash is ¥728.3B and ample, but the rapid increase in short-term debt heightens cash-flow volatility risk.

3. M&A Integration Risk and Goodwill Impairment: Goodwill rose about 4.6x from ¥67.5B to ¥311.0B, and intangible assets roughly doubled from ¥122.7B to ¥241.8B due to subsidiary acquisitions. Goodwill-to-equity is 5.8% and goodwill/EBITDA about 0.46x—within healthy bounds—but impairment risk could materialize depending on integration progress of the 13 newly consolidated companies. The Other segment expanded to Revenue ¥225.4B (about 18x YoY) but posted an operating loss of -¥17.0B, with upfront integration costs. If expected synergies (cross-sell, overlap cost reduction, procurement improvements) do not materialize as planned, recoverability assessments for goodwill may require impairment considerations, impacting Net Income and shareholders’ equity.

Industry Benchmark (Reference, Company Analysis)

Profitability & Returns

Company ROE is slightly below the median, but operating margin and net margin exceed the median, indicating relatively strong profitability within the industry. ROE underperformance is mainly due to declines in asset efficiency (working capital expansion) and low financial leverage.

Growth & Capital Efficiency

Revenue growth rate notably exceeds the median, driven by M&A effects and strong performance in certain product groups, maintaining high growth within the industry.

※Source: Company compilation

Financial Statement Highlights to Watch

1. Profitability Recovery Scenario after Revenue Growth with Margin Compression: Revenue grew +10.3% while Operating Income fell -8.7%, with operating margin down from 12.4% to 10.2% (213bp). Gross margin decline of 290bp was the primary driver and SG&A improvement of 80bp could not fully offset it. The full-year forecast targets slight operating margin improvement to 10.4%, contingent on H2 gross margin recovery. If Metal Processing Machines profitability stabilizes, Metalworking Machines growth continues, and M&A integration synergies materialize, recovery above 12% operating margin is possible, which could be the catalyst for ROE recovery.

2. Working Capital Efficiency and Cash Generation Improvement Potential: DIO 222 days, DSO 132 days, CCC 281 days indicate heavy working capital usage and possibly longer retention periods than peers. Although OCF is 1.9x Net Income, compressing inventory and receivables could significantly expand FCF. If DIO and DSO are each shortened by 20 days, about ¥24.4B of working capital could be recovered, potentially increasing FCF from ¥329B to ¥573B. Optimizing working capital would enhance capacity to sustain dividends and buybacks and improve ROE.

3. Early Realization of M&A Synergies and Restart of Investment Cycle: With goodwill ¥311B and intangible assets ¥242B accumulated and the Other segment currently loss-making due to upfront integration costs, early realization of synergies (cross-sell, cost elimination, procurement improvements) from H2 would increase the probability of achieving FY Operating Income ¥480B. CapEx/Depreciation ratio 0.24x signals potential underinvestment and suggests the need to restart mid-term equipment renewal and capacity expansion investments to maintain competitiveness. If FY Operating Income ¥480B is achieved and working capital compression proceeds, the ability to combine growth investment with shareholder returns would increase, forming a turning point for capital efficiency.

---

This report is an AI-generated financial analysis document based on XBRL earnings release data. It is not a recommendation to invest in any specific security. Industry benchmarks are company-compiled reference information based on public financial statements. Investment decisions are your responsibility; please consult a professional advisor as needed before making investment choices.