| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥1761.8B | ¥1502.2B | +17.3% |
| Operating Income | ¥38.3B | ¥30.0B | +27.5% |
| Ordinary Income | ¥33.6B | ¥32.3B | +4.3% |
| Net Income | ¥-264.9B | ¥32.1B | -45.9% |
| ROE | -22.3% | 2.5% | - |
For the fiscal year ended March 2026, Revenue was ¥1,761.8B (¥+259.5B YoY, +17.3%), Operating Income was ¥38.3B (¥+8.3B YoY, +27.5%), and Ordinary Income was ¥33.6B (¥+1.4B YoY, +4.3%), delivering revenue and operating profit growth; however, recognition of large special losses of ¥225.0B including an impairment loss of ¥209.1B led to a Net Loss of ¥264.9B (prior year Net Income ¥32.1B, change -¥297.0B), turning the company sharply into the red. Revenue increased for the third consecutive period, driven by double-digit growth in the core Surface Treatment segment (+24.1%) and Foundry segment (+21.8%). Operating margin improved slightly to 2.2% (up 0.2pt from 2.0%) but remains below industry levels. The main cause of special losses was impairment of intangible assets and goodwill: goodwill impairment of ¥111.3B in the Surface Treatment business was recognized, reducing goodwill balance from ¥123.5B to ¥4.4B (96% decline), materially lowering future impairment risk.
[Revenue] Revenue was ¥1,761.8B, up +17.3% YoY. By segment, Surface Treatment recorded ¥964.9B (+24.1%), accounting for 54.8% of revenue and was the largest contributor, supported by expanded capital demand related to automotive and foundry. Foundry posted ¥516.7B (+21.8%, 29.3% share) with double‑digit growth, aided by increased demand for powder handling equipment. Environment Equipment recorded ¥134.5B (+10.2%), Material Handling ¥81.9B (-11.4%), and Special Equipment ¥72.7B (-24.0%), with a notable decline in Special Equipment. By region: Japan ¥747.5B (42.4% share), Europe ¥390.4B (22.2%), Americas ¥183.4B (10.4%), China ¥126.0B (7.2%), Asia ¥155.0B (8.8%), South America ¥107.3B (6.1%), giving an overseas sales ratio of 57.6%. YoY, Europe grew +35.3% and Japan +12.9%, indicating expanded global demand.
[Profitability] Cost of sales was ¥1,253.3B (71.1% of revenue), yielding gross profit of ¥508.5B and gross margin of 28.9% (up 0.4pt from 28.5%). SG&A was ¥470.2B (26.7% of revenue, up 0.3pt from 26.4%), weighed down by intangible asset amortization including goodwill amortization of ¥22.3B. Operating Income was ¥38.3B (operating margin 2.2%), up +27.5% YoY, supported by revenue growth and improved gross margin, but the faster rise in SG&A (+18.4%) than revenue growth (+17.3%) limited margin expansion. Non‑operating items included dividend income ¥8.3B and interest income ¥5.8B as positives, offset by interest expense ¥12.6B, foreign exchange losses ¥6.7B, and other non‑operating expenses ¥3.2B, resulting in net non‑operating loss of ¥-4.7B. Ordinary Income was ¥33.6B (ordinary margin 1.9%, +4.3% YoY). Extraordinary gains totaled ¥48.1B including gains on sale of investment securities ¥44.3B, but extraordinary losses were ¥225.0B (impairment losses ¥209.1B, valuation losses on investment securities ¥8.4B, etc.), producing a pre‑tax loss of ¥143.3B. After income taxes of ¥14.4B and non‑controlling interests of ¥4.9B, Net Loss attributable to owners of the parent was ¥162.6B. In summary, top‑line growth and operating improvement were offset at the bottom line by large special losses from asset revaluation, producing a revenue‑up but net‑down result.
The largest contributor to Operating Income was Foundry with ¥19.3B (+17.6%, margin 3.7%), followed by Environment Equipment with ¥17.5B (+6.5%, margin 13.0%), both serving as earnings pillars. Material Handling delivered ¥8.9B (-1.7%, margin 10.9%) — profit declined but remained high‑margin. Surface Treatment, despite being the largest by revenue at ¥964.9B, generated Operating Income of ¥11.0B (margin 1.1%) and low profitability; although this represented a +496.7% YoY improvement, the absolute level remains low. Special Equipment produced an operating loss of ¥10.0B (worsened from -¥2.8B prior year), dragging on results. Significant dispersion in segment margins exists: high‑margin Environment 13.0% and Material Handling 10.9% support stable earnings, while Surface Treatment 1.1% and Special Equipment -13.7% suppress the consolidated operating margin of 2.2%. Structural reforms in Special Equipment and margin improvement in Surface Treatment are key to profitability recovery.
[Profitability] Operating margin 2.2% (up 0.2pt from 2.0%), gross margin 28.9% (up 0.4pt) — modest improvements but well below the industry median of 7.8%. SG&A ratio remained elevated at 26.7% (up 0.3pt). Goodwill amortization of ¥22.3B (58% of Operating Income) was a drag. Ordinary margin 1.9% (down 0.2pt), Net margin -15.0% (down 17.1pt from +2.1%) primarily due to special losses. ROE -22.3% (prior +2.3%) markedly deteriorated due to Net Loss. Dupont 3‑factor decomposition: Net margin -9.2% × Asset turnover 0.775 × Financial leverage 1.91x. ROA based on Net Income -11.6%, on Operating Income 1.7% — operating profitability remains. EBITDA ¥110.0B (margin 6.2%); EBITDA/interest‑bearing debt 0.23x indicates limited debt reduction capacity.
[Cash Quality] Operating Cash Flow (OCF)/Net Income -0.54x signals low quality, but non‑cash impairment of ¥209.1B heavily depressed net income while cash generation remained. OCF/EBITDA 0.80x is borderline; working capital optimization to exceed 0.9x is desirable.
[Investment Efficiency] Capital expenditures ¥84.8B were 1.18x depreciation ¥71.7B, indicating continuation of growth investment. ROIC is difficult to compute due to effective tax rate and net loss; substituting Operating Income / Invested Capital (Total Assets - Current Liabilities) yields 2.2%, a low level. Total asset turnover improved to 0.775x (from approx. 0.635 prior), and tangible fixed asset turnover 3.1x, indicating higher utilization.
[Financial Soundness] Equity Ratio 52.3% (down 1.4pt from 53.7%), current ratio 236% — liquidity is ample. Interest‑bearing debt ¥487.1B, Debt/Equity 0.44x, Debt/EBITDA 4.43x — somewhat high for a small‑to‑mid manufacturing firm. Interest coverage (EBIT/interest) 3.0x, EBITDA‑based coverage 8.7x — limited cushion for interest payments. Cash ¥413.2B is 5.2x short‑term borrowings ¥79.3B, indicating low short‑term refinancing risk.
Operating Cash Flow was ¥88.4B (prior ¥23.5B, +276.0%), largely positive as non‑cash items (impairment losses ¥209.1B, depreciation ¥71.7B, goodwill amortization ¥22.3B) more than offset the pre‑tax loss of ¥143.3B. OCF before working capital changes was ¥104.4B; working capital changes included inventory decrease contributing ¥32.3B, increases in trade receivables & contract assets of ¥17.1B and decreases in trade payables of ¥19.7B as cash drains, and decreases in contract liabilities of ¥16.3B as another cash outflow. After income taxes paid ¥19.1B, OCF totaled ¥88.4B. Investing Cash Flow was ¥-40.8B: capital expenditures ¥84.8B and intangible asset additions ¥3.0B were partially offset by sale/redemption of securities ¥60.5B and proceeds from sale of fixed assets ¥2.9B, yielding net outflow ¥-40.8B. Financing Cash Flow was ¥-60.2B, driven by long‑term debt repayments ¥59.1B, lease liability repayments ¥7.2B, and dividend payments ¥23.1B, partially offset by long‑term borrowing proceeds ¥35.9B. Free Cash Flow was OCF ¥88.4B + Investing CF ¥-40.8B = ¥47.6B, sufficient to cover dividends of ¥23.2B by 2.05x, indicating capacity to balance growth investment and shareholder returns. Cash and equivalents decreased from ¥320.6B at the beginning of the period to ¥312.2B at period end (net decrease ¥-8.3B after adjusting for foreign exchange effects +¥4.3B).
Core recurring earnings center on Operating Income ¥38.3B, and non‑operating net items of ¥-4.7B (financial income: dividend income ¥8.3B, interest income ¥5.8B; negatives: interest expense ¥12.6B, FX losses ¥6.7B) produced Ordinary Income ¥33.6B. Non‑operating income ¥20.9B represents 1.2% of revenue, showing low structural dependence on such items; dividend and interest income are reasonable returns on investment securities ¥349.8B and cash ¥413.2B. One‑off items were material: Extraordinary gains ¥48.1B (gains on sale of investment securities ¥44.3B, gains on sale of fixed assets ¥2.6B, etc.) versus Extraordinary losses ¥225.0B (impairment losses ¥209.1B, valuation losses on investment securities ¥8.4B, etc.), netting ¥-176.9B and explaining much of the Net Loss ¥-264.9B — special items accounted for 66.8% of the net loss impact. The impairment primarily related to goodwill ¥111.3B and other intangibles ¥98.0B in the Surface Treatment business; as non‑cash items, these do not directly affect cash generation in subsequent periods. From an accrual quality perspective, OCF ¥88.4B substantially exceeded Net Loss ¥-264.9B because impairment depressed accounting earnings; cash‑based operating performance remained solid. Comprehensive income was ¥-56.3B (attributable to owners of the parent ¥-62.8B); the ¥208.6B difference from Net Loss ¥-264.9B was due to other comprehensive income, primarily foreign currency translation adjustments ¥52.4B, valuation difference on securities ¥25.3B, and actuarial gains/losses on retirement benefits ¥21.5B, which mitigated P/L losses through balance sheet valuation movements.
For the fiscal year ending March 2027, management projects Revenue ¥1,700.0B (¥-3.5% YoY), Operating Income ¥73.0B (+90.5%), Ordinary Income ¥66.0B (+96.1%), and Net Income attributable to owners of the parent ¥56.0B (returning to profitability), with EPS projected at ¥106.63. While revenue is forecast to decline, Operating Income is expected to nearly double from ¥38.3B to ¥73.0B, with operating margin improving from 2.2% to 4.3% (+2.1pt). Assumptions include normalization of special losses after impairment cycle, reduction of goodwill amortization burden (goodwill balance ¥4.4B), structural reforms in low‑margin businesses (narrowing loss in Special Equipment and margin restoration in Surface Treatment), and SG&A optimization. Dividend forecast is annual ¥24 (¥-20 from prior ¥44); payout ratio against forecast Net Income ¥56.0B is 84.0%, similar to prior year. Progress rates versus full‑year forecast stand at Revenue 103.6%, Operating Income 52.5%, Ordinary Income 50.9% — revenue already exceeds plan while profit achievement is a little over half, implying significant profit improvement is expected in H2. Successful achievement depends critically on turning Special Equipment profitable and executing cost reductions, requiring close monitoring of progress.
Dividends for the period were interim ¥22 and year‑end ¥22, totaling annual ¥44 and dividend outflow ¥23.2B. Given a Net Loss attributable to owners of the parent of ¥162.6B, the payout ratio is arithmetic -26.4%, but dividends are covered 2.05x by Free Cash Flow ¥47.6B, indicating sustainability on a cash‑flow basis. DOE (dividends / equity) stands at approximately 1.9%. Forecast dividend for FY2027 is annual ¥24; payout ratio of 84.0% against forecast Net Income ¥56.0B is high but consistent with historical payout practice. No share buybacks were carried out; shareholder returns consist solely of dividends. With cash and deposits ¥413.2B and OCF ¥88.4B, liquidity is available, but Debt/EBITDA 4.43x suggests substantial scope for debt reduction; financial strategy may prioritize deleveraging over enhancing returns. There is scope for staged dividend increases upon profit normalization, while clarifying total return ratio targets and capital return policy would strengthen shareholder dialogue.
Risk of delay in restructuring low‑margin segments: Surface Treatment accounts for ¥964.9B (54.8% of revenue) but has operating margin of 1.1%; Special Equipment continues to post operating loss ¥10.0B. FY2027 plan assumes Operating Income of ¥73.0B, but delays in restoring profitability in Special Equipment and Surface Treatment would risk missing profit targets. Margin dispersion across segments (Environment 13.0%, Material Handling 10.9%, Foundry 3.7%, Surface Treatment 1.1%, Special Equipment -13.7%) is large; structural reforms in low‑margin segments are key to recovery.
Financial leverage and interest burden risk: Interest‑bearing debt ¥487.1B, Debt/EBITDA 4.43x, and interest coverage 3.0x indicate debt levels are relatively high versus cash‑generating ability. Interest expense ¥12.6B equals 32.9% of Operating Income ¥38.3B; in a rising interest rate environment, interest burden could materially pressure earnings. Refinancing risk on long‑term borrowings ¥407.8B and volatility in non‑operating expenses ¥25.6B (including FX losses ¥6.7B) affect ordinary income stability.
Asset valuation, goodwill and intangible asset residual risk: This period included impairment losses ¥209.1B (including goodwill ¥111.3B), compressing goodwill balance to ¥4.4B and reducing future impairment risk. However, investment securities ¥349.8B (15.4% of total assets) carry market valuation risk, and the company recorded valuation losses on securities of ¥8.4B this period. Deferred tax liabilities ¥126.8B likely correspond to unrealized gains on investment securities; market downturns could affect other comprehensive income and equity through valuation movements. Contract liabilities ¥124.8B and contract assets ¥126.9B indicate order balance is broadly balanced, but an allowance for loss on orders ¥3.6B signals residual risk of additional provisions if project profitability deteriorates.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 2.2% | 7.8% (4.6%–12.3%) | -5.6pt |
| Net Margin | -15.0% | 5.2% (2.3%–8.2%) | -20.2pt |
Operating margin underperforms the industry median by 5.6pt, placing the company in the lower tier within manufacturing. High SG&A ratio 26.7% and goodwill amortization burden are principal drivers; profitability improvement is urgent.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 17.3% | 3.7% (-0.4%–9.3%) | +13.6pt |
Revenue growth of 17.3% significantly exceeds the industry median of 3.7%, indicating strong top‑line expansion. Double‑digit growth in core Surface Treatment and Foundry and global expansion are driving this performance.
※Source: company compilation
Execution capability on profitability improvement is the inflection point for valuation: Operating margin 2.2% is well below industry median 7.8%, and the FY2027 plan targets 4.3%. Reducing the Special Equipment loss, improving Surface Treatment margin (current 1.1%), and lowering SG&A ratio are essential. Goodwill amortization burden of ¥22.3B should decline as balances shrink, but structural reforms must progress steadily to realize plan.
Balance sheet normalization and control of financial costs: Recognition of impairment losses ¥209.1B reduced goodwill to ¥4.4B and materially lowered future impairment risk. Conversely, interest‑bearing debt ¥487.1B and Debt/EBITDA 4.43x indicate leverage remains relatively high; interest expense ¥12.6B represents 32.9% of Operating Income, posing downside risk in rising rates. With OCF ¥88.4B and FCF ¥47.6B, cash generation is intact; priorities should be debt reduction and improving interest coverage (current 3.0x → target >5x) as milestones for financial stability.
Opportunity to optimize segment portfolio: High‑margin Environment (13.0%) and Material Handling (10.9%) contrast with low‑margin Surface Treatment (1.1%) and loss‑making Special Equipment (-13.7%), weighing on consolidated profitability. Given Surface Treatment’s 54.8% revenue share, potential for margin improvement is substantial; progress on pricing and cost control will be pivotal. Regionally, Europe accounts for 22.2% of revenue and grew +35.3%, contributing to growth; continued penetration of global demand is a condition for sustained growth.
This report was generated by AI analyzing XBRL financial statement data and is an automated earnings analysis document. It does not constitute a recommendation to invest in specific securities. Industry benchmarks are reference information compiled by the firm based on publicly disclosed financial statements. Investment decisions are your responsibility; please consult professional advisors as appropriate before acting.