| Metric | Current Period | Prior Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥9116.4B | ¥7966.7B | +14.4% |
| Operating Income / Operating Profit | ¥388.1B | ¥284.6B | +36.4% |
| Ordinary Income | ¥380.4B | ¥251.0B | +51.5% |
| Net Income | ¥243.1B | ¥111.9B | +117.2% |
| ROE | 3.5% | 1.7% | - |
For the fiscal year ended March 2026, Revenue was ¥9116.4B (YoY +¥1149.8B +14.4%), Operating Income was ¥388.1B (YoY +¥103.5B +36.4%), Ordinary Income was ¥234.1B (YoY -¥105.7B -31.1%), and Net Income Attributable to Owners of the Parent was ¥228.7B (YoY +¥121.5B +114.8%). Consolidation of the Steering Business (NS&C) added to consolidated sales, and a one-time contribution from a negative goodwill gain of ¥85.3B boosted net income. The operating margin improved to 4.3% (up +0.7pt from 3.6% a year earlier), but at the ordinary income stage margins fell due to higher financial costs and reduced equity-method income. Regionally, recovery in the Americas (+22%) and Europe (+27%) was notable, and China was robust at +12.7%. By segment, the Automotive Business was the largest earnings contributor with Operating Income of ¥173.7B (+18.0%), and the Steering Business showed high efficiency with a margin of 7.7%. Free Cash Flow was ¥330.6B, enabling dividend payments of ¥166.3B and capital expenditures of ¥380.3B to be funded from internal resources.
[Revenue] Revenue rose significantly to ¥9116.4B (+14.4%). Consolidation of the Steering Business (approximately 6 months of the period) boosted total company sales. By region: Japan ¥2869.5B (+9.8%), Americas ¥1831.5B (+22.1%), Europe ¥1267.0B (+26.7%), China ¥1944.9B (+12.7%), Other Asia ¥1203.6B (+6.7%) — all regions achieved revenue growth. By segment: Industrial Machinery ¥3774.9B (+4.4%), Automotive ¥4033.0B (+0.4%) remained stable, and Steering ¥1005.5B (newly consolidated) was additive. Gross margin was 21.0%, down -0.7pt from 21.7% a year earlier, suggesting pressure from higher raw material and energy costs.
[Profitability] Operating Income was ¥388.1B (+36.4%), with an operating margin of 4.3% (prior year 3.6%, +0.7pt). SG&A increased to ¥1608.9B (+11.2%), but this was absorbed in part by other operating income of ¥100.7B (prior year ¥16.5B). Equity-method profit declined to ¥32.6B from ¥49.0B. Ordinary Income fell sharply to ¥234.1B (-31.1%); although financial expenses decreased to ¥47.8B (prior year ¥66.0B), the increase in financial income to ¥40.1B (prior year ¥32.5B) did not offset deterioration in net financial results, and combined with reduced equity-method profit resulted in weaker post-operating-stage earnings. Net Income was ¥243.1B (+117.2%), driven primarily by the net effect of a negative goodwill gain of ¥85.3B and a step acquisition loss of ¥46.6B associated with consolidation of the Steering Business (net effect approx. +¥38.7B), which absorbed an increase in corporate taxes of ¥13,730 million. Comprehensive income was ¥392.5B, significantly exceeding profit for the period, supported by ¥315.3B of translation gains from foreign operations due to yen depreciation. In conclusion, while revenue and operating profit increased, there is a structural reliance on one-time gains and a deterioration at the ordinary income stage.
The Industrial Machinery Business recorded Revenue of ¥3774.9B (+4.4%), Operating Income of ¥125.7B (-9.9%), and a margin of 3.3% (prior year 3.9%, -0.6pt). The Automotive Business had Revenue of ¥4033.0B (+0.4%), Operating Income of ¥173.7B (+18.0%), and a margin of 4.3% (prior year 3.7%, +0.6pt), improving profitability and constituting the largest contributor to consolidated operating profit. The Steering Business, newly consolidated, posted Revenue of ¥1005.5B and Operating Income of ¥77.3B, with a margin of 7.7% indicating high efficiency. The Steering Business’s operating profit includes a negative goodwill gain of ¥85.3B and a step acquisition loss of ¥46.6B; M&A-related one-off items have mechanically boosted the reported margin. Other Businesses recorded Revenue of ¥302.9B (-9.6%), Operating Income of ¥4.8B (-78.6%), and a margin of 1.6%, underperforming. Industrial Machinery’s profit decline was mainly due to lower gross margin and higher fixed costs; Automotive improved via product mix and pricing. Excluding one-off items, Steering’s core margin is estimated around 5%, and realization of integration synergies will be key.
[Profitability] ROE improved to 3.5% (prior year 1.6%, +1.9pt) but remains low for a manufacturer. Operating margin is 4.3% and Net Income margin 2.7%, indicating thin margins; core profitability excluding one-time gains (negative goodwill etc.) is estimated at ROE in the low-2% range and Net Income margin in the low-2% range. Gross margin of 21.0% declined -0.7pt from 21.7%, indicating challenges in cost control. [Cash Quality] Operating Cash Flow / Net Income is 4.0x (¥978.1B/¥243.1B), indicating very strong cash conversion. OCF/EBITDA (Operating Cash Flow ÷ (Operating Income + Depreciation)) is 1.04x, also healthy. Inventory days are high at approximately 110 days (Inventories ¥2162.1B ÷ daily sales ¥25.0B), indicating room for inventory efficiency improvement. [Investment Efficiency] CapEx/Depreciation is 0.69x (¥380.3B/¥551.1B), signaling restrained investment. ROIC (Operating Income × (1 - effective tax rate 36%) ÷ Invested Capital) is about 3.6%, below the cost of capital, so improving capital efficiency is a priority. [Financial Soundness] Equity Ratio is 54.2% (prior year 53.4%, +0.8pt), and current ratio is 230% (Current Assets ¥6518.1B / Current Liabilities ¥2834.8B), indicating a solid financial base. Debt/EBITDA (estimated interest-bearing debt ¥3200B / EBITDA ¥939.3B) is about 3.4x — neutral to slightly elevated.
Operating Cash Flow was ¥978.1B (prior year ¥822.0B, +19.0%), a solid increase. In working capital, a decrease in trade receivables of ¥325.4B and a decrease in inventories of ¥75.7B contributed positively, while a decrease in trade payables of ¥370.9B was negative, yielding net progress in working capital normalization. Investing Cash Flow was -¥647.5B (prior year -¥587.5B), with capital expenditure ¥380.3B and net increase in time deposits ¥60.0B as main outflows. Free Cash Flow improved to ¥330.6B (prior year ¥234.5B), covering dividend payments of ¥166.3B and share repurchases of ¥0.1B, and the surplus was used to adjust Financing Cash Flow -¥377.9B (bond redemptions ¥250.0B, bond issuance ¥300.0B, long-term debt repayments ¥192.0B, etc.). Cash and Cash Equivalents rose slightly to ¥1421.2B (opening balance ¥1382.5B). Operating Cash Flow / Net Income 4.0x and OCF/EBITDA 1.04x indicate high quality of earnings; if inventory days are reduced from 110, Operating Cash Flow is expected to improve further.
Operating Income of ¥388.1B versus Ordinary Income of ¥234.1B indicates a ¥154.0B decline after the operating stage. The components include net financials -¥7.7B (Financial Income ¥40.1B - Financial Expenses ¥47.8B) and equity-method profit ¥32.6B; overall non-operating items improved by ¥24.9B, but the year-on-year decline at the ordinary income stage was large at -¥105.7B. Net Income of ¥243.1B exceeded Ordinary Income, driven by the net effect of the negative goodwill gain ¥85.3B (possibly included in Other Operating Income) and step acquisition loss ¥46.6B associated with consolidation of the Steering Business. Comprehensive Income of ¥392.5B exceeded Net Income by ¥149.4B, mainly due to ¥315.3B of translation gains from foreign operations attributable to yen weakness. Core Net Income excluding one-offs is estimated around ¥200B, implying a Net Income margin of roughly 2.2%. Cash conversion is strong with Operating Cash Flow ¥978.1B being 4.0x Net Income ¥243.1B; heavy Depreciation of ¥551.1B and working capital improvements support CF generation. Excluding M&A one-offs and OCI (foreign exchange), the accounting quality of earnings is broadly good, though weakening at the ordinary income stage remains a structural concern.
Full Year guidance calls for Revenue ¥1.0T (¥1,000.0B) (YoY +9.7%), Operating Income ¥42.0B (¥420.0B) (+8.2%), and Net Income Attributable to Owners of the Parent ¥24.0B (¥240.0B) (+5.0%). Progress vs. current period results is 91.2% for Revenue, 92.4% for Operating Income, and 95.3% for Net Income — generally within achievable range. The projected operating margin is 4.2%, slightly below the current period’s 4.3%, and Net Income margin is forecast at 2.4% (current 2.7%), reflecting a conservative plan that assumes one-time gains will not recur. The plan assumes full 12-month contribution from the Steering Business and continued regional recovery; inventory normalization and cost improvement will be key to meeting full-year targets.
Dividends are an interim ¥17 and a year-end ¥17 for an annual ¥34 (doubled from prior year ¥17). Payout Ratio is 72.7% (Dividend ¥34 ÷ EPS ¥46.75) — high. With Free Cash Flow ¥330.6B and total dividends ¥166.3B, FCF coverage is about 2.0x, indicating sustainability. Share buybacks were minimal at ¥0.1B, so total shareholder return is effectively dividend-driven. The dividend policy emphasizes stable dividends; given the doubling of profit this period, dividends were doubled accordingly. While ROE is 3.5% and capital efficiency is low, cash balance ¥1421.2B and ample liquidity allow increasing shareholder returns while preserving investment capacity. Considering reliance on one-off gains, future dividends may be adjusted to reflect core profitability. Medium-term priorities include improving capital efficiency and normalizing payout ratios to a more appropriate 30-50%.
Inventory efficiency risk: Inventories ¥2162.1B and inventory days about 110 remain high. In a demand adjustment scenario, discounting and obsolescence could compress gross margins; accelerating inventory reduction to below 90 days is urgent.
Capital efficiency risk: ROE 3.5% and ROIC 3.6% remain below the cost of capital. CapEx is only 69% of depreciation, risking delayed technology updates and weakened competitiveness, which could accelerate profit deterioration. Normalization of investment levels (CapEx/Dep > 1.0) and shifting to higher value-added areas are necessary.
One-off profit dependency risk: Of Net Income ¥243.1B, the negative goodwill gain ¥85.3B and step acquisition loss ¥46.6B had a net effect of approximately ¥38.7B (~16% of Net Income). If these items do not recur, core earnings weakness may become apparent. Delay in realizing integration synergies from the Steering Business and failure to improve core margins in Automotive and Industrial Machinery could lead to a sharp decline in profit levels.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Return on Equity | 3.5% | 6.3% (3.2%–9.9%) | -2.8pt |
| Operating Margin | 4.3% | 7.8% (4.6%–12.3%) | -3.5pt |
| Net Margin | 2.7% | 5.2% (2.3%–8.2%) | -2.5pt |
The company’s ROE, operating margin, and net margin are below manufacturing medians, placing it in the lower-profitability group within the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 14.4% | 3.7% (-0.4%–9.3%) | +10.7pt |
Revenue growth significantly exceeds the industry median, driven by M&A contributions and regional recovery, placing the company in the high-growth group within the industry.
※ Source: Company compilation
Scrutinize the consolidation of the Steering Business and M&A one-off P&L impacts: The negative goodwill gain ¥85.3B and step acquisition loss ¥46.6B had a net effect (~¥38.7B) representing 16% of Net Income. Assuming these items do not repeat, core Net Income is estimated around ¥200B (Net Margin ~2.2%). Progress in realizing integration synergies (cost reductions, pricing adjustments, production efficiency) will determine the pace of core margin improvement.
Evaluate scope for improvement in inventory and capital efficiency: Inventory days of 110, ROE 3.5%, and ROIC 3.6% are below industry averages. Inventory normalization (target under 90 days) and normalization of capital spending (CapEx/Dep > 1.0) are keys to medium-term earnings improvement. In the short term, strong cash-generation ability (OCF/EBITDA 1.04x) provides financial flexibility, and successful inventory reduction could drive simultaneous improvements in gross margin and ROIC.
Monitor sustainability of regional recovery and segment profitability trends: Recovery in the Americas (+22%) and Europe (+27%) is clear, and the Automotive segment’s operating margin improved to 4.3% (prior 3.7%, +0.6pt). Key watchpoints are reversal of the Industrial Machinery margin decline (3.3%, -0.6pt) and stabilization of the Steering Business’s core margin excluding one-offs.
This report is an AI-generated financial analysis document produced by analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the company based on public financial statement data. Investment decisions are your responsibility; please consult a professional advisor as needed before making investment decisions.