Quick View
| Metric | Current Period | Same Period of Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥135.53B | ¥114.01B | +18.9% |
| Operating Income | ¥3.42B | ¥1.82B | +88.0% |
| Profit Before Tax | ¥1.97B | ¥0.37B | +426.6% |
| Net Income | ¥1.33B | ¥0.23B | +474.9% |
| ROE | 0.4% | 0.1% | - |
Executive Summary
Operating income improved significantly due to revenue expansion and reduced losses in the machine tools business; however, profitability remains low and operating cash flow remained negative. Revenue was ¥135.53B (+18.9% YoY), operating income was ¥3.42B (+88.0%), profit before tax was ¥1.97B (a significant increase from ¥0.37B in the previous year), and quarterly profit attributable to owners of the parent was ¥1.49B (up from ¥0.17B in the previous year). The primary drivers of earnings growth were stable earnings from Industrial Services and reduced losses in Machine Tools, while financial expenses absorbing more than half of operating income remain a challenge.
Factors Affecting Performance
【Revenue】Revenue was ¥135.53B, representing an 18.9% YoY increase. By segment, Machine Tools generated ¥86.36B (+17.3%), while Industrial Services generated ¥49.15B (+21.8%); both segments achieved double-digit growth.
【Profit and Loss】Operating income was ¥3.42B (¥1.82B in the previous year, +88.0% YoY). The main drivers of earnings growth were the reduction in the Machine Tools segment loss from △¥1.41B in the same period of the previous year to △¥0.41B, a decrease of ¥0.99B, as well as ¥7.97B in profit generated by Industrial Services. However, the segment’s profit margin declined to 16.2% from 17.3% in the previous year, indicating some weakness in profitability. Financial expenses of ¥1.82B exceeded financial income of ¥0.17B, compressing profit before tax to ¥1.97B. Profit attributable to owners of the parent was ¥1.49B, representing overall growth in both revenue and profit.
Segment Analysis
Machine Tools recorded a substantial increase in external revenue to ¥86.36B (+17.3% YoY), but its segment loss remained at △¥0.41B. Nevertheless, the loss narrowed by ¥0.99B from △¥1.41B in the same period of the previous year, indicating a trend toward improved profitability. Industrial Services generated external revenue of ¥49.15B (+21.8%) and segment profit of ¥7.97B (+14.0%), serving as the core contributor to company-wide earnings. Losses from corporate functions were △¥4.66B, broadly unchanged from the previous year, while improved aggregate profit from the reportable segments supported overall operating income.
Key Financial Indicators
【Profitability】The operating margin improved to 2.5% from 1.6% in the previous year, but remained low. ROE was only 0.4%, indicating substantial room for improvement in capital efficiency. Basic EPS was ¥6.65, turning positive from △¥1.90 in the previous year.【Cash Flow Quality】Operating cash flow was △¥1.14B, a significant divergence from profit attributable to owners of the parent of ¥1.49B, indicating challenges in converting earnings into cash. The ¥7.36B increase in inventories was the primary pressure factor.【Investment Efficiency】Capital expenditures were ¥3.58B, compared with depreciation and amortization of ¥9.11B; the ratio of capital expenditures to depreciation and amortization was only 0.39x, indicating that investment remained restrained relative to depreciation and amortization.【Financial Soundness】The equity ratio declined slightly to 38.2% from 39.2% in the previous year. Current assets of ¥353.45B were below current liabilities of ¥397.01B, resulting in a current ratio of approximately 89%, below 100%. Dependence on short-term borrowings (¥85.56B, +30.3% from the end of the previous fiscal year) has increased.
Cash Flow Analysis
Cash flow from operating activities was △¥1.14B. Although this represented an improvement from △¥3.87B in the same period of the previous year, it remained negative. While profit before tax of ¥1.97B plus depreciation and amortization of ¥9.11B generated cash, the ¥7.36B increase in inventories, ¥2.73B decrease in trade payables, and ¥4.71B outflow from other working capital reduced operating cash flow. Contract liabilities increased by ¥4.86B, and the accumulation of customer advances associated with orders was a positive factor, but it was insufficient to offset the increase in inventories. Investing cash flow was △¥4.84B, primarily reflecting capital expenditures of ¥3.58B and acquisitions of intangible assets of ¥2.74B. Free cash flow, comprising operating cash flow and investing cash flow, was △¥5.98B. Funding requirements, including dividend payments of ¥6.98B, were covered by financing cash flow of ¥9.45B, particularly a net increase in short-term borrowings of ¥19.96B. As a result, cash and cash equivalents increased to ¥43.74B; however, this increase resulted from external financing rather than cash generation from the business.
Earnings Quality
The improvement in operating income to ¥3.42B was attributable to recurring factors—reduced losses in Machine Tools and stable earnings from Industrial Services—and no temporary items classified as extraordinary gains or losses were specified. In non-operating activities, financial expenses of ¥1.82B substantially exceeded financial income of ¥0.17B, significantly compressing profit before tax from operating income; this is important when evaluating earnings quality. Operating cash flow of △¥1.14B diverged from operating income of ¥3.42B, primarily due to an increase in accounting accruals arising from working capital factors, namely higher inventories and lower trade payables. Comprehensive income was ¥3.18B (¥3.34B attributable to shareholders of the parent), exceeding profit attributable to owners of the parent of ¥1.49B. Increases in foreign currency translation adjustments and the valuation of financial assets contributed to this result, but it should be noted that these items do not represent the business’s recurring earnings power.
Earnings Forecast and Guidance
The full-year company forecast calls for revenue of ¥565B, operating income of ¥28B (+47.6% YoY), and profit attributable to owners of the parent of ¥15B. While Q1 progress toward the full-year forecast was approximately standard at 24.0% for revenue, operating income was only 12.2% and profit attributable to owners of the parent was 9.9%; both were below the 25% benchmark for an evenly distributed quarterly progression. Achieving the full-year forecast will require improved profitability in the Machine Tools business and containment of financial expense burdens toward the second half of the year. The earnings forecast was revised during the quarter.
Shareholder Returns
The full-year dividend forecast is ¥105.00 per share, an increase from the previous year’s actual dividend of ¥50, and there was no revision to the dividend forecast during the quarter. Based on the average number of shares outstanding during the period and the full-year profit forecast of ¥15B, the payout ratio is equivalent to approximately 97%, a level requiring monitoring from a sustainability perspective. No share repurchases were conducted during the period. As shareholder returns consist solely of dividends, the relevant evaluation metric is the payout ratio rather than the total return ratio. Dividend payments during the quarter were ¥6.98B, exceeding free cash flow of △¥5.98B for the same period; therefore, dividends were not covered by operating cash flow on a standalone quarterly basis.
Risk Factors
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Profitability of the Machine Tools business: External revenue increased to ¥86.36B (+17.3% YoY), but the segment remained loss-making, with a segment loss of △¥0.41B. Although the loss narrowed from △¥1.41B in the same period of the previous year, the timing and scale of a return to profitability will be critical to achieving the full-year operating income forecast of ¥28B.
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Working capital and liquidity: Inventories reached ¥209.26B (+¥7.43B from the end of the previous fiscal year), and the current ratio was approximately 89%, below 100%. Short-term bonds and borrowings increased to ¥85.56B (+30.3% from the end of the previous fiscal year). If negative operating cash flow continues, management of short-term funding will become increasingly important.
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Financial expense burden: Financial expenses of ¥1.82B substantially exceeded financial income of ¥0.17B and compressed profit before tax by an amount equivalent to approximately 53% of operating income of ¥3.42B. Changes in the interest-rate environment and increases in borrowings could affect future earnings levels.
Industry Benchmark (Reference; Company Analysis)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 2.5% | 7.2% (3.2%–12.5%) | −4.7pt |
| Net Profit Margin | 1.0% | 5.9% (2.9%–12.5%) | −4.9pt |
| Profitability is substantially below the industry median and falls within the lower range. |
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 18.9% | 5.6% (1.1%–13.9%) | +13.3pt |
| Revenue growth is substantially above both the industry median and the upper bound of the IQR. |
※Source: Company analysis
Key Takeaways from the Earnings Results
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Revenue achieved double-digit growth of +18.9%, substantially exceeding the industry median, while the operating margin of 2.5% remained below the industry median of 7.2%. The profitability gap during a period of revenue growth indicates that improving the profitability of the Machine Tools business will directly contribute to strengthening company-wide earnings power.
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Operating cash flow was △¥1.14B and remained negative for the second consecutive period, indicating that improved earnings have not been accompanied by cash generation. The funding structure, characterized by increased inventories and dependence on short-term borrowings, is an important point of observation in the financial results.
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Progress toward the full-year earnings forecast was 24.0% for revenue, while profit-related metrics remained around 10%, indicating a plan weighted toward the second half of the year. Given the high payout ratio, earnings and cash flow trends in the second half will be key determinants of full-year results.
Theoretical Share Price (Reference Value)
| Scenario | Theoretical Share Price |
|---|---|
| bear | ¥2,056 |
| base | ¥2,077 |
| bull | ¥2,108 |
| Calculation Assumption | Value |
|---|---|
| Book Value Per Share (BPS) | ¥2,406 |
| Adjusted Forecast EPS | ¥97.9 |
| Cost of Equity r | 9.27% (10-year government bond 2.77% + equity risk premium 6.00% + size premium 0.50%) |
| Persistence Factor of Residual Income ω / Explicit Forecast Period | 0.62 / 5 years |
| Assumed Payout Ratio | 100.0% |
| Forecast EPS Confidence Adjustment | ×1.071 (based on the track record of industry peers in achieving guidance) |
| Implied PBR / PER | 0.86x / 21.2x |
Sensitivity: ¥2,023–¥2,134 for ±1% in the cost of equity, and ¥2,067–¥2,084 for ±0.1 in ω.
Notes:
- Net income is substantially compressed relative to operating income due to tax burdens, acquisition-related expenses, and non-controlling interests, among other factors (net income ÷ operating income: 54%). This value reflects that compression at face value; if the factors are temporary, underlying earnings power may be higher.
- Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
- Net assets as of the end of the quarter are used; therefore, there is a timing difference relative to the full-year forecast.
(Calculation model: Residual Income Model (Ohlson-type; explicit five-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated using only publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)
This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting professionals as necessary.
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AI Financial Analysis
Executive Summary
DMG Mori Seiki delivered a clear Q1 earnings recovery, led by 18.9% revenue growth and a near-doubling of operating profit, but cash conversion, leverage-related financing costs, and working-capital absorption remain material constraints. Revenue rose to ¥135.5bn from ¥114.0bn. Operating income increased 88.0% to ¥3.4bn. The operating margin expanded 93bp year on year to 2.5% from 1.6%, although it remains below the 5% level generally associated with adequate manufacturing profitability. EBITDA was ¥12.5bn and the EBITDA margin was 9.2%, showing that depreciation and amortization remain a substantial charge below the cash operating-profit level. Profit attributable to owners rose to ¥1.5bn from ¥0.2bn, and basic EPS recovered to ¥6.65 from a loss per share of ¥1.90. The attributable-profit margin improved to 1.1% from 0.1%, but remains thin relative to the revenue base. The Industrial Services business remained the earnings engine, while Machine Tools narrowed its operating loss but did not yet return to profitability. Financing costs of ¥1.8bn continued to consume a large share of EBIT, leaving profit before tax at ¥2.0bn despite ¥3.4bn of operating income. The annualized DuPont ROE was only 1.8%, reflecting the low net margin rather than weak asset utilization alone. Operating cash flow was negative ¥1.1bn despite positive net income, resulting in an OCF/net-income ratio of negative 0.77x. Inventory investment of ¥7.4bn was the principal operating-cash-flow drag, partly offset by a ¥4.9bn increase in contract liabilities and a ¥2.0bn release of receivables. Free cash flow was negative ¥6.0bn after ¥3.6bn of capital expenditure. Liquidity is tight on a current-ratio basis, as current assets of ¥353.5bn did not fully cover current liabilities of ¥397.0bn. Short-term borrowings increased ¥20.0bn during the quarter and funded the increase in cash, dividends, and investment outflows. Full-year revenue guidance implies a normal 24.0% Q1 progress rate, whereas operating-profit and attributable-profit progress of 12.2% and 9.9%, respectively, imply a back-end-loaded earnings recovery. The FY2026 forecast revision makes execution over the remaining quarters, particularly machine-tool margin restoration and inventory conversion, central to the outlook.
Profitability Analysis
Annualized DuPont ROE was 1.8%, decomposed into a 1.1% net profit margin, 0.618x asset turnover, and 2.61x financial leverage. The principal constraint is the low net margin: annualized asset turnover is reasonable for a capital-intensive machine-tool manufacturer, while leverage magnifies rather than resolves the modest underlying return. Operating margin expanded 93bp year on year to 2.5%, as operating income grew 88.0%, substantially faster than revenue growth of 18.9%. Revenue growth nevertheless did not translate proportionately into bottom-line profitability because net finance cost was ¥1.65bn, equal to 48.3% of EBIT, and the interest-burden ratio was only 0.576. Interest coverage, calculated as EBIT divided by finance costs, was 1.88x, a weak level that exposes earnings to borrowing-cost pressure. Personnel expenses increased 13.9% year on year to ¥49.7bn, slower than revenue growth, supporting operating leverage. Raw-material and consumables expense rose 56.9% to ¥64.5bn, faster than revenue, highlighting the sensitivity of gross profitability to production mix, materials, and inventory movements. The Machine Tools segment generated external revenue of ¥86.4bn, up 17.3% year on year, while its segment loss narrowed to ¥0.4bn from ¥1.4bn. Industrial Services generated external revenue of ¥49.2bn, up 21.8%, and segment profit rose 14.0% to ¥8.0bn; its approximately 16.2% segment-profit margin makes it the core earnings business. In contrast, Machine Tools' segment margin remained negative at approximately negative 0.5%, making its conversion to sustained profitability the key determinant of group margin normalization. The reported annualized ROIC of 2.7% is below 5%, indicating that the current earnings level does not yet generate an adequate return on the capital employed.
Growth Assessment
Top-line momentum is broad-based across the two reported businesses: Machine Tools grew 17.3% and Industrial Services grew 21.8% year on year. Industrial Services provides the more resilient and higher-margin revenue stream through repair, restoration, and solutions activity, and its ¥8.0bn segment profit materially supports consolidated earnings. Machine Tools' revenue recovery and sharply reduced segment loss indicate improving production utilization and fixed-cost absorption, but the business has not yet demonstrated a durable positive margin. Full-year guidance calls for revenue of ¥565.0bn, operating income of ¥28.0bn, and profit attributable to owners of ¥15.0bn. Q1 revenue represents 24.0% of the full-year forecast, broadly in line with the 25% seasonal reference point. Q1 operating income represents only 12.2% of guidance, 12.8 percentage points below the reference progress rate. Q1 attributable profit represents 9.9% of guidance, 15.1 percentage points below the reference progress rate. The implied remaining three-quarter operating margin is approximately 5.8%, versus 2.5% in Q1, requiring a meaningful acceleration in margin recovery. Forecast operating income growth of 47.6% and forecast attributable-income decline of 37.6% point to a continuing burden from financing costs, taxes, or other below-operating items even if operating performance improves. Contract liabilities increased ¥5.1bn from the FY2025 year-end, offering some support for near-term revenue execution, although inventories also increased ¥7.4bn and must convert into shipments without discounting or write-down pressure.
Financial Health
The current ratio is 0.89x, calculated from ¥353.5bn of current assets and ¥397.0bn of current liabilities, and is below 1.0x; this warrants an explicit liquidity warning. The short-term maturity mismatch is intensified by ¥85.6bn of current bonds and borrowings, up ¥19.9bn from FY2025 year-end. Cash and equivalents increased to ¥43.7bn, but this was funded principally by the ¥20.0bn net increase in short-term borrowings rather than internally generated cash. Contract liabilities of ¥95.9bn are an important source of operating funding, but are not interchangeable with unrestricted liquidity because they carry future delivery obligations. Debt-to-equity was 1.61x, below the 2.0x aggressive-leverage threshold but still indicative of meaningful balance-sheet leverage. Total interest-bearing bonds and borrowings were ¥145.6bn, comprising ¥85.6bn current and ¥60.0bn non-current obligations. On an annualized EBITDA basis, bonds and borrowings equal approximately 2.9x EBITDA, a moderate leverage level, but the 1.88x EBIT/finance-cost coverage shows that the cost of financing is currently more constraining than the absolute debt multiple suggests. Equity declined ¥6.3bn from FY2025 year-end to ¥335.8bn, mainly because dividends and hybrid-capital distributions exceeded Q1 earnings, despite positive comprehensive income. The equity ratio eased to 38.2% from 39.2%, reducing the loss-absorption buffer modestly. Goodwill was ¥99.7bn, equal to 29.7% of equity and 8.0x Q1 EBITDA on an annualized basis; it is within the 30% goodwill-to-equity benchmark but represents a long-payback M&A asset that requires sustained operating performance to avoid impairment risk. Right-of-use assets of ¥29.9bn and related lease-payment outflows of ¥2.0bn represent a recurring fixed financial commitment alongside borrowings.
Notable B/S Changes
Current bonds and borrowings: +¥198.9bn (+30.3%) versus FY2025 year-end to ¥855.6bn - substantial short-term funding increase; reinforces liquidity and refinancing sensitivity. Inventories: +¥74.3bn (+3.7%) versus FY2025 year-end to ¥2,092.6bn - working-capital build was the largest operating-cash-flow drag and requires conversion into shipments. Contract liabilities: +¥50.8bn (+5.6%) versus FY2025 year-end to ¥958.8bn - customer advances support near-term funding and revenue visibility, subject to profitable execution. Total equity: -¥63.4bn (-1.9%) versus FY2025 year-end to ¥3,358.1bn - dividends and hybrid-capital distributions exceeded Q1 earnings, reducing the equity ratio to 38.2% from 39.2%. Retained earnings: -¥73.3bn (-7.8%) versus FY2025 year-end to ¥864.1bn - distributions materially exceeded Q1 profit generation. Goodwill: -¥3.7bn (-0.4%) versus FY2025 year-end to ¥997.3bn - balance is broadly stable, but remains material at 29.7% of equity and warrants impairment monitoring.
Cash Flow Quality
Cash-flow quality was weak in Q1: operating cash flow was negative ¥1.1bn against ¥1.5bn of profit attributable to owners, producing an OCF/net-income ratio of negative 0.77x and triggering an earnings-quality concern. Cash conversion, measured as OCF/EBITDA, was negative 0.09x, far below the 0.7x caution threshold. Inventory increased by ¥7.4bn, the largest identified working-capital cash outflow and a key sign that production and procurement ran ahead of cash realization. Receivables released ¥2.0bn of cash and contract liabilities added ¥4.9bn, partially offsetting inventory absorption. Payables declined by ¥2.7bn, provisions declined by ¥3.3bn, and other working-capital movements consumed ¥4.7bn, reducing the benefit from customer advances. The low 0.3% accruals ratio is not itself indicative of elevated accounting accrual risk, but the direct cash-flow outcome remains unfavorable because cash was tied up in operational working capital. Free cash flow was negative ¥6.0bn after ¥3.6bn of capital expenditure. Including ¥2.7bn of intangible-asset purchases, total reported tangible and intangible investment cash outflow was ¥6.3bn, deepening the funding requirement. CapEx/depreciation was 0.39x, below the 0.7x underinvestment warning threshold; this conserves near-term cash but could defer replacement and capacity investment if maintained. Financing cash flow of ¥9.5bn, principally from short-term borrowings, covered the negative operating and investing cash flows and allowed cash balances to rise by ¥3.9bn. The core cash-flow priority is therefore inventory normalization and sustained conversion of contract liabilities into profitable deliveries, rather than further reliance on short-term funding.
Dividend Sustainability
The FY2026 dividend forecast is ¥105 per share against forecast EPS of ¥91.35, implying a dividend payout ratio of approximately 115.0%. This exceeds the 100% warning threshold and means the forecast dividend is not covered by forecast attributable earnings on a standalone basis. Using the current average share count, the implied full-year cash dividend is approximately ¥14.6bn, close to the ¥15.0bn forecast attributable profit. Q1 cash dividends paid were ¥7.0bn, materially exceeding Q1 profit attributable to owners of ¥1.5bn and negative free cash flow of ¥6.0bn. The quarter's dividend cash outflow was funded alongside a ¥20.0bn increase in short-term borrowings, rather than from internally generated free cash flow. No share buybacks were reported, so the relevant distribution metric is the dividend payout ratio rather than a total return ratio. Dividend capacity is supported by ¥86.4bn of retained earnings and the group’s ¥335.8bn equity base, but maintaining the forecast distribution depends on the substantial earnings and cash-flow improvement embedded in the remainder-of-year plan. The sustainability test should focus on whether operating cash flow becomes positive as inventory converts and whether the implied second-to-fourth-quarter operating-margin recovery is achieved.
Risk Assessment
Business risks include Machine-tool cyclicality and customer capital-expenditure volatility: the Machine Tools segment still recorded a ¥0.4bn loss despite ¥86.4bn of Q1 external revenue, leaving consolidated earnings highly sensitive to order mix, utilization, and pricing., Manufacturing cost risk: raw-material and consumables expense rose 56.9% year on year, much faster than revenue, creating exposure to materials inflation, procurement costs, and production inefficiencies., Inventory and demand-matching risk: inventory increased ¥7.4bn during the quarter to ¥209.3bn, or 23.8% of total assets; slower end-market demand could lengthen conversion cycles and pressure margins., Industry-specific technology and competitive risk: machine-tool demand is exposed to automotive, aerospace, industrial automation, and broader capital-investment cycles, while customers increasingly require advanced automation, digitalization, and service capability..
Financial risks include Liquidity risk: the current ratio is 0.89x, below 1.0x, while current bonds and borrowings rose to ¥85.6bn., Interest-burden risk: finance costs of ¥1.8bn absorbed 42.4% of EBIT, the interest-burden ratio was 0.576, and EBIT/finance-cost coverage was only 1.88x., Cash-conversion risk: OCF/net income was negative 0.77x and OCF/EBITDA was negative 0.09x, with negative ¥6.0bn free cash flow., M&A asset-retention risk: goodwill of ¥99.7bn equals 29.7% of equity and 8.0x annualized Q1 EBITDA, creating sensitivity to any prolonged shortfall in acquired-business profitability., Distribution funding risk: the FY dividend forecast implies a 115.0% payout ratio and requires improved cash generation to avoid greater dependence on external funding..
Key concerns include High priority: conversion of the ¥7.4bn inventory build into revenue and operating cash flow without margin erosion., High priority: return of Machine Tools to sustained segment profitability, which is necessary to bridge from the 2.5% Q1 operating margin to the approximately 5.8% implied margin for the remainder of FY2026., High priority: stabilization of short-term funding and improvement of interest coverage, given the ¥20.0bn quarterly increase in short-term borrowings., Medium priority: capital-investment intensity, because CapEx/depreciation of 0.39x may indicate deferred replacement investment if it persists., Medium priority: preservation of Industrial Services profitability, the principal high-margin earnings contributor..
Investment Implications
Key takeaways include Q1 revenue and operating-profit growth confirm a recovery in activity, with operating margin expanding 93bp year on year., Industrial Services is the core earnings business, generating ¥8.0bn of segment profit and an approximately 16.2% segment-profit margin., Machine Tools improved materially but remained loss-making, leaving group profitability below an adequate level., The annualized ROE of 1.8% and ROIC of 2.7% indicate that the recovery has not yet translated into satisfactory capital returns., Negative operating cash flow, inventory growth, and rising short-term borrowings are the principal financial issues despite the positive accounting-profit trend., The full-year plan requires a significant acceleration in profitability after Q1, while the forecast dividend exceeds forecast EPS..
Metrics to watch include Machine Tools segment profit and segment margin, Consolidated operating margin relative to the 2.5% Q1 level and the approximately 5.8% implied remainder-of-year level, Inventory balance and operating cash flow, Contract-liability conversion into revenue and gross profit, Current borrowings, cash balance, and current ratio, Finance costs and EBIT/finance-cost coverage, Progress against full-year operating-income guidance, Dividend coverage by attributable earnings and free cash flow, Goodwill relative to equity and operating performance of acquired businesses.
Regarding relative positioning, DMG Mori combines a high-margin industrial-service franchise with a currently under-earning machine-tool manufacturing operation. Its 9.2% EBITDA margin is stronger than the 2.5% EBIT margin, but annualized ROE of 1.8%, ROIC of 2.7%, and weak cash conversion place it below the return and cash-generation profile expected of a mature, high-quality industrial manufacturer. The IFRS framework avoids recurring goodwill amortization, so the reported EBIT margin is not reduced by JGAAP-style goodwill amortization; consequently, the principal issue is underlying operating and financing performance rather than accounting-standard comparability.