| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥556.0B | ¥543.5B | +2.3% |
| Operating Income / Operating Profit | ¥71.8B | ¥64.6B | +11.2% |
| Ordinary Income | ¥80.1B | ¥68.3B | +17.4% |
| Net Income / Net Profit | ¥34.4B | ¥28.9B | +19.0% |
| ROE | 7.6% | 7.0% | - |
For the fiscal year ended March 2026, Revenue was ¥556.0B (YoY +¥12.5B +2.3%), Operating Income was ¥71.8B (YoY +¥7.2B +11.2%), Ordinary Income was ¥80.1B (YoY +¥11.9B +17.4%), and Net Income was ¥34.4B (YoY +¥5.5B +19.0%). Operating margin improved to 12.9% (prior year 11.9%, +1.0pt), and gross margin improved to 27.4% (prior year 26.1%, +1.3pt), indicating improved profitability. The core Construction Machinery Business (sales mix 80.1%) achieved revenue +1.0% and Operating Income +11.9% with a margin of 15.8% (prior year 14.3%, +1.5pt). The high-growth Industrial Machinery Business (sales mix 19.9%) posted revenue +8.1% and Operating Income +22.3%, maintaining a high margin of 20.1% (prior year 17.8%, +2.3pt). The larger increase in Ordinary Income relative to Operating Income was driven by foreign exchange gains of ¥5.5B (prior year ¥1.2B), boosting non-operating income at the ordinary level. Meanwhile, Operating Cash Flow turned negative to -¥23.8B (prior year +¥39.5B); inventory increase -¥44.1B and accounts payable decrease -¥23.4B strained liquidity, resulting in OCF/Net Income of -0.69x and a marked weakening in conversion of profit to cash.
【Revenue】 Revenue was ¥556.0B (+2.3% YoY), a modest increase. Construction Machinery Business recorded ¥445.5B (+1.0% YoY) and Industrial Machinery Business ¥110.5B (+8.1% YoY), with Industrial Machinery driving higher growth. Construction Machinery breakdown: products ¥424.9B, parts ¥11.97B, services ¥8.69B — slight increase in product sales offset by decline in parts (prior year ¥14.47B → ¥11.97B, -17.3%). Industrial Machinery: products ¥79.4B, parts ¥14.6B, services ¥16.5B, with product +10.3% and services +2.9% performing steadily. Cost of goods sold ratio was 72.6% (prior year 73.9%, -1.3pt), gross margin 27.4% (+1.3pt), with price maintenance and mix improvement contributing to better profitability.
【Profit & Loss】 Operating Income was ¥71.8B (+11.2% YoY), Operating margin 12.9% (+1.0pt), achieving double-digit profit growth. Gross margin improvement of +¥10.2B outpaced SG&A which rose to ¥80.4B (prior year ¥77.4B, +¥3.0B +3.8%), producing positive operating leverage. By segment, Construction Machinery Operating Income was ¥70.4B (+11.9% YoY) and Industrial Machinery ¥22.2B (+22.3% YoY), both contributing to earnings growth. Corporate costs were ¥20.8B (prior year ¥16.5B, +¥4.3B), largely due to increases in administrative expenses and R&D of ¥6.1B (prior year ¥5.4B). Non-operating items comprised non-operating income ¥9.5B (prior year ¥5.1B) and non-operating expense ¥1.2B (prior year ¥1.4B), netting ¥8.3B; expansion of foreign exchange gains ¥5.5B (prior year ¥1.2B, +¥4.3B) lifted Ordinary Income. Ordinary Income of ¥80.1B (+17.4% YoY) exceeded Operating Income growth of +11.2% due to contribution from non-operating income. Extraordinary income was ¥0.05B and extraordinary loss ¥0.29B, minor impacts; Income before income taxes ¥79.9B (+17.0% YoY), income taxes ¥23.7B (effective tax rate 29.7%), and Net Income attributable to owners of the parent was ¥55.96B. After deducting non-controlling interests ¥0.14B, Net Income for the period was ¥34.4B (+19.0% YoY), Net margin 6.2% (prior year 5.3%, +0.9pt), concluding with year-over-year revenue and profit growth.
Construction Machinery Business: Revenue ¥445.5B (+1.0% YoY), Operating Income ¥70.4B (+11.9% YoY), margin 15.8% (prior year 14.3%, +1.5pt). Despite modest revenue growth, profits grew double-digits due to gross margin improvement and SG&A control. Industrial Machinery Business: Revenue ¥110.5B (+8.1% YoY), Operating Income ¥22.2B (+22.3% YoY), margin 20.1% (prior year 17.8%, +2.3pt), sustaining high growth and high profitability. Product sales growth and stable service revenue drove segment profits; Industrial Machinery margin exceeds Construction Machinery by 4.3pt. Construction Machinery accounts for 80.1% of company sales and 75.9% of operating profit as the core business, but Industrial Machinery’s accelerated growth (revenue +8.1%, profit +22.3%) is improving company-wide profitability and diversification.
【Profitability】Operating margin 12.9% (prior year 11.9%, +1.0pt), Net margin 6.2% (prior year 5.3%, +0.9pt), Gross margin 27.4% (prior year 26.1%, +1.3pt) — margins improved at each level. ROE was 7.6%, indicating mid-level capital efficiency; improvement in Net margin contributed but Total asset turnover 0.846x (prior year 0.847x) was flat, constrained by inventory build-up. EBITDA margin was 14.6% (Operating Income ¥71.8B + Depreciation ¥11.5B = ¥83.3B / Revenue ¥556.0B), indicating a good cash-generation base. 【Cash Quality】OCF/Net Income was -0.69x (OCF -¥23.8B / Net Income ¥34.4B), turning negative; OCF/EBITDA was -0.29x, showing markedly weak conversion of profit to cash. Main drivers were inventory increase -¥44.1B, accounts payable decrease -¥23.4B, and accounts receivable increase -¥6.8B, yielding an estimated CCC of 162 days (DSO 83 days, DIO 98–123 days) and a significant deterioration in working capital efficiency. FCF was -¥38.5B (OCF -¥23.8B + Investing CF -¥14.8B), indicating dividends and buybacks were not covered by internal cash. 【Investment Efficiency】Total asset turnover 0.846x, capital expenditure ¥12.4B equals 1.08x depreciation ¥11.5B — replacement to slight expansion pace. R&D ratio 1.1% (R&D ¥6.1B / Revenue ¥556.0B) is low. 【Financial Soundness】Equity Ratio 68.8% (prior year 63.9%, +4.9pt), current ratio 411.5% (current assets ¥460.2B / current liabilities ¥111.8B), D/E 0.18x (interest-bearing debt ¥72.3B / equity ¥402.1B, excluding non-controlling interests), Debt/EBITDA 0.87x — extremely sound. Interest coverage 65.0x (Operating Income ¥71.8B / interest expense ¥1.1B), cash & deposits ¥121.2B — minimal short-term maturity risk and a solid financial base.
Operating Cash Flow was -¥23.8B (prior year +¥39.5B, -160.2% YoY), turning negative. Starting from subtotal -¥4.2B (after adjustments from Income before income taxes ¥79.9B including depreciation ¥11.5B), inventory increase -¥44.1B, accounts payable decrease -¥23.4B, and accounts receivable increase -¥6.8B pressured working capital; corporate tax payments -¥20.4B also contributed to the final negative figure. Inventory balance on the balance sheet was ¥108.2B (prior year ¥70.5B, +¥37.7B +53.4%), indicating significant buildup and product inventory stagnation. Investing Cash Flow was -¥14.8B, mainly capex -¥12.4B (prior year -¥8.5B, replacement to expansion pace), intangible asset investment -¥1.2B, and insurance reserve -¥1.2B. Financing Cash Flow was -¥33.8B, including dividend payments -¥16.0B, share buybacks -¥14.0B (prior year -¥10.4B, increased), and long-term borrowings repayments -¥2.8B; at the same time, long-term borrowings of ¥70.0B were executed, resulting in net borrowings increasing by +¥67.2B. As a result FCF was -¥38.5B, cash & deposits decreased from opening ¥192.5B to closing ¥121.2B (-¥71.3B). Even including FX effects of +¥1.1B, liquidity was squeezed by inventory accumulation and payments for returns and investments. OCF/Net Income -0.69x and OCF/EBITDA -0.29x indicate very weak cash conversion; inventory normalization and collection improvement are urgent.
Operating Income ¥71.8B reflects strong core business earnings with high operating permanence, but Ordinary Income ¥80.1B includes non-operating income ¥9.5B, of which foreign exchange gains ¥5.5B (~58% of non-operating income) raised ordinary-level profit. Prior year foreign exchange gains were ¥1.2B, a ¥4.3B increase; if FX gains normalize, Ordinary Income could decline. Dividend income received ¥1.6B and equity-method investment income ¥1.4B are relatively stable non-operating items, but the transitory nature of FX gains is significant. Extraordinary items totaled -¥0.24B (extraordinary income ¥0.05B - extraordinary loss ¥0.29B), minor — gains on disposal of fixed assets ¥0.05B and loss on retirement of fixed assets ¥0.29B related to routine asset renewal. Comprehensive income was ¥69.2B (Net Income ¥34.4B + Other Comprehensive Income ¥34.8B); major Other Comprehensive Income drivers were unrealized gains on available-for-sale securities ¥12.4B, foreign currency translation adjustment ¥0.09B, retirement benefit adjustments ¥0.22B, and OCI share of equity-method affiliates ¥0.4B. The divergence between comprehensive income and net income is mainly due to valuation gains on securities, which pose capital volatility risk in market reversals. Accrual indicator: difference between Operating Cash Flow -¥23.8B and Net Income ¥34.4B is -¥58.2B, primarily driven by inventory increase +¥44.1B and accounts payable decrease -¥23.4B, indicating weak cash backing for accounting profit and short-term deterioration in earnings quality.
Full-year plan: Revenue ¥585.0B (YoY +5.2%), Operating Income ¥56.3B (YoY -21.6%), Ordinary Income ¥57.6B (YoY -28.1%), EPS ¥147, dividend ¥20. Compared with current results (equivalent to first half), revenue progress rate is 95.0% (¥556.0B / ¥585.0B), nearly reaching the plan, while Operating Income progress rate is 127.5% (¥71.8B / ¥56.3B) and Ordinary Income progress rate 139.1% (¥80.1B / ¥57.6B), substantially exceeding targets. This imbalance suggests the company’s plan incorporates a significant second-half earnings decline (Operating Income -¥15.5B, Ordinary Income -¥22.5B), reflecting conservative assumptions such as loss of FX gains, inventory correction costs, higher fixed costs, and deterioration in price/mix. The dividend plan of ¥20 is a large reduction from the current period dividend of ¥72, implying a payout ratio of 13.6% (¥20 / ¥147) and a stance prioritizing cash preservation. Planned Operating margin of 9.6% (¥56.3B / ¥585.0B) is -3.3pt below current 12.9%, indicating anticipated margin pressure.
Dividend is year-end ¥72 (including interim ¥20); payout ratio relative to Net Income attributable to owners of the parent ¥55.96B (EPS ¥204.99) is 35.1%. Total return is dividend ¥16.0B + share buybacks ¥14.0B = ¥30.0B, total return ratio to Net Income ¥55.96B is 53.6%. However, FCF is -¥38.5B, so dividends and buybacks were not funded from internal cash but by drawing down cash (ending cash ¥121.2B, down ¥71.3B from opening ¥192.5B) and increasing interest-bearing debt (ending ¥72.3B; opening ¥75.1B, after initial reduction long-term borrowings of ¥70.0B were executed during the period). Treasury shares at period end were 3,227 thousand shares (acquisition cost ¥44.4B), slightly up from 3,215 thousand shares (¥32.2B) at the beginning — acquisition cost increased by +¥12.2B, indicating active buybacks. Payout ratio 35.1% is near prior-year 33.1% and stable, but the full-year plan dividend ¥20 (payout ratio 13.6%) implies a significant cut, reflecting second-half earnings deterioration and cash conservation. Total return ratio 53.6% is appropriate, but sustainability from a cash flow perspective remains an issue.
Working capital deterioration risk: Inventory rose by ¥37.7B YoY (+53.4%) and DIO is estimated to have worsened to 98–123 days. Inventory stagnation may lead to discounting pressure, impairment risk, and higher storage costs; continued negative OCF will strain liquidity. Accounts payable decrease -¥23.4B also worsened working capital, with CCC estimated at 162 days (substantial extension from prior year) and efficiency declining. Failure to normalize inventory and improve collections could lead to prolonged weak cash generation and greater reliance on external funding.
Ordinary Income FX dependence risk: Foreign exchange gains ¥5.5B accounted for 58% of non-operating income ¥9.5B and contributed to Ordinary Income ¥80.1B. Prior year FX gains were ¥1.2B, so FX-related increase was ¥4.3B; reversal of FX rates could reduce non-operating income and materially lower Ordinary Income. The company’s conservative full-year plan (Ordinary Income -28.1%) likely factors in loss of FX effects, and volatility in non-operating contributions is a risk.
Segment concentration risk: Construction Machinery accounts for 80.1% of sales and 75.9% of Operating Income; slow growth in that segment (+1.0%) constrains company growth. Cyclical fluctuations in the construction machinery market, price competition, and rising procurement costs directly affect corporate profits; diversification progress is still incomplete. Industrial Machinery is high growth/high margin but remains 19.9% of sales, so near-term company performance is sensitive to Construction Machinery trends. The full-year plan’s Operating Income -21.6% likely reflects margin pressure in Construction Machinery; high segment concentration amplifies earnings volatility.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating margin | 12.9% | 7.8% (4.6%–12.3%) | +5.2pt |
| Net margin | 6.2% | 5.2% (2.3%–8.2%) | +1.0pt |
Operating margin 12.9% outperforms industry median 7.8% by +5.2pt, securing top-tier profitability within manufacturing. Net margin 6.2% also exceeds median 5.2% by +1.0pt, placing profitability in the good-to-excellent range versus industry benchmarks.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue growth rate (YoY) | 2.3% | 3.7% (-0.4%–9.3%) | -1.4pt |
Revenue growth 2.3% is -1.4pt below industry median 3.7%, positioning growth in the mid-to-lower range. Slower growth in the core Construction Machinery (+1.0%) depresses company-wide growth.
※Source: Company compilation
Profitability is among the industry leaders, but working capital deterioration and weak cash conversion are the primary concerns. Operating CF -¥23.8B, OCF/Net Income -0.69x, OCF/EBITDA -0.29x show very weak cash conversion, mainly driven by inventory build-up +¥37.7B (+53.4%). If inventory compression and normalization of payables/receivables progress, Operating CF could rebound substantially; thus quarterly trends in CCC (estimated 162 days), DIO, and DSO are key monitoring points. The company’s conservative full-year plan (Operating Income -21.6%) can be interpreted as incorporating inventory correction costs and FX gain normalization; near-term catalysts include progress on inventory normalization and improvements in cash flow.
The Industrial Machinery segment’s high growth and high margin (revenue +8.1%, margin 20.1%) is contributing to improved company profitability and diversification. Although its sales mix is still limited at 19.9%, the segment’s margin exceeds Construction Machinery by 4.3pt and improves portfolio quality. Construction Machinery concentration (80.1% of sales) remains high; growth slowdown (+1.0%) and full-year margin pressure pose company-level risks, but sustained expansion of Industrial Machinery could, over the medium term, reduce concentration risk and lift overall margins.
This report is an AI-generated earnings analysis based on XBRL earnings release data. It is not a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the Company from publicly disclosed financial statements. Investment decisions are your responsibility; please consult a professional if necessary before making investment decisions.